This episode dissects Bitcoin's strengthening relative performance against declining equities, exploring whether institutional fear and new investment vehicles signal a fundamental shift or just temporary support for the crypto market.
Market Overview: Equities Stumble, Hard Assets Shine
- Avi kicks off by noting a divergence: while the NASDAQ and S&P 500 are down, gold and Bitcoin are showing strength. He interprets this not as a panic-driven "everything selloff," but as a more concerning reallocation out of equities. This environment, Avi suggests, validates his recent shift towards gold, driven by market fear and a search for stability outside traditional stocks.
Gold's Surge and the 'TINA' Problem
- Jonah observes gold's rally is behaving more like a volatile micro-cap crypto asset than a multi-trillion dollar store of value, indicating significant market stress. He introduces the concept of TINA ("There Is No Alternative"), traditionally applied to the S&P 500 as the default destination for institutional capital. With equities faltering and not showing a quick V-shaped recovery, allocators are spooked and searching for alternatives. Gold's decoupling to the upside makes it an easy, defensible choice, creating a self-reinforcing momentum loop.
Bitcoin's Decoupling and Relative Strength
- The conversation pivots to Bitcoin's performance relative to equities, specifically referencing the Bitcoin/NASDAQ ratio (or cleaner IBIT/SPY ratio, as Avi prefers for matching closing times). Jonah highlights this ratio is near all-time highs, indicating significant relative strength. This isn't just Bitcoin bottoming first, as seen historically; it's holding firm or rising while equities bleed. Jonah states, "Bitcoin is decoupling from equities because people are viewing this as a digital gold right now." This potential shift from a correlated asset to a hedge is a critical development.
Drivers of Bitcoin's Resilience
- Persistent Buyers: Idiosyncratic buyers like Michael Sailor continue accumulating, providing market support.
- Seller Exhaustion: Investors sensitive to equity weakness or short-term liquidity concerns likely exited during the previous flush down below $80k (mistranscribed as $74k, likely meant ~$74k or lower based on context, but sticking to transcript). Current holders are less inclined to sell based on equity moves alone.
- Macro Shift: The move towards a multi-polar world increases the value of cross-border, state-neutral assets like Bitcoin and gold.
The Rise of MicroStrategy Competitors
- Avi points out a significant, potentially under-the-radar trend: the emergence of companies mimicking MicroStrategy's Bitcoin accumulation strategy in global markets.
- Metaplanet (Japan): Actively buying Bitcoin, aiming for 21,000 BTC by 2026, becoming a top 10 corporate holder. Its stock and associated private placements have seen substantial gains.
- Meluse (Brazil): Another example of this model.
- Solana Ecosystem: A similar vehicle focused on Solana was recently announced.
- Core Thesis: These entities capitalize on market appetite for non-recourse leverage on Bitcoin, essentially allowing investors exposure to accumulating Bitcoin financed by the company's operations or debt. Avi views this trend as "very bullish for Bitcoin" due to the structural buying pressure it creates.
Institutional Whales: PBOC vs. Sailor
- Jonah draws a parallel between large buyers in gold and Bitcoin. The People's Bank of China (PBOC) – China's central bank – is a major force in gold, divesting from US securities and likely pumping its own bags as it accumulates. Jonah feels more comfortable with the PBOC's predictable behavior in a mature market like gold compared to Michael Sailor's aggressive, debt-fueled Bitcoin accumulation via MicroStrategy (MSTR). While acknowledging Sailor's financial engineering, Jonah expresses unease, noting "somehow these sorts of things always end badly." He views Bitcoin's corporate adoption as being in a much earlier phase than gold's historical role.
Evaluating Bitcoin Accumulation Proxies
- For investors considering private placements in these MSTR-like companies, Jonah advises focusing on rigorous credit analysis:
- Debt Servicing: Can the underlying business generate sufficient cash flow to service the debt taken on to buy Bitcoin?
- Covenants: Are there legal requirements (covenants) ensuring the company must service debt with existing cash flows, preventing misuse of funds?
- Valuation: If the credit risk is acceptable, does the entry valuation make sense?
- Strategic Implication: Evaluating these opportunities requires traditional financial analysis skills applied to a novel crypto-linked structure.
Bitcoin's Potential as an Institutional Hedge
- Jonah emphasizes the game-changing potential if Bitcoin solidifies its role as a hedge against equity downturns. Currently, investors seek hedges but don't want to exit equities entirely. If Bitcoin proves effective, the institutional capital inflow could be immense given Bitcoin's smaller market size compared to gold. Jonah exclaims, "if bit the second Bitcoin proves it's a hedge oh my goodness Avi this is it's going to get silly."
Trading Strategy: Bitcoin Options
- Given the potential for a sharp upward move driven by institutional hedging flows, Avi suggests Bitcoin options are currently attractive, particularly calls.
- Implied Volatility: Bitcoin volatility (Vol) is relatively low (mid-50s), suggesting the market may be underpricing the potential for a large, rapid move. Implied Volatility reflects the market's expectation of future price swings.
- Specific Trades: Avi mentions looking at June 27th $100k calls (costing ~$3.5k) or potentially Dec 31st $170k calls (~$3k). He believes a move to $100k-$120k could yield significant returns (e.g., 6x+), especially if it happens quickly, causing volatility to spike.
- Accessibility: Jonah notes that if direct crypto options are inaccessible, IBIT (BlackRock Bitcoin ETF) options offer a liquid alternative.
- Strategic Insight: Options offer a capital-efficient way to bet on a high-conviction, potentially fast-moving scenario, though they carry significant risk (especially time decay).
Alternative Strategy: High-Beta Altcoins
- Jonah presents an alternative or complementary strategy: investing in select altcoins with strong fundamentals and high beta relative to Bitcoin. High Beta means the asset tends to move more, percentage-wise, than the broader market (in this case, Bitcoin).
- Hyperliquid (Hype): Highlighted for its model of returning ~95% of fee profits via token buybacks, directly linking token value to platform success. Jonah argues this is akin to, or better than, equity ownership with profit sharing. As an exchange, it benefits from volatility.
- Bittensor (TAO): Mentioned due to positive technical analysis (TA) signals from "Chiefing," suggesting underlying strength.
- Pendle: Also included in Jonah's short list of potential outperformers.
- Rationale: If Bitcoin rallies significantly, these specific, fundamentally sound projects might outperform Bitcoin itself due to their higher risk/reward profile and direct linkage to usage/revenue.
Options Strategy Nuances
- Jonah, drawing on his options trading background, adds crucial context:
- Buy Calls for Speed: Options are best bought when expecting fast market moves. The current potential for rapid institutional inflows fits this scenario.
- Puts are Expensive: Puts (bets on price decline) usually trade at a premium (put skew) due to market participants typically being long. Buying puts is often difficult.
- Potential Pairs Trade: Consider buying BTC calls and ETH puts to express a view on Bitcoin outperformance.
- Dynamic Hedging: If using strangles (buying both a call and a put), one might actively manage the put side (selling it or hedging delta if the market drops) while letting the call run. Theta (time decay) is a constant risk when buying options.
Bitcoin's Unstable Price Level
- Avi reiterates his view that Bitcoin's current level (~$88k) feels unstable. He sees two paths: a collapse if support (like Sailor) disappears, or a rapid move higher if the genuine institutional repositioning thesis is correct. He leans towards the latter but acknowledges the binary nature of the current setup. The recent low volatility period ($2k range for a week) was unexpected and likely precedes a larger move.
The End of Indiscriminate Altcoin Seasons
- Both speakers agree that the era of broad, indiscriminate altcoin rallies ("alt seasons") driven purely by speculation (like meme coins) is likely over, comparing it to the post-dot-com bust. Jonah argues, "retail is finally tapped out of memelike investing," and the market will now focus on projects with tangible value. Avi concurs, stating the "dot-com boom era of crypto is over," citing ETH's recent underperformance as a wake-up call for investors to demand real utility and financial linkage (tokconomics tied to revenue). A return to widespread speculation would require a significant macro shift (e.g., massive wealth effect, high GDP growth).
Selective Altcoin Opportunities Remain
- While the broad alt season is dead, Jonah clarifies that a selective alt season, focused on a small number of high-quality projects ("separating the wheat from the chaff"), is still possible during the next Bitcoin rally. These chosen few could outperform Bitcoin. The process of separation is ongoing, with weak projects fading while strong ones consolidate, awaiting the next catalyst. Hyperliquid is cited as an example that has already shown relative strength.
The Crucial Role of Research
- Avi stresses the increasing difficulty of navigating the crypto market and the necessity of deep research.
- Research Services: Subscribing to services like Blockworks Research, Messari, and Delphi Digital is vital.
- On-Chain Data: Daily monitoring of platforms like DeFiLlama is essential. DeFiLlama is a data aggregator for decentralized finance protocols.
- Network: Talking to informed individuals within specific ecosystems (like "Chiefing" for Tao) provides invaluable, hard-to-find insights.
Deep Dive: Using DeFiLlama Metrics
- Jonah shares his favorite DeFiLlama metric: 7-day Fees/Revenue.
- Fees vs. Revenue: It's crucial to distinguish between total fees generated and the actual revenue retained by the protocol (often different for DEXes like Jupiter where fees go to LPs vs. protocols like Hyperliquid where fees largely equal revenue). An AMM (Automated Market Maker) like Jupiter uses liquidity providers who earn fees.
- Top Earners: They review top protocols by revenue (Tether, Circle, Pump, Jupiter, Tron, Axiom, Hyperliquid). Hyperliquid stands out as highly investable among the top earners.
- Valuation: This data allows for fundamental analysis, like calculating Price-to-Earnings (P/E) ratios.
Case Study: Curve (CRV) Analysis
- Applying the framework to Curve:
- Revenue: ~$159k/day (~$8M annualized).
- Valuation: FDV (Fully Diluted Valuation) of $1.3B.
- P/E Ratio: Results in a very high P/E ratio (~167x), raising questions about its current valuation despite its utility in the stablecoin space.
- Takeaway: Demonstrates how on-chain data enables fundamental valuation, revealing potential over/undervaluation even for established protocols.
Finding Alpha in Niche Ecosystems
- Jonah suggests that true alpha (market outperformance) may lie deeper within specific ecosystems, which are less efficient than major token markets.
- Example: Tao Subnets: Trading specific subnets within the Bittensor ecosystem requires holding TAO and navigating a less liquid, less analyzed market where information travels slower, potentially offering easier trading opportunities. Subnets are specialized networks within the broader Bittensor network.
- Strategy: Go deep into promising ecosystems (Solana, Tao, etc.), identify winners within them, and potentially use pairs trades (long winners, short ecosystem token or ETH) to express views.
Call for Listener Expertise & Future Focus
- The hosts acknowledge their strong macro calls but recognize the need for deeper micro-analysis to capture alpha in the current market. They invite listeners deeply knowledgeable about specific niche ecosystems to share insights via Twitter DMs or their Telegram group ("Niger Delta Avengers.")
Preview: The 1000x Terminal
- Jonah provides an overview of the upcoming "1000x Terminal" project they are building:
- Concept: A "reactive" terminal contrasting with Bloomberg's "proactive" nature.
- Interface: A two-pane view; left pane shows a feed (news, AI-generated analysis synthesized in their style, chat history), right pane displays selected content.
- Key Feature: Users can "talk" to articles or data points, asking questions in natural language and receiving contextualized answers from an AI trained on the hosts' perspectives.
- Goal: To create the "world's best crypto analyst" accessible via an intuitive interface, built leveraging AI by a small team.
Conclusion:
- Bitcoin's potential decoupling and a market-wide shift towards fundamentally sound projects define this phase. Crypto AI investors and researchers must intensify deep-dive analysis into revenue models, institutional flows, and niche ecosystems to identify selective opportunities in this maturing landscape.
