市场底部已经到了吗？《The DeFi Report》的 Michael Nadeau 谈2026年下半年及其资金部署方向

I think what saddens me is that lots of people leave crypto in the bear markets. So if you want to lose money, you leave in the bear market and come back in the bull market, right? You should be doing all the work right now in these bear markets, deeply understanding where the future is going and building convictions. I think staying in it is a good way to not let that happen to you.

Michael, thank you for joining us. How are you doing?

I’m doing great. Excited to be here with you guys.

It’s another case where I feel like we should have already been filming the conversation that we’ve had behind the scenes. We’ll try to unearth some more of that into the actual podcast, but I’m really excited to chat. I’ve been following you for a long time, and I’ve noticed I’ve started to gravitate more toward people’s financial takes that make me feel uncomfortable. I think that’s a good thing.

When you’re cozied up to consensus and you’re in your little echo chamber, that’s probably not a good place to be. A lot of the takes that you’ve been putting on the timeline challenge my own thinking, so we really want to pick your brain on that. We want to talk about what to expect in the second half of the year for crypto. Everybody’s saying there’s going to be a bottom in October, and I want to get your thoughts on that.

1. From accounting to building The DeFi Report

We want to talk to you about some of the tokens that you’re holding and that you’re bullish on. There’s just a ton more we want to get to with you, but first of all, this is your first time on the show. For people who don’t know you, I think you’ve got one of the more respected crypto research businesses in our field, and I want to know how you got into crypto in general and what led you to build The DeFi Report.

I appreciate it. I’ll try to be as brief as possible here. My background is in accounting and finance, and I spent about 10 years in the commercial real estate business up in Boston. People who are familiar with Boston may know the John Hancock Tower. I used to do the accounting for that building, and then I later moved over to MIT. That’s kind of how the crypto journey started.

I went to work at MIT’s investment management company. They own a bunch of real estate around MIT’s campus, and they redevelop a lot of those buildings, lease them out to biotech companies, and then, when the school expands, they take over those buildings. I was lucky to be in a small, intellectually curious office where people were into crypto. This was back in 2017, and that’s where the journey started because it was socially acceptable.

I came from a much more white-collar, commercial real estate office. You weren’t really going to be talking about Bitcoin and crypto at the water cooler. This was totally cool at MIT. They had the Digital Currency Initiative there and the famous MIT Bitcoin Club. I started getting really interested in crypto at that time.

The journey was taking what I was learning at MIT and going out and talking to friends and family who worked in technology and finance, just seeing the reactions people would have. They would think I had lost my mind just considering that this was a real thing, and that made me want to go deeper into it. Eventually, I started investing in the space.

I left my job. I’ve always been doing lots of side hustles and always had this plan that I was going to go off on my own. I never knew what it was going to be, but crypto afforded that opportunity. My skills are around analyzing data, and when I started to realize that you could access data on public blockchains and analyze what was happening on these networks in new ways, to me that was a total breakthrough in terms of being able to get an edge.

I’ve never felt like I could get an edge in traditional markets. It was hard to get access to data, hard to get differentiated data, and hard to build a sort of contrarian view using data. With crypto, I was able to do that. I started writing on LinkedIn, and that’s kind of how The DeFi Report was born.

We were on LinkedIn well before we were on X. We built a brand there, and over the years we’ve done consulting and worked with a lot of data companies. We’ve now got this subscription model, and we did a partnership with Bankless about a year ago, which has been great.

2. The elevator pitch for crypto in 2026

It allows me to focus on research and portfolio management and build a service around that. The goal is really to align incentives with transparency and have no conflicts of interest, solving all the problems that I see in the research and data space. I’m excited to get a little more into the good stuff: portfolio management and how we’re managing risk in these markets.

I know your audience, like ours, is definitely a more advanced DeFi investor audience. I think we’ve attracted folks who already understand the product-market fit of DeFi, so before we talk more about all the expertise you have here, I’m curious about those who still don’t understand crypto or maybe don’t understand DeFi.

You clearly have lots of colleagues who would be in traditional finance. How do you communicate the value of all of this? I’m thinking of that elevator pitch that we all used to give 10-plus years ago to friends who were crypto-curious and learning about Bitcoin and Ethereum.

What’s the real sales pitch nowadays for getting folks to understand that this is real, it’s here to stay, stablecoins are taking off, DeFi is real, Wall Street is leaning in, and so forth?

Interesting. I haven’t been making these pitches as much these days, but back when I started, that was basically all I would have to talk about: What is Bitcoin? What are all these other things?

The way I’ve always communicated this with people is that, for me, my dad’s a gold bug, so I had deeply studied what happened back in 2008 and 2009. Bitcoin was very easy for me to grasp as a sort of decentralized store of value outside of government control. That just always made a lot of sense to me. That’s kind of like digital gold, and people can either grasp that or not.

With the rest of the space, having a background in accounting, the thing that made it easy for me to grasp was that public blockchains are a new accounting system for the internet. Specifically, it’s likely for finance, but there could be other use cases around this.

When you do accounting, you realize the complexity of where all the data gets stored and how to reconcile all of that data. When you can put it all onto one database and have smart contracts automate things and create new business models, it was obvious to me that this is what technology does.

It’s new infrastructure. It’s going to create efficiency, new ways to do business, and new ways for people to build businesses on top of that infrastructure. What that can mean for finance and payments—that’s really how I explain it.

It’s still a very abstract thing for people to grasp. These are not concepts that you’ve thought a lot about, but I think of it as a new data infrastructure for the internet. It looks like finance has the most product-market fit for that right now, and we’ll see where it takes us.

The funniest thing about this is that, depending on when you got into the space, thank goodness we have DeFi now. When you first got in, you might have had a Bitcoin maxi talking to you about the Isle of Yap and rai stones and taking you 500 years back. If you try to inject that into one of your family members or friends, they look at you like you’re the weirdest guy in the world.

3. What to expect for crypto in the second half of 2026?

Thankfully, we’ve got DeFi, and we can talk about more of these financial primitives and make this all much more relatable. But okay, Michael, I want to go big-picture here.

We’re halfway through the year. I’m curious what’s going to happen in the second half of 2026 with crypto. We’ve had all these people pointing to this coming October as the point when the four-year cycle pattern starts to align again, and that’s where the bottom is. People are speculating on whether it’s a bottom and whether we’ve bottomed.

I want to get your general views on what you’re seeing, maybe in the data, and what that’s telling you for the second half of the year. These are hard things to say, and I don’t think people should try to pinpoint bottoms, but do you think there’s enough evidence to say that we’ve formed a bottom already, or are you still looking for more downside pain in the second half of the year? Where do you stand right now?

So, yeah, we’re roughly 9 months into this bear market for crypto broadly. We’ve seen interesting pockets of dispersion, and I think it’s made things a little trickier in this bear market. Broadly, 9 months into a bear market for Bitcoin—which tends to drive most of the crypto markets—we’ve seen 2 pretty substantial retracement rallies. That’s something you tend to see in these bear markets, and it tends to pull investors, both bullish and bearish, offside at times during these markets.

You get the rotation of coins from the portion of the market that came in during the year when Bitcoin was elevated. A lot of the work that I’m doing, and probably spending a lot more time on, is Bitcoin market structure: how coins are rotating within that market structure and developing conviction. We look at a lot of high-level cycle metrics and compare where we’re at today versus past bear markets, and I would say that we’re in what I call the prior-cycle-top zone, which is the $56K to $66K zone. If you go back to the last bear market, the equivalent prior-cycle-top zone was about $17K to $21K.

That’s where the most coins ended up in terms of cost basis at the end of the cycle. What’s interesting is that you can go back and analyze these cost-basis cohorts and see which cohorts were picking up the most coins as the bear market played out. I think what you’ll find is that early in the market, most investors don’t believe that we’re in a prolonged bear market. They’re eager to buy dips.

About 3 or 4 months into this bear market, the largest zone of dip buying was in April, at about the $84K zone. We then ultimately broke down from that, came all the way down to $60K, and had a significant retracement back up to $82K. That kind of pulls a lot of people in. That was when Saylor was in the market buying, and the whole narrative was that SCRC was able to issue, raise capital, and that Saylor was buying; therefore, this bear market was going to be much more subdued than past bear markets.

4. Is the market bottom in? Why Michael’s buying below $65k BTC

Obviously, that narrative flipped in the opposite direction with what we’ve seen more recently, with Strategy basically running out of bullets and getting into trouble with its capital structure. For me, where we’re at right now—and what I try to do in my portfolio—is align my cash position with where I think the risk is. Roughly 25% cash right now is basically me saying there’s still roughly a 25% chance that Bitcoin hits a lower low, and I want to have some cash on the sidelines to potentially buy one more final correction.

In terms of the psychology of the market, when we get to the lows, the majority of people will think we’re going lower. We’re kind of getting to that zone. There are a lot fewer people who think the bear market is over. The people who were fading the idea of a bear market have obviously come around to it, and when those people come around and expect it to go lower, that can be a sign that you’re hitting those lows.

What I’ve been doing personally is buying anything below $65K or so. That was where we thought the market would come down to when I was going to cash back in September and October, so I think it’s a good time to deploy. We’ve been deploying into other coins, which we can get into as well. But when I look at the market-structure data, do I have strong conviction that the hot money that came into the space has rotated those coins to stronger hands and that we’ve seen that full rotation? I don’t have strong conviction that it’s fully played out just yet.

We just shared a report today that gets into a lot of the detail—how it played out last cycle and where we’re at right now. The pushback I get on this is, “Well, a lot of coins changed hands in the final 90 days of the 2022 bear market, and a lot of that had to do with FTX, with the credit cycle blowing up toward the end of the bear market.” We’re starting to see some signs of that with Strategy’s troubles right now.

People want to say, “There’s not going to be an FTX. There’s not going to be some other catalyst that’s going to cause this big rotation of coins later.” That could be true. I think there are other potential risks out there. Something that I like to come back to is that FTX was probably insolvent for about 6 months before we found out about it. So I’m trying to figure out: Is there somebody else out there? Is there a beer to your exchange? Is there something else the market is looking past, and is there potentially a little more risk out there than we’re aware of?

I don’t know what the catalyst is. I just know that historically, you don’t hit that cycle low, or have conviction in it, until enough of these coins have rotated into stronger hands. A lot of that has played out, but I don’t have strong conviction that it’s fully played out. So, even though I’m allocating and happy to buy at these levels, I still don’t have strong conviction that the lows are in just yet.

First off, I think it matters: Are you trading, or are you investing? And if you’re investing, are you investing over a multiple-year horizon, or is it just trying to time bottoms for the 4-year cycle and potentially be able to sell at a higher high for Bitcoin?

Based on following your research and your tweets, it seems like we’re all in a similar place. We’re trying to accumulate something like Bitcoin over the longer term. Right now, for me, it feels really obvious 9 months into this bear market, if we’re counting the October 2025 high as the top of the market. We’ve got the complete reverse situation now.

5. App layer tokens could be big winners next bull run

One of the indicators that’s most important for me to track is the 200-week moving average for Bitcoin, and I think it’s around $62,000. Bitcoin is sitting right around that price as of our recording today. Does it mean we can’t go below that? We’ve definitely gone below it and stayed below it for multiple weeks and even months in prior cycles, but historically, that’s a fantastic time to feel like a genius 12 months later if you bought there.

I love your point about a lot of hot money having exited. We normally look for the money that entered at the top of the cycle to have exited. What’s the latest in terms of those wallets being tracked on the Bitcoin network? Are long-term holders accumulating more, as usual, in the bear market? Are the folks who came in during the later part of the bull market all exiting? These are all things that tend to play out.

6. What’s different this bear market?

I’m not trading with leverage and trying to time the bottom so that I can trade with 10x leverage on the next 30% move up. I’m buying spot, and I’m looking for the ability to just buy some local low. Are there any differences, though, Michael, that you’re noticing in this bear market compared to the last one? I know you mentioned something about dispersion. In case folks don’t know what that is, could you translate that? What exactly does that mean, and what are you seeing that’s different this cycle?

Yeah, I did. Good point. I probably should have prefaced this with my style. We’re aligned with you here. We’re trying to invest in these cycles. It’s really a process of managing risk when prices are high, when we think leverage is exceeding what we call the capital base. That’s what pointed me to say, “Hey, maybe we should take some risk off,” back in September and October.

You want to have some cash, and then you want to redeploy that. We typically have 60% to 70% in Bitcoin, although we probably have a little bit less in this cycle. But I do think that this bear market has been more challenging than past bear markets. When the bear market started, my strategy was going to be to really just monitor Bitcoin.

We publish reports every Wednesday that mostly focus on Bitcoin in terms of market structure. Historically, you've been able to anchor to that, and I still think this works. But whereas you can sort of plan on altcoins and other assets hitting their lows or continuing to experience weakness until Bitcoin starts to hit its low and build some strength behind it—and then altcoins tend to rally after that—it’s been different in this bear market.

As you guys know, the dispersion that I'm referring to is really just other coins actually rising in a bear market. We've seen things like Hyperliquid do really well. We've seen a lot of strength from stuff like Zcash. We've seen things like Venice that have outperformed things that are sort of AI-adjacent. So, there have been these rolling narratives or rolling pockets of speculation, even with Bitcoin retracing 40% or 50%, which is different.

I think there are a few reasons for this. I think the markets are maturing a little bit, and that's part of it. You can have things like Hyperliquid that have strong fundamentals, strong token economics, and buybacks, where that thing can still perform even in sort of risk-off market conditions. So, I think that's part of why we're getting some of this dispersion.

I think another element of it is that Bitcoin is a $1.5 trillion asset now. There are lots of people looking outside of Bitcoin to try to outperform that and make their money faster, so there's maybe more interest in other projects. We've seen what I think are very healthy developments with token economics, with projects that have strong product-market fit and maybe a sticky user base.

A lot of crypto businesses are very asset-light. These are lean teams where they may have high velocity on what's happening there, and the revenue model works really well. They have a small, lean, efficient business, and it makes sense for them to take some of those revenues and buy back the token. That aligns their entire cap table—whether equity holders or token holders—so all the value goes to the token.

I think that's really healthy, and we've seen some pockets of outperformance with some of these stronger products that have these types of models. So, I think this is just becoming a little bit more of a stock-pickers' market. I enjoy this as somebody who's in these markets, and we have something called the watchlist that's a curated list of 35 investable projects that we've initiated coverage on. We're constantly monitoring these projects and looking for the right entry levels.

It's been much more difficult, I'd say, in this bear market, but I think that's really it. It's getting more challenging, but that just means that research and good data are becoming that much more valuable.

7. Why classic BTC top indicators never triggered?

Yeah, and I've seen the watchlist, so thanks for giving me access to that, Michael. I have a bunch of questions about the themes that I've drawn out of your watchlist, but before we get to that and maybe talk more about applications, I just want to ask one more quick thing about this current cycle.

I'm somebody who liked to track a lot of these classic Bitcoin indicators, and a ton of them misfired or weren't as reliable as they've always been. I've got some theories on that. I don't think any of them are good, but I think a lot of people were watching these things, like the Pi Cycle Top, the MVRV Z-Score, or whatever it is—these more classical indicators that maybe predicted a top within a 1-week or 2-week timeframe in previous cycles.

On CoinGlass, they have this cool page with a list of all the Bitcoin indicators. I think there are around 30 of them or something—don't quote me—but I think almost none of them fired, or maybe 1 or 2 did. Do you have any explanation of what happened there? I don't know if it's ETF-related. That changed a lot of market structure, but I'm curious about your thoughts.

Yeah, I know. It's a great question. I'm familiar with that CoinGlass page and some of those metrics that you're talking about. I think this is part of the reason it's challenging: there’s no easy button or code to navigate these markets.

For me, realizing that a lot of those indicators were not hitting even back in September and October, the thing I try to anchor to when managing risk through these cycles is a framework based on understanding the cycle from first principles rather than these narratives around the 4-year cycle. It's this kind of voodoo idea that Bitcoin just peaks and then bottoms a year later, and you either believe in that or you don't.

My view is that there are underlying reasons Bitcoin tends to have these 4-year cycles, and they align with how market cycles work in traditional finance as well. It all comes down to leverage and credit. So, I am a strong believer in the 4-year cycle, but to me, it's anchored to the first principles of how it works.

I'm constantly monitoring leverage and credit in the system. To me, you have to pair that up with all the social indicators and all the other metrics that we're looking at. We fold macro into the analysis as well. I think the reason I was comfortable going risk-off around September and October, even when a lot of those CoinGlass metrics were not hitting, was the amount of what I refer to as the capital base versus the valuation premium.

As bull markets kick into gear, that kicks off demand for leverage in DeFi and active loans in DeFi. We see funding rates and everything that plays out there. We see leverage come into almost every aspect, and then we find new ways to create leverage in every bull market. That season was basically leverage and new products.

There were a bunch of Bitcoin treasury companies, a bunch of ETH treasury companies, and a long tail all the way down through a lot of altcoins. That basically gave traders and people who wanted to put lots of leverage into the market a free pass, because they knew they had this buyer behind them who was going to bid up the tokens.

Once that started to fade out around September, it was pretty clear that there was too much leverage in the market relative to the capital base. That was kind of a signal: these treasury companies are done buying. Bitcoin had gone up 7x, and everyone thought the narrative was starting to shift toward the cycle extending. Last time, it was the supercycle. It's always a new version of it.

For me, it's more about anchoring to what I consider the first principles of what's driving everything and managing risk through that, rather than anchoring to any 1 or 2 top or bottom indicators.

I think one of your views that really shook me out of my seat is your focus on applications. I've always wanted applications to accrue value. I've wanted DeFi protocol-related tokens to accrue value.

In 2020 and 2021, they were all flimsy governance tokens with no value accrual. We were living in the Gary Gensler era, so everyone was basically playing games to avoid regulators. Then they were designing really bad tokens—bad token design—to avoid getting in trouble with regulators.

The market clearly reacted to this over the next few years, and we saw this token sell-off. Now that we're seeing more of a pro-crypto regulatory landscape, we do have tokens that are clearly set up to accrue value.

That said, I feel like I've just been burned over and over again. Being in this space for 10 years has constantly reinforced that you should be betting on the majors—the major L1 tokens, like Bitcoin. Everything still looks like it's correlated to Bitcoin, with the exception of maybe a few tokens right now. HYPE and Lyra have looked less correlated.

Your focus on application-specific tokens has been a view of yours. I want this to play out so badly, and I feel like I get burned every time. So, my question for you is: Why now? Why will the application-specific tokens we've seen you tweet about, and that I believe you cover in The DeFi Report, like Lyra—I know you've talked about HYPE, but I don't believe you hold HYPE—

We don't hold it. No, we don't hold it. DERI is one in that category that does buybacks. It's a sort of small-cap project in the options market.

But no, the trauma is real. I feel the same thing. This is part of why, historically, we try to buy stuff when your entry level is so important, because of this concept of assessing something, knowing there are unlocks, and knowing there might not be token alignment between equity and token holders.

This has been a topic all over CT lately, with Venice taking an equity investment.

And it's a challenge. The way I think of it, we've always tried to buy stuff when we think it's so oversold that it's at a level where it can double or triple before anyone even notices. So, I think timing your entries is extremely important. But we want to be able to buy stuff that we can hold, right? We want to buy stuff that we can build conviction in, that we can hold for 1- to 3-year periods at least.

Part of the reason I'm excited about applications in this bear market and the potential for the next cycle is that there are a few things here. I think the infrastructure is largely in place, right? We sort of know what the major L1s are going to be: Ethereum and Solana. Maybe we get some more corporate-type chains that are building around L2s and things like that, but it seems clear that the infrastructure is in place. It can support these types of applications that can scale and provide the performance that users need.

8. How to get long the tokenization of all assets

I think that's one thing that makes me excited about apps. The other is what we talked about with token economics and buybacks. If you can find something that has enough traction, a really strong team behind it, good investors, and product-market fit—and they've communicated to the market, “Hey, we're going to take a percentage of our revenues and go back in and buy the token in the open market”—why? Because we've got a really lean, asset-light business. Most traditional businesses could never do this. We're scaling this thing.

I refer to this as fast DeFi: stuff that has high velocity, because that's really what creates the on-chain economics. I think that's part of the reason why SOL outperformed ETH last cycle. I'm looking for stuff that has product-market fit. I like the team. It's on a chain where we know there's plenty of activity and plenty of users, the performance is strong, and then it's going to buy back that token.

If I know it's going to be buying back that token, I'm not as concerned about there being equity holders on the cap table, because you're creating some alignment in terms of where that value is going to accrue. You're telling the market, “We're buying back the token. We're not using that money to do something that may actually create more value for the equity holders versus the token holders themselves.” That's been a lot of the research and, I think, the process of building conviction around this idea.

One of the things I like to hang my hat on in crypto, in both bear markets and bull markets, is the extreme reflexivity of the markets themselves: the amount of users that come in during bull markets and the amount of transaction activity that picks up. We haven't really seen this setup just yet, where you have some of these things that have product-market fit in a bull market, where they're buying back that token and there are tons of new users and lots more activity coming. That means more buybacks, and that reflexivity can get kind of interesting in a bull market. So that's one of the reasons I'm tilting my portfolio a little more toward some of these apps versus Bitcoin and maybe the L1 infrastructure itself.

Yeah, there's so much in there. I want to get more into the token-versus-equity question, but that whole topic is total quicksand, and we could spend a whole podcast just walking through that quagmire. But it rings in my head all the time. That's the first thing I have to ask, because I still think, personally, buybacks are downstream from that problem. If I'm looking foundationally, I have to know what I have.

I think the Venice thing shook a lot of people because it started out as something like, “Oh, look, they didn't raise capital. They launched a token. This is Erik Voorhees. This is kumbaya. This is everything you want and want to see in crypto.” Then, fast-forward a year or whatever it was since they launched the token, and all of a sudden there's an equity sale.

To be an application-token investor, you have to know: How can I get rugged? Are the buybacks enshrined somewhere? We see teams start buybacks, and we see teams stop buybacks. To your point, you have to know the team, but you also have to see some track record of commitment to the buybacks and that they haven't put them on pause willy-nilly.

9. What is fast DeFi and why Michael likes PUMP

Ultimately, I want to get better than that, because we're still in trust-me-bro territory, even if you talk to the founder once a week, know them, and they're a great guy. It's tough, because other investors don't have that connection. So why are they going to buy it if they don't have enshrined rights as well?

Maybe let's talk about some of the other terms you mentioned: fast DeFi, which would also imply that there's slow DeFi. Maybe expand on that a bit. Since I've had a peek into the watchlist, I don't want to give everything away, but would something like LIT, like Lighter's token, or PUMP be considered fast DeFi?

Yes. That's how I think of this. A lot of the work that I was doing in the last bull market was looking at what was happening with Solana. Solana's valuation looked like it was rising toward Ethereum's a little bit, even though Ethereum had multiple times the TVL, stablecoins, applications, and users. Most of the activity was on Ethereum, and there was less of that on Solana, yet Solana was turning that activity over at a much more rapid pace. That was driving transaction fees and MEV, powering the entire ecosystem.

I think that's part of the reason why Solana was rerated last cycle and outperformed. I'm now taking that framework for applications. When I look at something like Pump, which is in our portfolio, I think it's a misunderstood project. I don't want to get too much into the weeds, but my style of investing is to look for things where we think people are misunderstanding a business or applying ideology to a business rather than just observing the market for it.

10. What are the best ways to lose money in crypto?

We're interested in Pump for some of these reasons. We like the fundamentals. A lot of the work we've been doing in the bear market is looking at the activity on Pump, which, if you're not looking there, you probably would assume there's not much going on with memecoins. They're all down 80% or 90%. But there's still been quite a bit of activity on Pump, and it's been doing almost $1 million of revenue per day. That's pretty interesting in a totally risk-off bear market, given what we could see coming.

I consider that fast DeFi because the platform itself incentivizes sniping. It's basically a game where people are trying to get in front of one another and front-run each other, using various trading tools to do that. All of that drives a lot of economics, and they use 50% of their revenues to buy back the token because of this velocity.

I think the same thing about perps. Perps are being traded at 5× the level of spot trading, so that is the preferred product for retail and others to access a lot of these markets. Again, there's high velocity, and I think something like Lighter doing buybacks fits into that fold as well.

If you were to compare that to slow DeFi, there are other relevant projects that are doing really well, something like Morpho, right? It's a lending business doing really well in the bear market. But it's a lending application, so it's not going to have the high velocity of transaction activity that you would have from something that's more of a trading application. I tend to favor the stuff where I can build a thesis around the volume of activity that can play out on that platform, because that's really what's going to drive a lot of the economics.

Michael, one of the points you made there was about Pump. This has been one of the research areas that has, again, shaken me out of my seat—reading your takes and trying to learn from the research you're doing there. I think the part of Pump that I'm wondering if you can shed more light on is this: I think of Pump as a place for, ultimately, the trading of memecoins, or let's just call them newly created tokens.

I think this last bull run really shook my confidence in there being continued demand for new tokens. I feel like the bear market has done its thing. We've seen money reallocate to the majors, but we've also seen this dispersion where HYPE has gone to new highs. We've seen LIT—I don't know if LIT is at new highs, but it's been in a very clear uptrend, following HYPE, here in the last 3 or 4 months.

My one question on Pump is this: I'm following your thesis on fast DeFi there. I'm following your focus on application-specific tokens having the promise to outperform the slower DeFi or L1-type tokens next cycle.

Do they still have a business model that can grow? I'm bearish on creator tokens. I'm bearish on meme-related tokens.

Yep. Yeah, this is a space. As a crypto investor, I have long thought that the intersection of social and crypto would spawn a massive application at some point. We had Zora, which was an Ethereum L2 last cycle. I was on Zora, trying to post content and get a feel for how it works, and I didn't love the idea that every piece of content is a token.

I like the idea that maybe there's a token, but it's not the content itself. There's some sort of integration between social media, attention, and tokens. I think Pump.fun is potentially this app, and I think you have to squint a little bit to see it.

If you go on Pump.fun right now, you're probably going to be turned off. You're probably going to see weird stuff that looks stupid, and people are pumping things and trying to get attention. I view it as a marketplace for people who want to play this game. I view what Pump.fun is offering as a game that people like to play, and it has social elements to it.

You can gamble, do memes, and whatever. I try not to judge it. I just try to observe what is actually going on there. Rather than having an opinion on the people who are using it, I'm just trying to understand why they do it. Nobody's putting a gun to their head, right? Nobody's saying, “Go gamble on this and lose your money.” They're there, they're enjoying it, and some of them must be making money. The application is doing really well.

I try to remove my view of the product itself and just observe the market. I don't know if we're going to get this big super app out of this combination of social and crypto, but to me, meme coins are social crypto. Almost everything around social activity on CT is around meme coin communities.

There are different types. Some of them try to meme into existence a cultish holder base. There are certain coins whose whole thing is “stop trading and believe in something.” This is SPX6900. It's the total opposite of what Pump.fun is doing, but they've memed that into existence. There are people who believe that.

I'd rather just observe it and then look at data to ask whether that meme is actually getting memed into existence by looking at certain data metrics. I try to be open-minded about these things. I don't know what the future of Pump.fun is. I don't think all of these coins being launched, with none of them really accruing value, can go on forever.

But there is a base of users on Pump.fun, and I think a lot of them aren't even really on CT, which is fascinating to me. People on CT are shocked at some of the numbers and fundamentals coming off of Pump.fun. That's telling me that they might be reaching a different audience as well.

I don't know. It's a bit of a ramble, but I find it interesting. I tend to gravitate toward things that are a little contrarian or misunderstood. I like Pump.fun in this bear market because I feel like it checks all those boxes for me, and it has really strong fundamentals. I don't want to ignore that. That's my take on it.

11. Why Michael bought ENA

Yeah, well said. It's a very level-headed approach to it, I think. What other one is on your watch list? I don't want to give away your allocation size or anything, but—

I'm going to keep walking through them piece by piece. So, we're really sorry. We're going to mention all of them.

No, just kidding. This one—both myself and DeFi Dad invested in Ethena pre-TGE a long time ago. This is a “my bags” question that I'm asking you, and I want you to give me good news only here. Anybody who's been paying attention over the last few weeks has seen that the announcements have been insane. All the partnerships are coming together, and they haven't turned on the buyback engine yet. I'm curious what you're seeing with Ethena and what you're excited about.

As an investor, there are a few ways to approach portfolio management and asset selection. We want to be in the areas we've talked about. Fast DeFi is one category, and stablecoins are another category that I want to have exposure to.

There's another thing I tend to look for: things that have done well in a bull market and really made a lot of progress in their first cycle, but then have had a very rough bear market, with the potential for the big comeback story, sort of like Solana from last cycle. I think Ethena fits this very well.

Part of the reason I think it's had such a brutal bear market is that it's a very reflexive type of asset, and demand for USDe really comes from demand for credit coming back. When I start to see demand for active loans, people who want to loop, and people who want to be on-chain and trading, that's when I think USDe will start to see that supply come back.

The token has been very correlated to Bitcoin in bull markets, and demand for USDe is very correlated to Bitcoin. I think it has a chance of being one of these big comeback stories.

The reason for that is they did such a good job of making integrations across basically all of Ethereum DeFi in the last cycle. They've got what I would call a moat in terms of distribution, with all of these partnerships across DeFi. They've added to that in the bear market, as you just mentioned, with some really positive news: a partnership with Coinbase, which means more distribution. I think there's $100 million of demand already for what they're doing with Coinbase.

Then there's the BlackRock announcement, where they're going to be integrating with BlackRock's Aladdin network. To me, they've got an institutional side of the business and a crypto-native side of the business.

The token is trading, I think, down 93% or so right now. If you look at protocol revenues—we have a dashboard that people can check out—part of what I need to be doing as an investor is not just finding things that are already doing buybacks, but asking whether there are projects where I could foresee that they have a cushion in terms of what they're producing versus what they're paying out to the supply side or to run their business.

I think Ethena is potentially one of these businesses that has a cushion in terms of its protocol revenues and the ability to potentially do buybacks or announce them in the future. I think it's checking a lot of these boxes for me. It's in a high-growth stablecoin sector.

The growth of Ethena, in my view, is somewhat tied to the growth of Tether, because Tether users are often taking their Tether and converting it into USDe to get yield. I've seen both founders agree with this idea that they complement each other. I think that's interesting: Tether is the emerging-market stablecoin, and USDe may offer the ability to access yield through it.

This is what goes into my analysis of it. I think it has the potential to outperform, but for me, that's a token that's going to take time. It's going to need really risk-on conditions to come back. That's my view on Ethena. Hopefully that felt good to hear.

12. How Michael ended up with LIT vs HYPE

Absolutely. We do want to get back to broader market takes on what we should be doing more research on by looking into The DeFi Report and looking for things to invest in. I've got to ask you, though, about just one more specific token, and it's one that you're not invested in. You might be one of the most prominent voices not invested in this token.

I was not in the HYPE airdrop. I ended up buying it on the market at a much later date. I have funny stories to tell with Nomadic about how, no matter how low it went, I would always say, “I probably should buy just a little lower.” Ultimately, I ended up buying it at much higher prices.

Happens to the best of us.

Right, yeah. It happens to the best of us. When it comes to Hyperliquid and HYPE, and I look at the criteria that you look to invest in, it seems like it checks a lot of those boxes. I'm curious why you aren't invested in HYPE.

Again, it's less about why you're not invested in HYPE. I think it's an interesting exercise to better understand this: Here's something that looks like Fast DeFi to me. It does have some sort of L1 premium to it, even though I know you're more focused on application-specific tokens.

But then it also is this unicorn of a use case, I think, where all the attention is on the actual perps exchange and the spot exchange. Everything's being rolled up, and they're doing buybacks.

So, anyways, yeah, tell us more about why not HYPE.

The reason I don't own it is because I missed it. Let's just be perfectly honest: I've been watching it. It's one of these tokens that has thrown me off, and I haven't been able to get on the right side of it.

That's kind of how my experience with HYPE has gone. I actually owned it for a very short time. I bought it at around $45 and ended up selling when I exited the market, thinking I'd be able to buy it back between $10 and $20 or so. It came down to about $20. We were recording a podcast and talking about it in January, and I should have just bought it then, right? This is kind of the case of what you were just saying: thinking it was going to go lower.

Then it started rallying, and I didn't want to chase it. That's really the story. I like it and would like to have it in my portfolio, but it sort of ran away from me. Maybe this is a good segue into one of the biggest mistakes I think I've historically made—and I think a lot of investors make—which is chasing things once they get away from you.

Fortunately, what we did was focus on the perps market at the time Hyperliquid was taking off. Nobody was really paying attention to Lighter, even just going back a couple of months, so we were spending a lot of time on Lighter. When I went on to test the onboarding experience and compare it to Hyperliquid, I thought it was a much easier onboarding experience than Hyperliquid's. I thought the functionalities and everything else were pretty much on par.

The fact that it's on the Ethereum ecosystem, where you can anchor all of the accounting of everything that happens on Lighter back to Ethereum, is very interesting. Ethereum is the most secure, decentralized network, whereas Hyperliquid is still more like a Binance-type thing today. Yes, it's decentralized, but there are a small number of validators, so it has these features that made me think, “This is kind of interesting.” The team is really strong, and they have relationships with Robinhood.

We ended up buying LIT and got in pretty much at the lows. It was an example of things actually working out for me where I didn't chase something. I became curious and, with an abundance mindset, found something else. At the time we bought it, we were looking at the LIT-to-HYPE chart, and I thought LIT was at a low and had a decent chance of outperforming HYPE. That's kind of what's happened.

I sort of think both assets are over what I would call fair-value ranges right now. When I look at it—and I've been saying this all bear market, but the price doesn't come down—we've got a dashboard on Hyperliquid, and we cover the entire ecosystem: HyperEVM, HIP-3, and everything. The charts and the fundamentals don't look that different from Solana's or Ethereum's charts. They're holding up better, but revenues are down 50%, open interest is down 50%, and volumes are down 50%.

It's not like it's hitting all-time highs. The token is hitting all-time highs, but the fundamentals aren't. It's more that the narrative has taken off. I think Lighter is in a similar spot: the price action has far exceeded the fundamentals over the last few months. I think it's been more of a narrative and a relative repricing, probably relative to HYPE.

So, anyways, I love both projects. I just ended up with Lighter because I missed HYPE, in some ways, and I'm happy with the way that has transpired.

Dude, that's such a great answer. I feel like we could bring 10 other analysts onto this podcast, and they'd give us some massive word salad about why HYPE is just a failed investment. But no, I love the honesty.

And yeah, man, if I didn't have an entry when I did, that one would have been so hard to catch because, again, it didn't function like any other token in the bear market. DeFi Dad and I have made reference to this. It felt a lot like GMX in 2022, when it was one of the only things really pulling away during that bear, but then it kind of continued to ascend.

To your point about revenue numbers being down, I feel like some people are starting to price in this massive Circle deal that hasn't really hit the tape officially yet. It's like another $200 million to $300 million a year on top of what they're already doing, and then there's the growing HIP-3 activity. It's almost like every week I look and there's a new record for HIP-3 volume. On top of that, their priority fees look to be making an impact on revenues now.

Whenever I think the story is starting to look settled—“Okay, this is what they are”—they pull in a new feature or introduce something else. “Oh, they're also this? Okay, crazy.”

You were alluding to what I don't want to call mistakes, but for anybody listening to this podcast—maybe a newer investor getting into crypto—I think it's worth talking through what they should be looking at, what sectors, and then one thing I want to inject as well is a lesson that I feel like I'm finally learning, even though I've heard people say these words over and over again: bet sizing.

If you have high conviction, you need to put the chips on the table that reflect that conviction. If you hit a 2x on something that you had high conviction on and put some decent capital behind it, that payoff is massive. If you limp in with a little, measly position because you have to spread it over 20 things and don't really know, you can hit a 10x and it's meaningless, which is crazy. You really have to live through that stuff.

13. Key themes in Michael’s portfolio

You mentioned that you want exposure to stablecoins and perps. What other avenues or areas are you looking at? Maybe they're emerging sectors, or maybe you just want to double down. I guess there's also options with Derive, but is there anything else you want to riff on?

Yeah, I think the way I've got the portfolio set up right now is sort of like store of value. We've got Bitcoin and ETH in that sleeve of the portfolio. We don't have any Zcash. I like Zcash, and I like the privacy narrative. We can get into that if you want, but I think that's in a macro-bearish structure, even though it's really held up quite well so far in this bear market.

We've got SOV. We've talked about on-chain perps and options. We talked about stablecoins. I like Circle. At these levels, it's down 65%–75% or so. It's selling off on this news of open USD, which is kind of like a new sort of payments network. They're going to be launching a stablecoin.

I think what's underappreciated with Circle is that they actually have some moats—really strong moats, I think—that are going to be really hard for these new upstarts to eat into. Those moats are basically the liquidity of USDC itself. It's the number 2 stablecoin, it has to play the games with regulators, and it's sort of sitting in that area. It's integrated across 35 blockchains.

I think this is an underappreciated thing about USDC: it has this thing called CCTP, where you can issue USDC and make it portable across all of these chains. So, it's probably the most portable asset. It can move freely across all blockchains, more so than any other asset, even more so than ETH, for example. I think that's interesting and underappreciated in terms of the infrastructure moat they have.

And then they already have Circle Payments Network, which is what open USD is trying to build with institutions: bring them in and incentivize them. And now they’re going to be launching Arc blockchain. So, I see a moat there that I think is going to be hard to overcome. I think Circle is interesting on the stablecoin side.

We talked a little bit about this other category I call consumer retail, fast trading, and social. We have small investments; roughly 6% of our portfolio is in concentrated meme coin bets. I think there are 2 ways to play that. There’s Pump, which I consider more infrastructure on the fast-trading side, and then there are actual meme coin communities. These are obviously high-risk things to get into.

But we’ve actually done pretty well with meme coins in the past. It’s because I’ve always studied them from a data perspective and really tried to understand the holder base. We have dashboards on this, and we’ve come up with a number of metrics to assess the conviction of the holder base.

So then maybe I’ll throw a stat out there. Something we’ve uncovered is that SPX6900—we talked about coin rotation, top buyers, and top-rotating coins that came in at the peak of the market—and its metrics line up with Bitcoin’s in terms of the conviction of the holder base, which is fascinating. You can pair that data up, look at the chart, and say, “Okay, it’s down 80–90%. It looks like there are buyers here.”

Another category is meme coin cults—things that we think have a cult behind them, a marketing department, and are going to work for you. We have small allocations in that area. Then there are crypto financial services. That could be Coinbase or Robinhood. You could potentially put Circle in there, but I put it more in the stablecoin bucket.

Those are the categories that we’ve primarily focused on. One area that I don’t have any exposure to, but that we may look to add to, would be decentralized compute. This could be a Bittensor-type thing. There’s a big bottleneck when it comes to AI inference and the ability to access it without building your own data centers and all of that.

I think that’s interesting, and we’re going to be doing more research in that area. We try to keep the portfolio between 10 and 15 assets, with 15 as the maximum—10 or so assets with high conviction—and really watch them closely. We’re constantly doing research and data analysis around them.

I agree with your point: you’ve got to go in when you find something you have high conviction in and it’s in the depths of the bear market. Put something behind it, because you’re right—you can do a lot better by having conviction than by just spreading your bets. You don’t want to miss any particular token or something.

Michael, one theme that we’ve been very focused on through the lens of the podcast is RWA adoption. We’ve always been very focused on stablecoin adoption and seen that as one of the ultimate product-market fits in DeFi. However, I’m starting to realize—and we’ve almost felt like we’ve been late realizing this—that DeFi has always lived off crypto-native assets like tokenized Bitcoin, ETH, SOL, and HYPE.

So, we have these crypto-native assets that we’re used to seeing trade. If you’re on Hyperliquid, you’re seeing the likes of Bitcoin and HYPE trading at the top of the list in terms of trade volume. We’re finally at a place, it seems, where RWAs—whether it’s a tokenized equity, an ETF, gold, or commodities—are trading on-chain. Commodities obviously blew up in the past year.

We’ve seen a lot of trading of gold perps, silver perps, and copper perps on-chain. Oil as well. We just had Robert Leshner on from Superstate, and I think he framed up the opportunity as DeFi being in an experimental stage years ago, while now we’re at a place where it’s actually ready to tokenize all these real-world assets.

There are 700–800 trillion in assets, depending on how you price them. If we capture a small fraction of that, it would be significant, because we have very little on-chain in comparison right now. So, the takeaway from all of this is that we feel like we figured something out—kind of like when you saw the beginnings of DeFi in 2019 and 2020—and you’re thinking, “Okay, how do I bet on RWA adoption on-chain?”

How are you thinking about that opportunity? Do you bet on something like HOOD or COIN? Do you bet on something like ETH? Do you bet on the application-specific tokens that we’ve discussed here? What are your thoughts there?

Yeah, it’s tricky. Something I’ve been thinking about, and something that I think is interesting here, is the real-world-asset activity. You just went through the list of things that have been trading on Hyperliquid, for example, and I think this actually had a lot to do with how Hyperliquid was performing in the bear market. Oil prices went down, stocks went down, but everybody suddenly wanted to speculate on oil. Where are you going to do that? You went to Hyperliquid.

That’s really interesting with HIP-3, where basically any market can be created and you can have these real-world assets trading there. It’s just a derivative of the asset, but that’s what people want to trade. My view on the real-world-asset thing is that perps could be a better way to express the view, because it’s really hard to actually tokenize all the assets. It’s very easy to just list a derivative of the underlying asset.

It seems like people actually want to trade the derivative more than the actual tokenized stock. I think we will see people who want to trade the stocks themselves, and if you can attach the legal rights to them and pay dividends to wallets and all that, it’s going to get really interesting. But I think real-world-asset activity is going to be expressed in the perps market first.

It’s unclear to me. I think this is one of the hardest sectors to have a clear thesis on in terms of where value is ultimately going to accrue. You could look at the infrastructure: Ethereum has the most real-world assets right now, but where does the value of that trading accrue? Does it go to an L2? Does it go to an app? Is it all going to happen on Robinhood Chain? Is that actually going to create value for ETH holders and things like that?

I think it’s a tricky thing to forecast. Are asset managers going to bring the assets themselves, find a way to tokenize them, and take fees? It’s a tricky area to build conviction in, so I don’t have a clearer view on it. The way I’m playing it is more in the perps market and in crypto financial services, like you said.

Coinbase and Robinhood are places where I think they’ll benefit from all of these assets coming on-chain and offering them. Robinhood being able to do this through Robinhood Chain is particularly interesting.

Michael, we’ve talked a lot on this podcast about ways to make money, but I feel like we probably don’t often talk about ways to avoid losing money. I could have somebody sit beside me while I’m click-clacking away at my computer, and they’d get a pretty good idea of how to lose money. I’m curious if you have any strong takes on managing risk—just how not to lose money in these crypto markets.

I think investing is an incredibly personal thing. Everyone has their own styles and their own ways of doing it, and how they sleep at night is probably the most important thing. Your lifestyle is the most important thing, so it’s about aligning things there.

The foundation of my approach as an investor comes from Charlie Munger, Warren Buffett, and all these investing legends—George Soros, Howard Marks. We read all these books, and summertime is a great time to do that. We spend a lot of time on it.

I love Charlie Munger’s idea of “invert.” He says, “Invert, always invert.” We always think about how to make money, but what’s a way to lose the most amount of money in crypto? If you want to lose the most amount of money in crypto, reframe it that way and think about it from that perspective. We’ve all made mistakes, and it’s all about learning from them.

The best ways to lose money in crypto would be to follow narratives, not understand things from first principles, not anchor yourself to data, and not be able to build conviction in differentiated views. One of the things that’s so frustrating for me when I go on crypto Twitter is that when prices are down, everyone is bearish, and when prices are up, everyone is bullish. There’s very little differentiation. You want to follow the people who are bullish at the bottom and bearish at the top.

You want differentiated views, and you want to look for that in people. So that's one thing: focus on first principles. Failing to do the work—I think what saddens me is that lots of people leave crypto in the bear markets. If you want to lose money, you leave in the bear market and come back in the bull market, right?

You should be doing all the work right now in these bear markets, deeply understanding where the future is going and building conviction. So I think staying in it is a good way to not let that happen to you. One of the things I see in crypto, because of the tribal nature of crypto and crypto networks and communities, is ideology seeping into investment frameworks or investment portfolios. I think that's one of the biggest mistakes that I see.

I talk to people all the time. This comes up for me right now with meme coins in particular, where I talk to sophisticated investors. I love getting feedback, especially when it's a counterview to what I think. And I consistently see people who have an opinion on something, but they don't have an opinion on the market for that thing. Those are 2 completely different things.

You can have an opinion—you don't like meme coins, or you think they're stupid, or they're just gambling. Okay, that's you seeing the world through your eyes. But just see the world as it is. Do lots of people care about these things? I try to frame things outside of what my own bias is, what my own ideology is, and try to observe things.

Second-level thinking is a tricky thing, but there's always another level to get to and to poke holes in your own ideas. I think that's really important. Chasing—we talked about chasing. That's a good way to lose money: missing something and then chasing the asset. Falling in love with assets is a good way to lose money. I see this a lot in crypto.

Failing to hold, right? Failing to have conviction and actually hold. You make your most money by holding for 1, 3, 5, or 10 years in some of these things. So being able to hold and compound your wealth that way.

I think just having an abundance mindset is important. A lot of people have a scarcity mindset. They're trying to get rich quick, and this is a long-term game. You should approach it like it's an endless game and try to have a growth mindset around just getting a little bit better every day. I think that's a great way to approach the markets.

I loved what you said, DeFi Dad, earlier, about getting shaken out of your seat and then paying more attention. I think a lot of people become sort of something—if they see something they disagree with, they get a little bit triggered and then they shut their brain off. When you get triggered by something, you should be like, "It's telling you something." Your subconscious is telling you something, I think. And it's a good excuse to actually go into the areas that maybe you disagree with.

I think a lot of it's psychology and things like that. These are some of the things I try to work on myself as an investor, and just be intellectually honest, right? If you're in something that's not doing what your thesis said, you've got to cut it. You can't just stay anchored to things when they're not working.

That's a little bit of a ramble, but I sometimes do like this idea of inverting things to provide clarity. Not how to make money—how do you lose a lot of money? I think what we've done well is really being broadly on the right side of the market. Managing risk, getting into cash positions at the right time, and then that really sets you up for the next cycle. So it's not easy. If it was easy, everybody would do it, right?

14. 1M price target for BTC and why it’s a portfolio anchor

There were just a few things you mentioned there that had me thinking about Bitcoin for a moment. One is not falling in love with an asset, even though I think most of us who have held Bitcoin for many years continue to see it as a store of value. And then not getting anchored to old ideas, just continuing to play out the same way.

But then there's Bitcoin. It feels like it just continues to repeat this 4-year cycle. I don't want to take us on a tangent—we should probably close out here. But can you give us any final thoughts on why you remain so invested in Bitcoin? I think you've mentioned before it might be your largest holding, or at least one of your larger holdings, given all the great advice you just gave.

I think there can be arguments made that those who have really just stayed the course and said, "This thing is number 1, and it will remain number 1." It's the most accepted digital asset in the world. Whether you agree with its value or not, there's an enormous base of investors in Bitcoin. So, why do you stay long Bitcoin?

Yep. This is a good example of the other thing with investing: holding conflicting thoughts. I just said don't fall in love, but then you have to be able to hold conflicting views at the same time, which is really challenging. For me, the Bitcoin thesis hasn't played out just yet. We've gotten to a level where we have institutions and we've sort of financialized the asset, but it still hasn't played out.

We're at maybe 1% to 2% penetration in terms of people who hold the asset. And I think now we're in a position where we still have the same problems. If you approach this from an accounting perspective of government finances and things like this all around the world, it becomes kind of clear. Then you look at all the wars breaking out around the world, and it just seems so clear to me that Bitcoin is going to slowly keep churning away.

My view on it was that it should get to gold's market cap. That's been a tricky one to chase because gold had a big cycle and its market cap went much higher. But it's my view that Bitcoin should get there. My price target for Bitcoin—I don't really have a timeline on it—but I think it's going to get to $1 million.

And you want to hold that. That's why it's the largest holding: I can have the most conviction in it, and I want to hold that as the benchmark of our portfolio and also the anchor of the portfolio. When I put other capital to work, I have to outperform Bitcoin, which is very hard to do. We've been able to do that in the past cycle by having conviction in a few different things that did really well.

But if you're not outperforming Bitcoin, that's not it. You probably can still outperform the S&P 500 if you're in the right assets. But to do this well, you want to anchor to Bitcoin, and then you want to outperform it when you're placing capital elsewhere.

15. Closing

Well said. We hold a very similar view, so I know Nomatic and I continue to denominate a healthy portion of our portfolio in Bitcoin. Aside from BTC, clearly ETH is always there, but that's a whole other conversation. Michael, I think this is a great place for us to wrap up.

Thank you so much for your time. Thanks for staying over with us. This was great. I wish we could keep you longer, but we'll have to have you back in the future. Any final word for us before you go?

No, I just really enjoyed it. Thank you guys for inviting me on. Really enjoyed the conversation, and hopefully it was helpful for folks out there.