# Up or Down from Here? Bears vs. Bulls

*Author: Ryan Sean Adams*
*Published: Apr 14, 2026*
*Source: https://www.bankless.com/fr/podcast/up-or-down-from-here-bears-vs-bulls*

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## TRANSCRIPT
Ryan Sean Adams:
[0:03] Bankless Nation, I think the most important question for cycle investors is,

Ryan Sean Adams:
[0:08] where is crypto going? Are we going up? Are we going down from here? The market, of course, it's sort of where this battle plays out between bulls and bears. That's how we get the market price is, you know, on a constant basis, the winner of these skirmishes, the winner of these battles. One of the most interesting battles that's happening in the crypto cycle right now is raging now between the bulls and the bears. The bulls think the bottom is in. They think we're done here. The bears think we're still headed for more pain, more dips, more prolonged, I guess, maybe despair.

Ryan Sean Adams:
[0:43] We're going to lay out both cases today. I've got Michael Nato on the podcast. And he, as you guys know, is one of my favorite cycle investors. He's from the TDR podcast. Mike and I usually do these episodes on the TDR podcast. That's a whole separate feed. We publish them on a weekly basis every Wednesday. If you're not tuned into that, go take a minute to subscribe to the TDR podcast. The DeFi Report is called. It's available wherever you listen to podcasts. But the bulls and the bears, they're fighting. It's like almost to a standstill. I would call this maybe the second battle. In fact, that's what you referred to it as, the second battle of this part of the cycle. And I know, Mike, you are team bear right now. What I'm going to ask you to do, though, in this episode, particularly when we get into the bull case, is to steel man the bull argument for us. Like, give us the absolute best version of their points. Because do you think they actually have a point here? Yeah.

Michael Nadeau:
[1:44] I do. I do. I think that, you know, you know, we're going to get into all the details here. But when you look at from a high level perspective, when you look at what we've seen play out so far in this bear market, we're at like a very interesting kind of point of contention here. So I think what we're going to go through in this episode and, you know, it's one of my favorite quotes from Charlie Bunger is you always want to understand the opposing view as good, if not better, as their view. And so that's some of the work that we've been doing is really understand both sides of the equation and then sort of lay out what we think the probabilities are moving forward here.

Ryan Sean Adams:
[2:20] Okay, great. Because I do think sometimes bears can give you the best version

Ryan Sean Adams:
[2:25] of the bull case by putting on a bull hat. So I'm hopeful you do that for us here today. Before we get into today's episode, I want to thank our friends and sponsors over at, okay, Mike, I called this the second major battle of this part of the crypto cycle, but let's define the cycle the way maybe you define it. So we're still in the fourth cycle. Crypto has oscillated bull and bear and there've been booms and busts and there've been four of these so far. And I think the way you define it, we are in the fourth cycle, but we're at the end stage of the fourth cycle. We're in the wealth destruction phase. And that maybe wasn't obvious in, say, November of last year, but I think it's become obvious now that we are in this wealth destruction phase with Bitcoin and other crypto assets trading so far down from their all-time highs. Can you describe the cycle and where we are right now?

Michael Nadeau:
[3:22] Yeah, so this is, you know, kind of a high level sort of framing for how we think about cycles. And if we kind of just take a look at kind of what has transpired here going back to the beginning of the last cycle. Typically, and this started really this where we're saying this started was, you know, at the beginning of 2023. So kind of at the after we saw almost a year long bear market that played out over 2022, eventually that flipped and we had bottomed. And so that's that's the kind of the exercise that we're going through today. But what tends to happen in an early bull, you know, Bitcoin went up 120% or so in 23 and like barely anybody, you know, even noticed it at that point. That took us to, you know, sort of the end of 2023, where we kind of went into the wealth creation phase of the last cycle. That's when the ETFs came out. That is when you see, you know, venture capital activity really picking up across the sector. That's when you see DEX volumes, you know, picking up and people are coming on chain.

Ryan Sean Adams:
[4:24] It's my favorite part. It's the most exciting part.

Michael Nadeau:
[4:26] Yeah. And prices are gapping up and, you know, you can start to see the annual spirits coming back. So that was the wealth creation phase. That took us through really Trump's inauguration in early 2025. And then we went through wealth distribution. That's the part of the cycle where you want to be, you know, leaning a little bit more risk off, you know, looking to build cash positions. Getting ready for the next sort of phase, which is wealth destruction. So we peaked out October of last year, and we're now six months into this kind of bear market cycle. And we've been in this wealth destruction zone going back. Really, we didn't have wealth destruction confirmed until really kind of earlier this year. So that was, you mentioned there's been these kind of like phases where we've had bulls and bears battling. The first phase of that was really December of last year into early parts of this year when we were kind of ranging between 84K or so up to about 97. And then we broke that channel. That's kind of when everybody decided, okay, we are clearly in a bull market or sorry, a bear market now.

Michael Nadeau:
[5:38] And we've been in this structure now where we're trading between low 60s and mid 70s or so for about two and a half months. And so really, the exercise that we're in now is to say, you know, yes, we're in wealth destruction, you should be more bullish now for sure than you were, you know, back in the wealth distribution phase. And we want to be leading bullish. we also are trying to assess where this could ultimately bottom and it's possible we have bottom we'll go through that case today but this to me is the sort of like, But the big picture, what we see now is not what we would expect to see during like a sort of an up phase, right? We're seeing venture capital activity very, very diminished out there. We're going to get into sort of some of the current conditions of what we're seeing out there to give people an idea of if we are in sort of a new regime shift here. But this is kind of the high level. We're very clearly in wealth destruction. The question is, have we bottomed during this phase?

Ryan Sean Adams:
[6:40] Okay. So just to orient us and to maybe summarize that, we are in the fourth of these early bull to wealth destruction cycles, the fourth time this has happened in crypto. And we have various years. This fourth time has played out from January 2023 up until now. And we are in the wealth destruction phase. That's been pretty much confirmed as of, say, January and February this year, although some of the bulls in the last battle were reluctant to capitulate on that. Now I think they have. Now I think the market has admitted that we are in some form of a wealth destruction phase.

Ryan Sean Adams:
[7:18] And the battle lines are now, you know, how long will this last? Or is this the end? Have we bottomed yet? But can you bring us back to, if we're in the second battle of the fourth cycle in the wealth destruction phase, can you bring us back to the first battle when this wasn't obvious? So I know you were calling for, hey, this is wealth destruction. You were saying that back in October, and you were sort of one of few who was actually saying that. Everyone else was saying, this is just a dip. Bring us back to the battle in December and January. January, of course, of this year. What were the bulls saying? And what were their what was their rationale and the reasoning and what were people like you saying on the bearish side?

Michael Nadeau:
[8:02] Yeah, I think if you go back to that period, it was a lot of, I think, probably a lot of the same voices that were saying maybe, you know, this idea of a four-year cycle is going to come to an end at some point. A lot of people thought that was the case, you know, going back to Q4 last year. So, when we kind of had dipped down into the low or the mid-80s or so, I think a lot of people were viewing that as like, this is the buying opportunity. And, you know, there was just a lot of narratives surrounding. I think a lot of people still thought the four-year cycle was basically not a thing. And we're in, you know, 84K is a good buying opportunity.

Michael Nadeau:
[8:40] What I was mostly paying attention to, you know, at that stage of the cycle was just the, you know, I was of the view that if you look at this kind of the big picture here, you know, we've never had a period where we've kind of gone through what I would conclude is like a very good idea. A clean cycle structure where you didn't go into a sort of reset mode. And so I was really just anchoring to the fact that the market structure was lopsided. You had all this new money that had come in over the last year or so. And, you know, if everybody's, if all the money is in the market and the sentiment is still on the side of we're not going into a bear market, that's a pretty interesting indicator to tell you that everybody's deployed, right? Everybody, if someone's saying that we're going higher, they're in the market, right? They've already deployed. And so you can kind of get a feel for like kind of where the structure of the market is. And so we've seen since that time, things have started to reset. So we've seen a lot of that sort of new hot money that came in during kind of the wealth distribution phase. We're starting to see that turnover. We've done a lot of work on Bitcoin market structure, cost basis, you know, holdings, things like that across different cohorts to understand where we're at in that sort of like, you know, top buyers rotating coins to sort of long term, you know, stronger hands.

Michael Nadeau:
[10:03] And that's, you know, we've seen some of that play out. This typically takes about a year to play out. We're six months into it. There's no law that says it has to take a year. But that's really, you know, that's what I was anchoring to at that time. And now the key question is just have we bottomed?

Michael Nadeau:
[10:19] And are we actually potentially in the early bull phase of the next cycle?

Ryan Sean Adams:
[10:26] For some of the nonbelievers out there in the cycle, of which I am no longer one of them, but can you just make the case why is the four-year cycle still undefeated mike some people just don't understand they just say oh you're going back and you're saying history is going to repeat and like but what's the underlying reason what's the rationale like why does it have to be this way is there some structure here to the four-year cycle are you just saying hey it's always happened like this so we're just going to use history to extrapolate because For the non-believer, that's not enough.

Michael Nadeau:
[11:00] Yeah, to me, it shows up in the data. It shows up in what you see in market conditions. And this is very similar to what we see in traditional finance as well. You tend to have four to five-year cycles in the traditional markets. They tend to align with what you see in the formation of a business cycle, right? Interest rates tend to come down. That tends to create demand for loans. People want to access credit. And so you get liquidity conditions starting to improve.

Michael Nadeau:
[11:32] And then that leads to the asset allocation cycle and people rotating from cash into risk assets. And we saw basically everything of what you would expect to see in a normal business cycle play out in TradFi. That same structure works in crypto. It's slightly different, right? In crypto, you're looking more at on-chain activity. You're looking at demand for loans in DeFi. You're looking at DeFi yields typically rising during these periods. And so there's like a reflexivity to all of this that then kicks into sentiment and risk on appetite and all of these things. And there's just seasons. There's just seasons to this. And I just, I just, I almost think it's like biology or, you know, the way to see, I live in the Northeast, we have seasons. It would be very odd to go through winter and then, you know, not have a spring, right? So I sort of view it as like, this is just the way markets work. And there's data that we follow to track this. And then you can tie in the reflexivity, the sentiment, all of that. So to me, this is somewhat of like a law of nature. When someone says the cycle doesn't exist, you're kind of saying like, there's this we're breaking some law of.

Ryan Sean Adams:
[12:43] Nature okay so it's some combination of of liquidity of credit cycles happening in these patterns and also just investor psychology and human psychology which which doesn't change and tends to repeat that said while we may have four seasons sometimes winter time can be milder right i mean you live in kind of the boston area sometimes you guys get some mild winters. Other times it hits you like a blizzard. So that's what we're trying to figure out is what's the winter going to be like? And there's a bullish and bearish side. Let's check in on some of the KPIs around Bitcoin right now and compare them to previous winter times. So we've got the second cycle, which is the 2018 cycle here and the 2022 cycle

Ryan Sean Adams:
[13:31] and now the 2026 low cycle. Where are we on some of the on-chain fair value KPIs that you prioritize?

Michael Nadeau:
[13:40] Yeah. So when we were back, if we go back to sort of when the market was peaking, we were kind of starting to say that it's time to kind of go risk off. We were targeting roughly 65K for Bitcoin and we were arriving at that number based on where we thought some of these important KPI levels would get to. This is just a small snapshot of some things that we look at. But you can see, you know, looking at the 2026 KPI low, Um, we, we've got to some levels that are, are pretty, you know, pretty close to that fair value zone. The price did drop into what we would say is our fair value zone. Um, and so that, that, if you're bullish and you're saying this, the bottom is in, you would look at this and say, well, uh, we got very close to the realized price for Bitcoin, which is kind of a proxy for the kind of cost basis of the network. And those KPI lows were printed in early February. This is before the war started when we had kind of a capitulation on February 5th. That's when these lows were printed. So we got very close to realized price. If you look at the MVRV Z score, that's just another measure of Bitcoin in relation to its realized price.

Ryan Sean Adams:
[14:57] You said we got close, but this is, you know, the low in 2026 was 1.14, whereas the low in 2022 was 0.76, and 2018, 0.70. Shouldn't we expect getting close to be below one, at least on this?

Michael Nadeau:
[15:13] That's what I expect. And this is kind of, you know, we'll get into sort of the bearish view of this. We sort of came into fair value very briefly, and then we've come out of this. And so the question is, are we going to end up capitulating lower? And I think this is really the million-dollar question right now. But you can see we got to levels that... You could form an argument that maybe that's a cycle low. But if you look at the history here, especially just looking at the 2022 cycle, we haven't got to where we would expect there would be this sort of deep value opportunities that tend to come in bear markets.

Ryan Sean Adams:
[15:56] Okay, so then the bulls are basically assuming that this is the mildest winter we've ever had in crypto by a lot. But there is some precedent to that in that each cycle does have a milder winter, doesn't it? But this would just be incredibly mild, I suppose, when you look at the fair value KPIs. How about the S&P? Where does that factor in? That indicates global risk on-ness versus risk off-ness. Yeah, yeah. And how does that shape the view?

Michael Nadeau:
[16:25] This is, well, this is another big question in the markets right now where the S&P is currently trading, you know, almost near all-time highs. And we've seen a period where the VIX was elevated and there's more uncertainty in the markets.

Michael Nadeau:
[16:42] We haven't had like a, what I would say is like a true correction in the traditional markets just yet. There's been quite a bit of dispersion within sectors, within individual assets. We haven't actually seen these indices, you know, come down. And this is the other sort of thing we're looking at just to broadly understand the structure of kind of the broader markets here. And this chart is just showing, you know, we're just going back to the last bear market just to show that the 200-day moving average, like there's a famous quote, Paul Tudor Jones, nothing good happens under the 200-day moving average. You know, when you break that, it's usually not a great sign. We broke it in mid-March on the S&P 500, also on the NASDAQ. We tend to make a retracement move, sometimes multiple retracement moves when you're in a correction or in a bear market. And so we broke it. We've made that retracement move last week. That was during the ceasefire negotiations and the markets sort of kind of from a positioning perspective. It looks like a lot of people took off their hedges and the markets are back into what I would say is like maybe a little bit more of a complacent zone.

Michael Nadeau:
[17:58] We've been looking at, Other indicators, like sort of the surveys, bulls versus bears survey is a good survey to look at for sort of contrarian positioning to understand, you know, where most people are. Again, if everyone's bearish, then that kind of indicates to you that they're out of the market and the likelihood starts to shift towards, you know, you're probably going to go up.

Michael Nadeau:
[18:22] We haven't seen any extreme indicators in terms of people being extremely bearish or extremely euphoric. So we're kind of in a middle zone in terms of bulls, bears surveys on the traditional markets. And this is just the big question. Is the market complacent right now after these recent negotiations? Or are we just sort of like making that initial retracement move before we make another leg down?

Ryan Sean Adams:
[18:49] I mean, even if you look at this chart, Mike, like, so we dip below the 200 day moving average during the tariff scare in April of 2025, but then we quickly rebounded, right? Just like months after and we're on a fantastic track. So the question is, is what's going on right now with Iran and some of the energy crisis surrounding that? Is that more like 2025 tariff scare? Or is it more like the chart in 2022 where we had kind of a dip and then a recovery back to the 200-day and then another dip and then somewhat of a recovery and then another dip, but the trend was lower each time? That's the big question, isn't it?

Michael Nadeau:
[19:29] That's the big question. That's precisely where we're at in this phase right now. We look at global liquidity indicators, things like this, and we think global liquidity has topped and is now in a process of rolling over.

Ryan Sean Adams:
[19:44] Before you get there, though, before you get there, because I know that's kind of the bearish take that you've been sharing on the TDR in our weekly episodes. I would like for you to steel man... As aptly as you can, the bullish perspective on this at this point in the market. You've got a number of different points here. Let's start with the first. The bulls right now are saying the worst of the

Ryan Sean Adams:
[20:09] war in Iran, like the impact on oil prices, all of this, it's already known by the market. And therefore, it's already priced in. And furthermore, if you look at Bitcoin, even if you look at Bitcoin versus something like gold, it's been up since the war started. And markets in general haven't been that affected. I mean, you yourself have talked about this in our weekly episodes that like, well, you know, there's somewhat of a surprise that markets haven't been harder hit. So, Bowles are saying the worst of the war in Iran is over. Can you steelman that?

Michael Nadeau:
[20:44] Yeah, this is the big question. And we've seen most of the fear, I would say, that was getting baked in with people putting on hedges. The VIX was really kind of like almost like in an uptrend, almost looking like a stock for a little while.

Michael Nadeau:
[21:00] And the question here is like, is this more like tariffs last year where we had a significant, we haven't even had a significant correction like we had during tariffs. But once the sort of pressure was off and Trump started to negotiate and the market started to get comfortable that there were going to be some deals struck, That was it. You know, we were kind of off to the races. And this has been a little bit harder to, I think, navigate because it's not as much of a unilateral decision coming from Trump, the Trump administration. There's obviously another player here. There's many other players involved in the Iran conflict. And I think markets have to price in, you know, how long is this going to take to actually be resolved with some sort of certainty that the markets can look at? And what is the disruption going to be to oil prices? And you know my it is very difficult to tell what's going on the news changes every you know every 24 hours it seems like and everyone's really just reacting to to trump tweets um i've been of the mind that like this is a pretty complicated setup over there there's there's quite a bit of um you know different incentives of different countries that are located closer to the action versus what the u.s is doing and i've just kind of been of the mind that this is complicated and it's probably going to take longer to resolve.

Ryan Sean Adams:
[22:26] I know you are, but give me the bull case.

Michael Nadeau:
[22:29] Yeah. Well, the bull case is just saying this is over. It's priced in. Oil prices are at over 100. The market's comfortable with it. Kind of thinks that inflation may rise. The Fed will look through it. The Fed's going to cut and the markets can handle this. I think that's the view if you're, If you're bullish and you're kind of looking at this and just saying it doesn't matter, like the markets are just going to look through this geopolitical conflict. Oil prices can remain elevated, but it will eventually get solved. And, you know, this is a buying opportunity.

Ryan Sean Adams:
[23:07] So the bull cases, it's just like tariffs from last year, right? And including Trump's reaction to it. How about some of the on-chain bull case metrics? So somebody might look at the numbers we just looked at and they might say, from the bullish perspective, Bitcoin has already hit the fair range value, right? You yourself have purchased Bitcoin during this bear market, recognizing the fair value range. We've already seen massive fear in the markets. In fact, the fear and greed has been at bear market lows that we haven't seen since 2022. I mean, you look around sentiment in crypto right now is pretty bad and was particularly bad in February and March of this year. Crypto VCs in full reset mode, right? Capital's drying up. It feels kind of capitulation zoney. I mean, how much worse could it get? Talk about that. I mean, you put your steel man that argument.

Michael Nadeau:
[24:00] Yeah, to me, that's what I would typically expect to see in a bear market conditions. VCs likely having trouble raising fresh capital from investors at this stage of the cycle. The strongest VCs getting access to the best deals in the market. I think that's really kind of the structure we're seeing right now. And that's typical for a bear market.

Michael Nadeau:
[24:25] And the question is just like, what's different here from what we would typically see in a past bear market? One thing that's very different is MicroStrategy has been in the market as a large buyer of Bitcoin. So this is something we did not see in the last bear market. And over $7.6 billion of purchases so far in 2026. And this is mostly related to their ability to raise capital through this new STRC product. And so, you know, is that going to help us? You mentioned it would be sort of unusual to have this muted of a bear market cycle and this fast. Is that something that we should really be putting a lot of focus on because maybe that is shifting the market structure a little bit? And I think if you're a bull, you're pointing at that as one of the main sort of catalysts to say, this is not a normal bear market. It's going to be quick. And there's just more confidence from investors because we know MicroStrategy is in the market buying up the supply.

Ryan Sean Adams:
[25:33] That is what I hear the bull saying. They're saying, okay, this time it is different. And they're pointing to actual data where it is different. I mean, we've never had a MicroStrategy buyer experience. You know, purchasing $7 billion during the depths of a bear market, that's going to make the winter more mild. It has to. And this additional demand in the structure, as well as ETFs, they've been holding up quite well. So, I mean, you mentioned on the bull case, the AUM is down just 5%. So the institutional hands do seem kind of diamond handed. And let's maybe talk about the S&P because there's some points here on the risk on side, which is basically that AI is just getting started. And you could see that in some of the analysts projecting earnings growths. I think that's maybe the strongest case that I'm seeing on the bold perspective coming to the S&P is we've got a 19.2% earning growth potential in Q2. And so PE ratios are coming down. Is that the case? Because profits are so good?

Michael Nadeau:
[26:36] PE ratios are coming down at the same time as analysts are re-rating earnings higher, which is if you're a bull, it's sort of a contrarian bull signal to say, like, look at this, these corporations are strong. They're projecting even stronger growth. And the market's sort of resetting right now. That's a buy signal if you're bullish right now.

Michael Nadeau:
[27:00] And I think that's fair based on what we're seeing. I will just say that those analysts' estimates are really more focused on the companies themselves, you know, looking at the financials of the company, looking at, you know, margins and product growth. And maybe a little bit less focused on the macroeconomic setup, oil prices, all of those other things. So just keep that in mind.

Ryan Sean Adams:
[27:23] Totally. The other thing to keep in mind, too, is these earnings are driven from strong demand for compute in the form of AI. And we are seeing daily, if not like weekly and daily miracles coming from the AI sector. I don't know if you've seen Anthropics revenue curves. right it's just absolutely insane their their rate of growth recently and this is um actual real revenue from companies outside of ai actually paying anthropic presumably because they're getting getting some value from it like i don't know what my daily spend in tokens is but um i mean i'm i'm using i'm using ai tools in my daily life and like uh quite a bit and i imagine many others are as well. So we're kind of seeing that, that the AI demand could be just getting started if they continue to make these breakthroughs.

Michael Nadeau:
[28:14] Yeah, agreed. And the demand is there and there's almost no supply of compute right now. So this is kind of strengthening, I think, the AI case right now. Last week, we saw almost a further capitulation from kind of the SaaS sector in the market. So, There's plenty to be bullish here. I think that's kind of the point here of laying out these bullet points is there are a few things that are different this cycle. We talked about microstrategy. We talked about the ETFs. Those things are different. We have strong earnings projections coming. We have this AI story that doesn't seem to be losing steam. So there's plenty here, I think, if you're of the mind that we've bottomed, that you could anchor to.

Ryan Sean Adams:
[29:00] All right. Now I'm going to let you go full bear mode on us, Mike, and maybe lay this out. You probably want to start with the global liquidity story because I think that's one of the anchors of the bear thesis right now. Tell us about that.

Michael Nadeau:
[29:16] Yeah. So this is following the work that Michael Howell does. We don't track this stuff internally. We use a lot of the indexes that he puts out. I think this has been the highest signal indicator for global liquidity that I've come across. And it's factoring in everything that the major central banks are doing. It's factoring in treasury liquidity, which is increasingly impacting financial markets. It's factoring in bond market volatility, all of these things. And it looks like we've peaked and we're now kind of in what looks like a, you know, somewhat of a secular decline. These declines or just really the marginal growth stalling tends to, you know, take about a year or so to play out. And we're about 1% off the peak.

Michael Nadeau:
[30:06] When you think about sort of what's the catalyst for this to potentially just go back up, I think you would have to have a view that the Fed is going to be easing potentially aggressively, or there's going to be some sort of fiscal support. We're not really seeing anything on the fiscal side that's making us think that there's any type of regime shift. And then you look at the other major central banks and you're starting to see hikes get priced in in the UK, in the Eurozone. And so, you know, this framework to me is pointing towards liquidity has peaked and there tends to be about a six month lag in terms of how that impacts the traditional markets. There's a closer lag with Bitcoin. Bitcoin is much more sensitive to liquidity. So we've already seen this really impact Bitcoin, I believe. And six-month lag for the traditional markets, we're coming into that zone where you would expect it to potentially start to impact the crypto markets. On the next chart down here, we just have a little bit more on what we're seeing, just how this typically plays out with Bitcoin.

Michael Nadeau:
[31:20] Historically, Bitcoin peaks before these liquidity cycles peak. And we've seen that. We saw that this cycle, we saw it in the past two cycles as well. And it's taken about a year or so for the liquidity cycle to play out. Bitcoin then tends to bottom, sort of at the bottom of that, of the trough of that. And so the question here is just, is this view correct? That liquidity has peaked, you know, oil prices, I think you have to have a view that the Fed is not going to be able to cut rates, Oil prices are, you know, hurting consumption in the market and that's hurting liquidity. Inflation is rising. And then when you look at the major central banks around the world, we don't see like a sort of forecast that we can project in rate cuts and more liquidity. Not seeing like a ton of demand for loans, you know, from the banking sector as well. And so that's kind of the view is like, if this has peaked over and this is correct, impact then this should take a little bit of time to play out and this this should impact uh financial.

Ryan Sean Adams:
[32:22] Markets and there's some stacking cycle faith here right michael howell's framework is is based on what like five to six year cycles global liquidity cycles and in fact that might be the underlying driver of what we're seeing uh in crypto you know to begin with so um you got to rank that with with some importance in the model here how about the fiscal story yeah

Michael Nadeau:
[32:43] This is just focusing on fiscal in the US. This is through Applied MMT, which does some good work here. And we've done a decent amount of work on kind of just understanding MMT and how that impacts markets, not from a kind of political philosophical framework, but just how does fiscal impact markets?

Ryan Sean Adams:
[33:01] By MMT, you're talking about modern monetary theory, which is basically like massive fiscal deficits to kind of juice spending in the economy, right? It's just big government spending.

Michael Nadeau:
[33:13] Correct. Correct. It's sort of, I think a lot of people sort of frame that as a economic philosophy or a political philosophy. I've sort of focused on this more just to understand how fiscal spending, how government finance impacts financial markets. And so, as you can see in the.

Michael Nadeau:
[33:32] The red, more smooth line is a moving average of the fiscal impulse and kind of the change year over year. And then the blue line is Bitcoin change year over year. And we can see like there's a pretty interesting correlation between, you know, what's happening with the treasury, how much money is coming out and being pushed into markets through the government.

Michael Nadeau:
[33:56] And we've been talking about this even going back to when we were turning risk off back in September, October of last year, that we didn't see, you know, we thought fiscal was sort of, you know, we're still running large deficits. We're not saying that we're like balancing the budget, but just on the margin, we're seeing that kind of roll over. And this chart, I think, visualizes that really well. You know, what would it take for this to sort of shift into a new regime? And we do have some catalysts for that. And that's really the war in Iran, And I think I saw the Trump administration has already requested a $1.5 trillion military budget for FY27. So, you know, that kind of aligns with our view that this conflict in Iran is going to take much longer. It looks like the Trump administration is preparing for that, requesting lots of capital. So if we did see like more volatility in the markets, I would expect like a massive spending package to come out. if the war escalates, and that would be probably a really good buying opportunity because it's telling you that they're going to start printing money again. We think the Fed is going to be able to cut at some point as well. And that's kind of the potential setup. But what we're looking at right now is just, there's really no impulse coming from the fiscal side.

Ryan Sean Adams:
[35:20] So fiscal spending growth is down, and particularly it's down relative to the 2021 period in time. And there would have to be some catalyst to propel that up, which you maybe can see on the horizon, something like the Iran war might be part of that. What about the current market conditions that you're seeing?

Michael Nadeau:
[35:37] Yes. Yeah. So we can just kind of probably go through these pretty quickly. But, you know, even last week, just I'm starting to see, just on the timeline, on crypto Twitter, I'm seeing tweets, you know, telling people to get ready for a melt up, you know, like the type of stuff that you would see in the early bull period, or sorry, maybe even the wealth creation period. And so I think that's a little premature based on what I'm seeing in the on-chain data. This is a chart of just showing spot volumes. And we can see on the right side there, this is a 30-day moving average, but there is very little activity on the Bitcoin blockchain right now. Transactions are very, very low.

Michael Nadeau:
[36:23] Spot volumes, even on centralized exchanges, are very, very low. We're back to levels that we saw deep into the last bear market.

Michael Nadeau:
[36:31] And volatility tends to pick up later, later in these cycles, we can see, you know, massive spike in volatility in the middle of the chart there. That was when Bitcoin started to, you know, capitulate into, you know, the 20 to 30k range is when we saw volatility really increase. And so that to me, we mentioned we're about six months into this.

Michael Nadeau:
[36:53] Volatility started to really pick up about six months into the last bear market. That could be to the upside as well. It doesn't have to be, you know, to the downside. But to me, like, I'm just not seeing any signs of just like lots of, you know, trading volumes, anything that would indicate that there's some sort of regime shift here. And, you know, if we look at the perpetual funding rates, it's another way to just assess, you know, the sentiment amongst traders and who's putting on leverage. We don't see any signs of, you know, people trying to really go long in the perps markets right now. So what I am seeing is that funding rates on positive days so far this year have been lower than funding rates on positive days in 2022, which just kind of confirms to me like where this is a bear market structure that I'm seeing. And some of these indicators are not seeing like this pent up demand and that people are confident the bottom's in and they're going long.

Michael Nadeau:
[37:57] And this, yeah, this one is just, again, on-chain indicator. Solana was where sort of fast DeFi was playing out in the last cycle. And again, looking at just like, is there signs of life on-chain? Does it look like there's demand to get on to DEXs and get active loans going and all that? I'm just not, I'm really not seeing that. That indicator looks like it's at levels last seen in 2023. And then, you know, if you wanted to look at the kind of animal spirits, kind of a mean coin sector, this is Solana bonding curve revenue. So this is the launch pads and the amount of tokens, you know, coming off of those and then the trading activity of those tokens. Again, not really seeing any any uptick here. It's kind of been in a steady downtrend, similar to levels we saw, you know, back in 24.

Ryan Sean Adams:
[38:50] So how would you summarize the bearish perspective then? Like give us the full Michael Nato bear case. And when I say bear, by the way, recognizing that, you know, maybe folks are new to some of your work, you're not a perma bear. You are long term, incredibly bullish, the entire crypto asset class. You're just playing the cycle. So long term, I think I've heard you say, you know, Bitcoin to a million, right? Long term. But in the short run, if you're playing these cycles, you're still bearish. So give us the reason if you were to summarize all this.

Michael Nadeau:
[39:24] Yeah, and I don't want people to take away to be that I'm like, super bearish here. Like, I want to be clear that we are in the stage of the cycle that you want to be buying, you don't want to be selling at this part of the cycle. So I don't want, what I'm trying to do is assess, you know, are we going lower is really kind of where I'm at. And so if you're to take the perspective that we haven't bottomed, I think what you would be looking at is that we looked at some of those kind of cycle-to-cycle metrics. And while we have, you know, the price did come into the fair value zone, we have not hit any of the sort of what you would expect to see from a deep value metric perspective. So that's one thing. Realized price, 200-week moving average, those types of indicators have not hit what we typically see in a bear market.

Michael Nadeau:
[40:13] The other thing that we spend a lot of time on is market structure and really paying attention to the amount of coins that get bought up at the later stages of the bull market. And then we're monitoring those wallet cohorts to try to understand, you know, how much of that has reset. And we haven't seen a full reset of that. I think part of this is there's just the length of the cycle. It takes time for that to play out. We're about six months in. This process typically takes about a year to play out. So we haven't seen a full turnover there. We talked about just from the broad, you know, kind of liquidity perspective, we don't see the catalyst here for, you know, monetary impulse or fiscal impulse. And we know that we do have an ongoing conflict in Iran that, It could could end tomorrow. It could escalate further. We don't we don't know what's going to happen there.

Michael Nadeau:
[41:10] So you have that uncertainty still still sitting out there. We talked about just the, you know, kind of the broad business cycle, asset allocation cycle. Like my view is that we are late stage from the traditional finance perspective of that cycle. I know some people are pointing at the ISM, which has been above 50 now for three straight months and saying, oh, this looks like it's actually the start of a new business cycle. I think if you look at under the hood of some of that data, it's much less bullish than you would think. And I'm mostly looking at just the actual employment data within the manufacturing sector, within the services sector. We haven't seen that inflect and there's I won't get into all the details of that but I'm sort of fading this idea that the ISM is telling us we're going into a new, business cycle we know inflation, the inflation data wasn't great last week, that's making it hard for the Fed to come in and cut rates.

Michael Nadeau:
[42:13] We talked about the BC cycle, that's a reset mode, BCs are starting to allocate but it's not uh, It's just typically what you would see kind of at the bottom, you know, at what you think is, you know, bear market conditions. And then, of course, you know, there's there's also other concerns within the private credit markets. You know, we've seen, you know, LPs trying to get out of funds, getting gated, trying to get out of funds. And so there's still there's still a decent amount of uncertainty out there. We don't see these impulses to tell us that we've bottomed and that we're going to go into a new regime shift here.

Michael Nadeau:
[42:55] And we know that this typically takes about a year or so to play out. We're about six months into it. So that's kind of, I guess, the offset to the bull case. And I mean, I think if you hear both sides, you can see why we're saying this is a battle between bulls and bears right now.

Ryan Sean Adams:
[43:13] Yeah, I can totally see that. Say more about your response to the bullish perspective on the war in Iran. So the bullish perspective, just to remind our audiences, basically the worst of the war is over. That's already been reflected in market price. Look, by the way, Bitcoin is up since the war started. The market's already absorbed that, factored it in. It's already baked into the model. What's your bear response to that?

Michael Nadeau:
[43:42] The bare response to that is that... Oil prices, so Bloomberg has done some work on this in terms of just like the impact that higher oil prices have on consumption in the economy. And about a $10 increase in the oil price equates to about a 30 basis point decline in consumption. And so if you have $100 oil or so, and it just kind of stays at that level for a long enough period of time, that's likely to pull about, you know, 1% of GDP out of the consumption economy. So I think that's something to pay attention to. The offset of that is that, you know, we've seen some of these, what it looks like is a lot of the oil tankers, you know, in Asian markets,

Michael Nadeau:
[44:28] other parts of the world are now rerouting and coming to the U.S. And heading towards the Texas area to fill up their tanks. And that's good for the kind of like, you know, main street economy and the oil sector, industrial sector in the US. So you're kind of, you know, maybe you're hurting the consumer in the US and consumption, but we're sort of boosting, you know, kind of the real economy. And so that can be a bit of an offset there. Um, but I think, you know, to me, it's, it's really about how long does this go on? Does it escalate? And how does that bleed into inflation?

Ryan Sean Adams:
[45:04] But address, address that piece, because I think that the, the bold perspective is like Trump kind of wants out of this war, just like the tariffs, there's going to be a back down. Like you can totally tell he's trying to, you know, we do have a two week, I guess, piece. I don't, I don't know what's going to be negotiated. But the idea that Trump doesn't want this, he's going to back out. He's pretty good with not being swayed too much by sunk cost fallacy. He's not going to just stay there for the sake of staying there. He's just going to go move on, maybe pretend it didn't happen, something. He's going to find a way out. That's been how he operates, is what the bull would say, and that's what we saw with tariffs. Why do you think that wouldn't be the case here?

Michael Nadeau:
[45:46] Well, partly because it's not a unilateral decision from him. And I think what I'm starting to pay more attention to is just what are these other countries starting to do as we're starting to see, you know, how is NATO? Is NATO getting involved right now? Are they going to start blocking the strait with us? Is that an escalation? How do markets perceive that? But we're seeing moves from, you know, people that may want to support Iran's position, you know, China supplying weapons to Iran. We've seen Trump come out and tweet, if they give them weapons, we're going to, you know, start tariffing 50% on China. So that's an escalation now of the trade war, which is still ongoing, you know, in the background here. So to me, that's, you know, I was pretty bearish on sort of the setup of the economy before this conflict started. So like I'm paying less attention to this. I think if this is like you're, if you think the war is the only thing that matters, then you're missing like that, what the structure of the economy was before the war started and we've done more damage to it. And so, you know, I'm not putting as much emphasis on like, oh, if the war is over, then we're just going to go into a bull market.

Ryan Sean Adams:
[47:05] There is still the thing I think you have to contend with, you know, being more bearish, which is the AI miracle. And we did talk on the bull case about this massive demand for AI, you know, Anthropic with its Mythos model, which is so powerful, can't even release it. That just the revenue climb of these AI companies has been spectacular. Big tech companies still have pretty strong balance sheets and they're deploying it into what looks to be a revolutionary technology. Maybe the one thing to look at is just AI. And Ron, it doesn't matter. All these other things don't matter for the market just because AI is so strong. What's your counter to that?

Michael Nadeau:
[47:51] I think the AI sector can do well. What's fascinating about this is that the MAG-7 has been weak while this is going on. So... To me, like that, that can be true and you can still have asset prices coming down. Like it doesn't, it doesn't just because we're seeing that demand doesn't tell them, doesn't, doesn't mean that the liquidity cycle is going to inflect and some of these other important factors in the market are going to support that. But so, yeah, I mean, I think it's really good that we're seeing that, but it doesn't, it's not just like a, you know, a green light to me to say, okay, the economy is healthy. You know, it's time to, it's time to be, you know, be full on risk mode, risk on mode. And like I'm saying, you know, we, to me, this is like a time where you should be leaning towards being in the market versus out of the market. What I'm trying to do is align my portfolio with what I think the probabilities are that we've sort of gone to what, you know, I think is potentially deep value zone for Bitcoin and some of these other crypto assets that we're tracking. But yeah, it's, I mean, this is probably the most difficult episode that we've produced together because I think it's, you could probably see even the way I'm answering all of these questions, it is a very difficult market to navigate right now.

Michael Nadeau:
[49:19] And, yeah, we're very divided, I would say. And one thing that I would say, just to add on to this, is like, if we're seeing people becoming more and more convinced that the bottom is in, and I still have fairly strong views on some of these other things we've talked about, that's an important piece of information that everybody has bought in. Right. So now, you know, if everyone, if the structure and what you're seeing in sentiment is at the bottom is in, but the price hasn't actually like come too far off the lows, that it's telling you everybody's allocated. And then if Bitcoin, let's say Bitcoin goes up to 80K or so, which is very possible, right? I don't have strong views on what can happen in the short term. But if we do see Bitcoin start to creep back up, that sentiment will get even stronger that the bottom was in. And that's, and if I still have strong views that we haven't actually, the market structure hasn't, you know, rotated from weak hands to strong hands and what we expect to see throughout a bear market hasn't actually played out and everyone's sort of going all in again. It kind of, that's the setup that takes you back to like Q4 of last year where

Michael Nadeau:
[50:36] everyone's in expecting to go higher.

Ryan Sean Adams:
[50:38] So Mike, what's your probability that we'll get another dip versus the bottom is in? So I guess the probability that we've seen the bottom already and the bottom's in versus we haven't seen the bottom yet, we're going to dip further still. How would you weight the probability there?

Michael Nadeau:
[51:00] I think it's really close. I've been trying to align my portfolio with my view on that, and I'm still of the mind that the probability still points towards that Bitcoin hasn't actually hit its cycle low. It would be odd for me, for me to, for Bitcoin to hit that low as fast as it did as early in a cycle as it has. And also without being able to have any conviction on like a shift in the liquidity, you know, structure out there. It would just be, it would be a bit of an anomaly for me to...

Ryan Sean Adams:
[51:35] So is that like 60-40 to you or is it more like 80-20 in terms of probability?

Michael Nadeau:
[51:40] More like 60-40. More like 60-40.

Ryan Sean Adams:
[51:42] More like 60-40. So you really are on kind of the cusp of not being quite sure where we are in this market. Yep.

Michael Nadeau:
[51:50] Yet at some point, like at some point we will have hit the low and... You know, that's it. It's in. And you got to start to be more in a risk on stance. And like, we don't know if we've hit that. And I just don't think we have. And the more people that disagree with me, you know, that gives me like more conviction that we probably haven't hit the low because everything else that I would look for hasn't really played out.

Ryan Sean Adams:
[52:16] Is it harder to time the highs or the lows or the lows? And like, I guess, do you even have to decide. What's a sensible way to play this if you're 60-40?

Michael Nadeau:
[52:25] A sensible way to play this, I think for the average person out there, is just to be scaling in. Have a list of what we do is we have a list of things that we want to buy. We have targets on what we think are fair value and deep value ranges for those. And start to scale in when you think the probability of one year, two year, three-year returns is in your favor so i mean i'm i'm we we spend a lot of time on this so i'm probably being more cute than the average investor should try to be and probably should just be you know scaling in just averaging into the things that you that you think are um the the best place for the next the next cycle i'm i i'm sort of trying to hit the home run and we've got a little bit more of like a warren buffett approach like i want to buy capitulation like

Michael Nadeau:
[53:15] we were buying in early February because the market was capitulating. And that's when I want to be buying. I don't want to be buying when I, you know, everyone's starting to turn bullish. And like, I still think that there's more time for this to kind of play out.

Ryan Sean Adams:
[53:30] So Bankless listeners, if you want to hear the scaling in journey, as I said, Mike and I publish weekly episodes every Wednesday. The next one's going to come out on this Wednesday. To get that, go subscribe to the DeFi report as well. Spotify, YouTube, Apple, wherever you consume podcasts, you can find that. What's coming up This Wednesday on the DeFi report, what report are you dropping?

Michael Nadeau:
[53:52] Yeah, so every Wednesday, that's our TDR Pro report where we go through market structure and we go through just kind of like how we assess the probability of like deep value and stuff. So one thing that we track is a lot of these important KPIs and we track what the one, two, three year forward looking returns could look like based on historical analysis. And we've done some analysis on tracking as we kind of came down in the bear market as we hit those levels, okay, this is what your forward-looking returns look like. The other way to do that analysis is to actually assume that you're coming out of the trough and you're hitting those KPIs now. So what do those forward-looking returns look like if you're actually inflecting into a bull market stage? So we'll have some analysis on that. And yeah, just always anchored to data, market structure, and a lot of this cycle type of analysis that we put out.

Ryan Sean Adams:
[54:50] I can't wait to do that with you on Wednesday. I guess that's the, we get to see the ROI, the numbers for being patient. What are the rewards to an investor for buying in fair value and deep value territory? Mike, thanks so much for joining us today. This has been great. Bankless listeners, gotta let you know, of course, we don't truly know where the market is headed. None of this has been financial advice. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.