The Rotation Begins: Why Altseason Might Be Real This Time

Bankless Nation, the question today, are we headed for an alt season meltup? Man, I sure hope we are. We've got Michael Nato on the podcast. Mike, how you doing? I'm doing great, Ryan. How are you? Ah, I'm doing pretty well. You know what? I'm I'm I'm wondering if a lot of people listening to this episode on Bank list are kind of like, have you seen this Vince McMahon meme? So, uh, for those who can't see, this is this is a tweet. Wow, Bitcoin is all-time high. You must be so rich. Me with 99% of my net worth in alts and it's Vince McMahon

and he's just crying because he's not getting that upside. I'm wondering how many people are feeling like this meme right now. Mike, I think a lot of people are. I think a lot of people are. You know, ETH made a pretty big move uh a few weeks ago and it looked like BTC dominance may have been peaking. Um we've seen Bitcoin Diamonds actually sort of come back a little bit uh since it fell after the ETH rise. But yeah, a lot of people out there uh ready for alt season. I think there's a lot of animal spirits kind of ready to to come roaring back. So excited to talk about it today.

Yeah, we'll get into it. Mike's got a lot of data points around this and I I know it's something that you've been studied. You know what we should do is we should just tee up this episode before we get into the alt season conversation. So Mike's been on the episode before on bank list before a number of times. And uh Michael is the founder of the DeFi Report, which is my number one destination when I want to read reports about like crypto fundamentals, what's really going on. And we've actually partnered with Mike to bring these episodes to you every

single month. So if you want to think about this episode, this is an episode about crypto fundamentals. And Mike and I are going to be recording this and we're going to be uh providing this episode on the Banklist podcast feed on the last Tuesday of every month. We're going to bring these episodes to you with kind of a fundamentals analysis. Mike, I'm wondering if you could give folks a taste for like what how you think about crypto as an asset class and when I say the word fundamentals, what that actually means for you. I've been

at this since 21 uh trying to understand how value occurs through these networks and I think the only way to do that is to be really really deep uh in the data and to be thinking uniquely about valuation. Um it's been interesting to see like this topic of real economic value you know getting hot on crypto Twitter very cool for me to see. I've been very focused on on fundamentals and so yeah for me I mean how do I how do I think of this? It's really um data driven. you know, everything for us, it starts with data and then we kind of build our thesis from there. So, super

excited to do this this show with you and get into a lot of this really deep data that that we cover in a lot of our our research. Certainly, crypto is like super data rich and we're still early on the journey of fundamentals. I I know you and I have talked about this uh analogy before, right? That this idea of like, well, what did the early uh US equities market actually look like? And when we think about fundamentals and equities, where did those actually come from? Uh, you know, someone like Warren Buffett, okay, so he bought his first stock, he was like 11 years old. It was

1942. And at that point in time, there was really no concept of fundamental valuation for a stock, for an equity. The idea of discounted cash flow had just come out in like 1938, something like that. And it was this esoteric book, but the consensus narrative around most stocks at that time was that they just they just traded on narratives. It was like kind of animal spirits like discounted cash flow of like uh discounted future cash flow like what even is that? And over the decades to come, as equities and stocks really

matured, there started to be a consensus view on what fundamentals actually look like for the asset class of stocks. And of course, people like Warren Buffett played this game very well and bought things for cheap uh and bought assets that had strong fundamentals at very low valuations. And he is the most notable successful equities investor in history. As a result, it feels like we're still in the 1940s. let's say with respect to crypto fundamentals 100%. I think that's

a really good uh way to think of this and you know I think one something that's really interesting about crypto is you can go back and look at past industries as they were emerging and see tons of parallels and I think you know in terms of valuation we see this uh in terms of how do we value these things what are the key KPIs that investors should be looking at how is the market eventually going to sort of converge on consensus or a social construct around valuation you know that certainly has not happened yet and it's been mostly speculation and that's just normal.

That's how any industry forms. Um and so we mostly see speculation um and a lot of sort of relative valuation based on Bitcoin and its you know its sort of store of value and comparing that to digital to gold. Um so you know I think over time we're going to see the market start to kind of converge on a key set of KPIs to do relative valuation for specific assets, specific sectors. Um, and this is just going to evolve over time, but I think it's important for people to realize

that, you know, DCF is a social construct, right? That's something that Benjamin Graham sort of brought forward in the 1930s, and it's some it's really just the market saying, okay, we think this is the best way to do relative valuation of of equities. Um, and so the market converged on that. That does not mean that that is how crypto is ultimately going to converge. This has been a hot topic. uh people, you know, have sort of divergent opinions on this. In my opinion, it's going to be a combination of, you know, sort of cash

flow and some other KPIs that, you know, we we can get into on this show. Um, but that's kind of how I think of it. We are in the process of figuring this out and achieving consensus, which will become the new sort of valuation criteria. So, if you guys are trying to get a sense of what Mike and I are going to do in these episodes, which again is going to be every last Tuesday of every month is basically we're going to be on a quest to uh figure out what the fundamentals in crypto truly are. We'll be looking at a lot of charts, looking at a lot of uh onchain data, open-minded, but also like

trying to figure it out aggressively. And um this is going to be very datadriven because Mike brings a you know like mindset and a set of skills with respect to analytics that David and myself just don't have on Bank list. And so we're going to be looking at uh just in-depth charts, the data every single episode. And another thing I I should say, Mike, is I I think your orientation to crypto is is similar to ours at Banklist, which is longer term time horizons, right? So again, this is the

spirit of Warren Buffett. What is what is B was Buffett a trader? No, he was a buy and hold investor. He bought things for cheap based on the fundamentals and then he held them. You know, we've not really been I'm not a success. I'm not a good trader, Mike. Okay. And so I prefer Yeah. Okay. So, what's your time horizon when you think about fundamentals as applied to crypto? And when we even think about these episodes, uh are we talking about like weeks to months to years holding time periods or like how

how do you structure your own portfolio? Yeah, this is this is super important. I think a lot of people come into crypto because they they want to get rich quick, right? That's kind of usually the first thing that sparks the curiosity and then you start learning. Um we that is, you know, I don't think that's the right approach uh to come into this. I think you want to deeply understand what these things are. Um, if you do deeply understand what they are, then you can start to think about, okay, what is fair value for these things, how can we start to look at data to determine where that

fair value is, build a thesis, a really strong thesis with conviction and then, you know, buy assets and hold them for for years on end. But that's really my my style is to basically have a set of data that we are always monitoring to figure out where we are kind of in the cycle. Like we tend to have these these cycles which are evolving uh as crypto matures as a as an asset class. Um but it's really deeply understanding where you're at in the cycle and then com combining that with fundamental analysis of specific assets, developing

conviction and then buying, you know, backing the truck up when you think it's time to do that and then holding for for long periods of time. So, that's that's the style. I love it. All right. So, if you're into data, onchain data, if you're into fundamentals and uh long-term holding horizons for this asset class that we call crypto, this is what you know, you're you're the listener that these episodes were really built for. And one other thing I'll add is Mike, at the end of every single episode that we do together, I'm going to ask you what positions you're taking. Okay? What are the Mike Nato bags? and

uh you know what have you decided to allocate to and and change your position on on a month-to-month basis. So, I guess there'll be some copy trade uh opportunities for folks, although I don't think you'll be able to copy Mike NATO's conviction around these assets, but you can certainly read the analysis that went into them. So, uh with that, we should get into the topic of today's episode, which is my question to you and a title of a recent report that you put out. Are we heading for an alt season

meltup? Okay. And before we address this question, I guess when when someone says alt season or alts, what what does that mean to you? Is that everything aside from Bitcoin essentially or is it, you know, collection of assets? Yes. Yeah, that's important to kind of define like what is alt season. So I I think of alt season as a period in time where the for every new dollar that comes into crypto more than 50% of that is going to assets outside of Bitcoin. Right? So so historically you know Bitcoin's dominance is around 65%. Historically in

cycles Bitcoin is sort of the leads the market. Um and you see the altcoin market tend to follow. Um but you do get like a key inflection point typically uh in these cycles. that tends to come towards in the last year of the cycle. Um there's a few other factors uh that we look look at in terms of like macroeconomics, liquidity conditions um and just sort of like market sentiment to determine like when is that sort of nearing. Um but I think we are sort of nearing this point where we are going to

see this rotation. Bitcoin has shown a ton of uh strength uh of late, but we have seen some interesting signals in the market that that is potentially going to shift here. So Mike, for people who haven't been here in previous crypto cycles, right? Like I guess um when we talk about these things in cycles, we're saying that this has happened before. So, in other, you know, periods of time, I don't know if you'd say four-year periods of time or something like that, we've seen Bitcoin dominance increase

and then we've seen it decrease relative to other assets, which implies the other alternative assets are increasing a substantial amount um after a Bitcoin runup. But it's not it's not clear to me like why all of this should play out in repeating fractal cycles, right? It's like do we like is that how do we know that just because it's played out the last you know three or four times this way? Yeah. Like why is this time not different? Why are we even assuming that there'd be a cycle to any of these things at all? Yeah. I think it's a fantastic question and you know there's

this like this saying like you know history doesn't repeat it rhymes. You know I kind of think of it more like history doesn't repeat but human behavior uh repeats. And so, you know, if you tend to believe something based on how it's played out in the past and everyone sort of has a similar view, then it becomes sort of this self-fulfilling prophecy. And so, I think that that certainly plays into it. And I like to sort of think about my own psychology as as as an investor as well and think about how that applies to the

broader market. And like, you know, we can get into, you know, kind of what I'm doing later in the show, but for for myself, I'm not as interested in Bitcoin at this stage of the of the cycle right now because I think there's potentially larger gains to be had farther out the risk curve. Um, and so I kind of apply that to the rest of the market as well. Most people in crypto have a a fairly large percentage of their portfolio in Bitcoin. if you've already had a significant gains on those, the market's heating up, it just makes sense that

people want to rotate and just capture, you know, the end of the cycle in some riskier assets and have some fun. And I just think that's sort of why it tends to to repeat. Imagine if your checking account and DeFi wallet finally spoke the same language. That's Mantle Banking, an all-in-one fiat and crypto account. It lets you save, spend, and invest all from one dashboard. Swipe for coffee, stake me through yield, or even use virtual cards for payments through Apple Pay. So it feels web 2 simple yet stays web 3 sovereign. For allocators, meet Mantle Index 4, the S&P 500 of crypto. A tokenized institutional-grade

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on X. Okay. Well, let's start with maybe the uh the macro catalyst for some of this and and set the background context and then we can start applying this to uh crypto. So, when you look at macro catalysts and and kind of the the setup here, what sort of things are you are you looking at? Yeah. So, we we were getting, I would say, pretty bearish um towards the end of last year, beginning of this year. Uh started to take some risk off the portfolio as as Trump came in. There was a ton of uncertainty obviously uh in the markets and crypto

had was sort of looking like it was kind of having a a blowoff top like as as Trump came in uh at the end of January. Um, and since that time we've been really focused on, you know, we were expecting a pullback and then really focused on where does Bitcoin sort of settle? Does it does it maintain its bull market structure? Um, it did. It ended up bottoming around 75K or so and and now we are sort of, you know, seen about a 50% move off of that. So, I'm watching this. as I'm watching global liquidity conditions and then but

really the big thing for me is this shift from the Trump administration from what looked like were going to be policies of austerity um you know trying to balance the budget uh we have Doge you know and and and you you tend to not want to bet against Elon Musk uh when he when he comes in and they they were pretty aggressive early but it looks like um a lot of that's you know mostly sort of just kind of politics uh it doesn't look like it's going to be a huge needle mover. Um, and so it looks like the the debt is going to continue to

increase. Um, it looks like the the budget bill just just went through Congress that looks like it's going to pass. That looks like just more and more fiscal spending. Um, and something that's, you know, been interesting to me as an investor over the last few years, I've been studying more um, this concept of MMT, uh, modern monetary theory, which is really just a description of how government finance works. Um, and this has really helped me understand the importance of the fiscal side and it's

almost like the Fed is irrelevant to me uh to right now. Uh, they're sitting on their hands, but the Treasury is really in the driver's seat to me. And what what has become clear, I would say, over the last month or so is we're going to see a a continuation of fiscal spend. And I believe that is that is now that is driving the market. Okay. And that has uh positioned you as as bullish like bull market resumes kind of positioning. Right. Exactly. Yeah. Okay. So let let me understand this. You were looking in Q1 you were kind of looking for indicators of whether we would have sort

of bull market in crypto or bare bare market in crypto. And first you were seeing some uh bearish signals right around you like Doge austerity how many government workers would be like uh laid off things like this. the tariffs as well. That's going to be kind of like a pie shrinking uh sort of move. It can be sort of an austerity move. And then I guess coming into uh this quarter, we've seen particularly in May, we've seen a relaxation, right? It seems like Doge is just like not doing a whole lot with respect to government spending. And it

also seems like tariffs have relaxed. We did an episode with Arthur Hayes and he's basically like, look, tariffs, Trump pushed as far as he could. It's not geopolitically. He's not able to geopolitically push any further. It's not popular. He's got the Republicans have to get elected again. So, the tariff season is kind of over or it's at least diminished. And now we have uh the fiscal bill, Republican bill, I believe. And this is like a bill. It was like 3 to 5 trillion uh to the deficit. It would add over the next 10-year period

of time. So, are you seeing these signals and you're saying, "Okay, well, if we're not going to austerity and if it looks looks like we're going to money printing and something like MMT and that equals resume the crypto bull market, do you do you feel like you have the signals to just basically say this at this point and are you positioning accordingly?" Yes. Um so yeah the way the way I think of this is we are going to continue to see fiscal spend and I think the key takeaway for people on this is when the government is running a

huge deficit that is a surplus to to us right that's money that they're printing and pushing out into into the economy. So it's a it's a it's a deficit in terms of the the government budget but it's a surplus going out into the economy. And so that is what what's going to drive this liquidity. What you know I'm a little bit concerned about is just you. So I the way I'm thinking of this short term is we we have a nice little pocket here and I think we are going to see like animal spirits. It's already starting to happen. It looks like we're going to start to see a little bit of an

alt season for specific coins. Um but I do have a little bit of concerns maybe once we get into like July August period because that is when these tariff pauses are going are coming. um we're going to get more hard data in terms of what is going on in the real economy. You know, these tariffs, uh it takes, you know, 60 to 90 days for that to start to kind of make its way through the economy. So, looking at, you know, we're going to have, uh, labor reports coming. There's

a bunch of data that's going to come. We're going to get more CPI data. We'll see if that's impact the tariffs are impacting that. And so, you know, I do think we have a nice little pocket right here. Um but there's there's still some darker clouds like potentially in the in the summer months and also the bond market you know is has you know as Trump would put it gets a little yippy around the the 5% level u which we are getting back towards. So you know there are some dark clouds out there but I feel like we are in a wriston environment uh right

now and I'm just kind of watching that and then getting ready for potential correction maybe in the summer months. Yeah. Yeah. What's unclear to me is if some of those dark clouds are just kind of um bearish for crypto as an asset class or or bullish because you can interpret them as as bearish. you you say maybe supply chain tariff issues start start to look like the US is in a kind of recession uh decline and like that feels maybe bearish for crypto on the other hand doesn't that just mean that the government is going to at some

point in the future sort of step in and the money printer is firing and so there therefore you know crypto uh number go up you could say the same about bonds okay so if the bond market's getting a little yippy when you have like um you know longduration treasuries above 5% % interest. Well, doesn't that mean that there's some sort of Treasury Fed intervention that needs to be taken to like go, I don't know, do some form of quantitative easing? And so maybe it's maybe some of these uh bumps are bad in

the short run, but you you could also interpret them as as bullish and it's really hard to know how the market the crypto market will interpret these things. Yeah, to totally agree and I think the the stuff that's coming, you know, the policy makers are very aware of this, right? So, and they've been watching how the the bond market has been receiving their policies. And so, I think there there are plans here. And what I think is going to happen is, you know, there's a lot of Treasury issuance that that is coming. And you can already see the signs of like how they're going

to deal with this with there's like these potential changes coming to the supplemental leverage ratio and that just basically allows banks to hold more treasuries and lever them up. So if you get changes there, which I think the regulators can put through, then all of a sudden you can kind of stuff the banks with with this new issuance. Um, and then we've heard, you know, Bessant talk about the Treasury doing more stock buybacks, right? Um, and so that becomes sort of a form of liquidity. Uh, it's sort of like shadow QE. Um, and I think

that I think what we're seeing is like Bitcoin sniffing this out. Uh, and and crypto sniffing this out. So, um, to me, like the policy makers sort of understand this and they're they're developing ways to sort of allow for all this due treasury issuance without disrupting the bond market. But we'll see. We'll see if there's some turmoil as that as that kind of plays out. One last catalyst, and this is sort of a I guess a macro catalyst, but it um bumps up against being a crypto catalyst,

which is the genius uh stablecoin bill legislation. And um I mean I think talking to people closer to DC than I am, Mike. I think that's going to pass. Like I think we will get that passed in the Senate. It'll go to the House. Maybe some revisions, but it ultimately it'll pass there. It's Republican dominated uh House and of course Trump's going to sign it. And I'm What do you think about that as a catalyst? because so far it doesn't maybe feel like the market's

reaction re reacting to this yet or or maybe it is in your mind. Do you think this will be um net good for crypto and will reflect in prices? I do. I think this is huge and I I think it's kind of being discounted in the markets uh right now. Um you know it looked like this may not pass about a week ago but looks like it is going to go through. It's also incredibly important for the larger crypto bill that that will be coming. Um so this is this is huge. I mean this is in coming back to sort of you know Bessant needs to sell treasuries like

this is another uh vector where they can essentially issue more debt put that into stable coins which I think is just incredibly bullish um for the US uh in many ways and the US dollar actually. Um but this is huge. I mean, back in 21 when alt season really kicked off like really early in 20 That was our last that was our last alt season, right? 20 21 2021. Yeah. Like it was very early in 21. Okay. Uh ETH made a massive move like the first week of the year. Um and

what people don't I don't think is appreciated so much is there was an OC ruling related to stable coins right before that that happened. And then ETH made like a you know I think it was like a 65% move in one week and then we just had like you know then you have NFTTS then you have everything else that sort of came after that. Um so that is a potential catalyst here this this stable coin bill. I'm thinking back now you got me thinking back to 2021 and the last um I guess cycle and the last season right?

So, if I'm recalling, Mike, we had 2020, which by the end of 2020, there was a pretty massive Bitcoin um like uh appre price appreciation at that point in time. I remember a lot of people were saying, "Hey, again, similar to what they're saying now, it's Bitcoin's world. Bitcoin's doing it. You don't need any other. You don't need ETH. You don't need other assets. It's just like Bitcoin, right?" And then maybe Bitcoin plus DeFi or maybe Bitcoin from NFTTS. And then in 2021, alt season kind of kicked off in the price with a massive

jump of Ether. Ether kind of led alt season. And I guess that lasted all the way until the end of the cycle, which uh I I would call that maybe Luna collapse, April 2022. Yes. My god, after that everything came crumbling, right? I was It was not fun after that. So that was a a pattern of the previous cycle. You had a Bitcoin run. It was Bitcoin's world. Then you had an ETH run and then you then you had a whole bunch of other assets downstream

of that run and that alt season lasted about maybe like a year and a half. I'm wondering if you think the contours of the 2021 2022 season will look similar to this. If it feels like we're heading in this direction, I think the the big difference here potentially is just that, you know, we are four years later. we are four years uh more mature in ter in terms of data in terms of the protocols themselves and their ability to um show their fundamentals to the market. Some of these are you know

producing pretty good cash flows. They're they're doing buybacks. Um and so you know one thing that I think will be interesting in in this this alt season if if we do get this is just the dispersion and we I'm looking to see you know the assets that do have an interesting fundamental story. do those you know start to separate themselves. Um I think it'll be a combination of this. So what I sort of my base case for how this will play out is you know we will get you know ETH will um appreciate

against Bitcoin again. It got to you know 008 in the last cycle. If you you know if you got to 008 right now I think you're you know you're at close to like 9K or so for for ETH, right? Just that's the type of rerating that that can occur. Um, and so, you know, if that happens, I expect to see the animal spirits and I expect to see the things that we saw earlier in the cycle also, you know, come back. So, meme coins, definitely not fading uh memecoins and we can talk about some of those at the

at the end here. Um, but I think you're going to get a combination of like things with really strong fundamentals and then also of course, you know, crypto, animal spirits, and speculation. And so you'll see like this barbell I think of like the really highly speculative things that get lots of attention and then the things that have fundamentals that maybe like you know funds are are allocating towards uh as well. I think when you say fundamentals and memecoins in kind of the same breath people go what? Huh? So you have to you have to tell us about that in a little

bit. Okay. So now let's get into it. So that's the macro setup here right? Um I guess kind of looking good looking okay. There might be some blips as we get some other economic data in the summer, you're saying, but looking pretty good at least right now. So, can we look at some of the the metrics that uh that you pulled out for maybe the beginning signs of uh alt season? We're looking at Bitcoin moving averages here. Can you explain this chart? Yeah, so this is the uh 50-day and the 200 day moving average

for for Bitcoin. And we can see that uh there was a death cross uh a couple months ago. And and important to understand this is backward-looking data. So when you have a death cross, it's telling you the price has already, you know, collapsed quite a bit. And that's when the 50-day moving average dips below the the 200 the the longer 200 day moving average. So we had the death cross. You you tend to get a you know a pump actually after the the death cross, which we got. Um and now we've actually just now had achieved the

golden cross uh where the 50-day is now in a bullish pattern and it just pierced through the the 200 day. So that's telling you okay again that's something that just played out. So that was I think we've had almost a 50% move or so in Bitcoin just over the last six six weeks or so which is pretty pretty aggressive for you know a $2 trillion asset. Um, and so, you know, what to what should we expect in the short term here? Golden crosses can be this this

this can be like a bearish signal, like a counter signal to me where it's telling you, okay, you've already had an aggressive move. We could see a little a little correction here. So, that's something um I'm watching for. There's also a chance that it just just continues to rip rip higher. It did this in 23. Um, we had a golden cross early in the cycle and a lot of people were saying, "Oh, it's going to uh sell off and there'll be another buying opportunity and it just like never came. It just ripped all the way up to like 45K." Um, so so we'll see. It's It's