This episode dissects the critical market divergence between rallying equities and stagnant crypto, exploring whether investors should rotate capital out of digital assets in the short term.
Market Weakness and Divergence
- Avi Feldman opens the discussion by highlighting a concerning divergence in the markets. While traditional assets like the S&P 500, NASDAQ, and gold are experiencing strong upward momentum, the crypto market—including Bitcoin, Ethereum, and Solana—remains stagnant or is declining.
- From Avi's trading perspective, this is a significant red flag. He interprets the lack of follow-through in crypto during a broader risk-on rally as a clear sign of market weakness and potential buyer exhaustion.
- Avi Feldman: "When you see a divergence like this, when you see SPY up half a percent, NASDAQ up almost a percent, and Bitcoin down or like not moving, you have to start thinking, okay, well, does this mean we've run out of buyers?"
- Jonah contends that even in seemingly uneventful markets, there are always compelling dynamics one layer deeper, setting the stage for a debate on underlying opportunities.
The Aerodrome vs. Ethena Pair Trade Controversy
- Jonah details his recent, controversial pair trade idea: long Aerodrome (AERO) and short Ethena (ENA). A pair trade is a market-neutral strategy that matches a long position in one asset with a short position in another, betting on their relative performance.
- The idea sparked intense backlash online, which Avi suggests is a signal in itself. He notes that the fierce defense of ENA, particularly from the VC community, could indicate that it is an over-owned and crowded trade.
- The core of Jonah's thesis rests on a stark valuation and narrative mismatch:
- Ethena (ENA): An $11 billion Fully Diluted Valuation (FDV) on just $28 million in annualized revenue. FDV is a metric representing a project's total value if all its tokens were in circulation. Jonah believes its model, reminiscent of past DeFi failures, will struggle to attract institutional capital.
- Aerodrome (AERO): A ~$2 billion FDV with $178 million in annualized revenue. As an AMM DEX (Automated Market Maker Decentralized Exchange) on the Base network, Jonah sees it as a bet on new market creation—like prediction markets and on-chain commodities—that Wall Street can easily understand and integrate.
- While Avi questioned the direct comparability of the two assets, he agreed the valuation gap was the most compelling part of the thesis.
The Fading Influence of On-Chain Treasuries
- The conversation shifts to the role of DATs (Decentralized Autonomous Trusts), which are on-chain entities managing treasuries to deploy capital into the market.
- Avi argues that the market-moving power of DATs is waning. Their investment strategies have become predictable, leading to aggressive front-running by traders. This dynamic turns their capital deployment into a short-term trading event rather than a sustainable source of demand.
- He uses the recent Solana rally as an example, a trade he took based on anticipated DAT flows but exited quickly once the move played out.
- Strategic Implication: Investors should be cautious about relying on DATs as a primary catalyst for sustained market rallies. Their impact is becoming less significant as the market adapts to their behavior.
The Short-Term Bear Case for Crypto
- Building on the theme of market weakness, Avi outlines his thesis for a potential 2-3 month consolidation period or "snooze" for crypto.
- His primary concern is Ethereum's recent price action, where it printed a lower high by failing to reclaim its previous peak. He views ETH as the bellwether for the altcoin market, and its struggle suggests broader weakness ahead.
- Actionable Insight: Avi's analysis suggests it may be a prudent time for active traders to reduce leverage, trim altcoin positions, and concentrate capital in more resilient assets like Bitcoin or even rotate profits out of crypto entirely.
Crypto's Long-Term Trajectory and Institutional Adoption
- Jonah provides a counterpoint, framing crypto not as a correlated risk asset but as an "episodic macro asset" that often moves independently of equities. He sees the current decorrelation as a healthy sign of crypto's unique value proposition.
- From his long-term perspective, the market is undergoing a structural shift:
- Institutional Drum Beat: Jonah believes the underlying trend is a "slow drum beat" of institutional adoption, driven by the tokenization of real-world assets.
- Wealth Transfer: The current sideways price action represents a wealth transfer from early investors to DATs, which act as long-term vaults, effectively locking up token supply and creating a stronger foundation for the future.
Rotating Capital into Equities and Commodities
- Avi reveals he has been actively rotating capital out of crypto and into traditional assets that he believes offer "altcoin-like returns" with stronger fundamental narratives.
- His diversified portfolio includes:
- Robinhood (HOOD): A bet on the global expansion of retail trading and "gambling culture."
- Gold & Silver: A multi-year thesis on the declining dominance of the US dollar and continued accumulation by global central banks.
- Uranium (URA ETF): A geopolitical play on the global push for energy independence, which is driving a resurgence in nuclear power.
- Tesla (TSLA): Positioned as the only public pure-play investment to gain exposure to the coming humanoid robotics revolution.
An Investor's Edge in Traditional Markets
- Jonah analyzes how a retail investor can find an edge in highly efficient public markets. He argues the advantage lies not in short-term trading but in adopting a longer time horizon (12-36 months) and the capacity to withstand volatility.
- Jonah: "As a personal investor... you do have a mega advantage over the institutions."
- Retail investors can make high-conviction, narrative-driven bets that institutional analysts, who are often constrained by career risk and herd mentality, are unwilling to make. However, Jonah cautions that when investing in commodities like uranium, it's critical to bet on the miners (as the URA ETF does) rather than the spot asset, as human innovation is incredibly effective at increasing supply in response to high prices.
Conclusion
This episode highlights a market at a crossroads, with crypto's stagnation contrasting sharply with rallies in traditional assets. This divergence signals a potential short-term rotation of capital, urging investors to reassess altcoin exposure and explore high-conviction opportunities in equities and commodities with powerful, independent narratives.
