Bitcoin May Have One Sharp Move Lower Before Next Bull Run

I think that there's just a lot of dispondency for folks that especially cryptonatives folks right now seeing you know the coins just kind of meander while um tech continues to rally to all-time highs. There are opportunities out there despite my base case for another leg lower. We are showing signs of that bottoming process starting and and I do think that it is time to if if you have checked out to check back in, you know, start start paying attention, locking in and getting ready for the broader market to turn because I do think that we are getting to that point if not now, you know, soon. [music] Welcome into another edition of Coinage. I'm your host, Zachman, coming to you live from our Brooklyn studios here in New York City as we are watching stocks hit new record highs. Is that cooler than expected or dare I say just in line with expectations? Uh that CPI print earlier this week giving investors a little bit of boosts here that we may see interest rates hold steady and turn a bit doubbish in the Fed's thinking. Want to bring on our guest today. You know him well. one of our favorite guests covering all things crypto and macro for us here, uh, the head of digital asset strategy at Funstrat, Sean Ferrell, back on Coinage. Sean, it's good to see you, sir. >> Zack, thanks for having me on. Always a pleasure. >> Yeah, it's good to it's good to chat because I think right now it seems like uh all the market guests that we've been chatting with are getting a little bit less fearful that uh crypto could move lower, although who knows. Uh it seems like we're in this bottoming process and I know you want to talk a little bit about some of those names that are actually seeing things work maybe more so than just talking Bitcoin, Ether, and Salana, but we're going to chat about all that. I just want to start with kind of whether you're in that camp too or whether you think the end of 2026 will be as cheery as we all hope. What does Sean Frell say? >> Yeah, look, I think uh my base case is still we have another leg lower. I'm I'm I'm a bit less pessimistic on the degree to which we we move lower. Um you know the the price action over the past month or two perhaps you know it's it's been emblematic of we'll call it end of cycle apathy which you know that that knife cuts both ways. oftentimes you can see big moves after long periods of apathy. Um, and it could be a move move higher, but you know, given the balance of risks, I I do think we see a pretty significant or not significant. Uh, I think we see another sharp move lower. Uh, whether it's a significant new low or or perhaps we just, you know, test the lows that we made uh about a month ago, I think that remains to be seen. But I just think there are other opportunities out in the market beyond the majors right now. And you know, if I could summarize my uh hesitations as it pertains to getting too overallocated to the majors right now [snorts] uh it really stems to lack of um it stems from, you know, a continued lack of liquidity tailwinds. We continue to see real yields rising. You know, I think that is um you know, due to a combination of a number of factors. You know, there's pretty strong real growth. um fiscal imbalances which have I think come to the forefront of of a lot of uh investor psyche and uh you know there's just financial asset supply and demand I think is putting putting upward pressure on yields you know you have a lot of companies raising a lot of capital um uh and uh obviously you know the pace of treasury treasury issuance from from the treasury has continued at at its uh recent pace and so I think all that put together is uh shaping up for a tough time for the long end which you know I think um doesn't bode well near-term for liquidity sensitive assets but I do think you know beyond that perhaps actually sets up the the bull case if we want to get into it for uh you know Bitcoin and ETH's next leg higher. >> Yeah I mean I think that that's kind of the interesting thing is like a confluence of events if you are also to believe that this is kind of the end of the bare market. Um, obviously always tricky to call bottom bottoms, but certainly a lot of the factors are starting to stack up and it's a very different thing in terms of what we were discussing on the leg lower before. I think last time we had really chatted with you was kind of still in the throws of the strategy flywheel uh moving lower. Now we're kind of starting to see that shift in the opposite direction with stretch moving back towards $100 par value. MSTR somehow still holding up even though it continues to get tapped with new issuances. I mean, Bitcoin specific stories do seem to be moving in the right direction, putting aside everything else, but I don't know if that's necessarily fair to think about where prices go when you just look at that. >> Yeah. No, absolutely. Um, you know, I've I've obviously been been um covering the whole strategy complex pretty closely over the past several months as as most people that trade crypto markets have. And, you know, we've seen strategy, you know, start to do the right things. I think last time we were I was on we talked about how they really messed up um you know financing those putable bond purchases repurchases with uh you know their stretch proceeds um uh drew or sorry they financed Bitcoin purchases with stretch proceeds financed the put putable bond repurchases with their dollar reserve drew that down to six months of dividend coverage and obviously we saw that um uh [snorts] tail risk start to get priced into you know both spot bitcoin and stretch and uh they've raised a lot of capital via common stock sales and obviously Bitcoin over the past month or so and have really uh done a good job of repairing their balance sheet and so say for any capital markets you know mistakes in in their capital markets activities going forward. I think that we could put that acute risk behind us and like you said it is a good thing to see stretch start to trade higher and perhaps you know it does get to par still has a bit of way to go and and that could catalyze some animal spirits um in the Bitcoin market. >> Um but yeah I guess to put a finer point on it I think that you know the the strategy related headwinds [snorts] are are probably behind us at least in an in an acute sense. Well, I think that's kind of partially why we've just kind of chopped around in this range for a little bit. We found uh bottom stage one, if you want to call it that. Um because we took one worry off the table. But to your point, still very much the case that I think a lot of the rebounds that we're seeing play out right now is still leverage the AI names. Uh Jensen Wong being on CNBC, we we talked about this this week as well in terms of unlocking half a trillion dollars to kind of chase uh turning AI compute into an investable asset. seems like it's injecting uh more enthusiasm back into that trade. Obviously, situational awareness blowing up was another thing. So, I I don't know. I mean, I it seems like I would agree with you that more people and idle dollars maybe more on the margins continuing to shift over into the AI pieces of things, but shifting out and looking at the longer term as you talk about kind of a a positive uh optimism to be had for people looking out farther than maybe if we get a dip in the near term. Uh why are you so confident about that? What are the pieces that you're kind of excited to get to on the other side that has you so optimistic still? >> Yeah. So, you know, I've been doing a lot of thinking about what is uh going to shift. So, I mean, backing up, if we just think about the current setup and how weird this year has been from a crypto markets perspective, at least for a lot of past observers, you know, you have equities zooming to new all-time highs. um obviously in a very volatile fashion, but uh you've obviously seen tech do very well this year and um you know meanwhile crypto has obviously not done very well say for a couple of nice tactical balances here and there [snorts] and um look that is attributable to a a dynamic that uh you know I have been writing about recently and that is the fact that this bull market for equities is driven by historical earnings growth. growth and if you go back and and look at the dynamic between [sighs and gasps] liquidity growth, right? If you look at the last bull market for equities, you know, it was really driven by uh it was pushed by monetary and fiscal policy from you know coordinated actions from the Fed and Treasury to you know stimulate markets and um obviously in that environment liquidity sp a liquidity sponge you know hedge against monetary debasement like Bitcoin and anything that has beta to it should perform very well as uh you know the growth in liquidity outpaces you know the growth in earnings. But yeah, we've seen that dynamic shift over the past 12 months where earnings growth has outpaced liquidity growth and that's really what is driving risk assets. And so um that is where all the marginal dollars are going and and frankly in that environment that's where it's where they should go. You know there's no real need for you know this this debasement hedge this liquidity sponge that is that is Bitcoin and and uh obviously it's it's beta assets. And um I do think that there's a world in which that shifts. I think it will shift eventually over the next say three to six months. Um and I think that you know how I'm thinking about right about that dynamic shifting right now and and um still formulating putting of putting um you know crossing crossing my tees and dotting my eyes around this these these ideas. But, you know, we've seen some of these tech stocks come under pressure, you know, commensurate with with the rise in long yields over the past couple of weeks. And, you know, it stems from the fact that assuming that the AI thesis, long-term AI thesis is correct. and um you know all of the forward-looking expectations for earnings are correct. It's going to require, you know, another, say, I've seen estimates of $250 billion in capex. Um, and that needs to be financed in large part by debt. And as the long end sells off, that makes that cost of capital, you know, quite expensive. >> And that's a big reason why the miners have have drawn down, right? In addition to some other idiosyncratic factors. But um you know as we get into year end I I do think you know the the fundamental case for long bonds is um you know subpar you know given supply and demand in financial assets fiscal imbalances just real growth and as that long end continues to sell off you know I I think that there's a case that a we might get you know a risk clearing event in which case you know we're more liable to see positioning clear and and that'll be a great time to, you know, layer into to the coins. >> Yeah. >> And um B, I also think it increases the odds that you see some kind of coordinated intervention, whether it be through accommodative monetary policy, through some kind of quasi yield curve control like active treasury issuance that actually uh improves liquidity conditions and stimulates liquidity growth that could outpace earnings growth. I think that is something that is on my radar as something that could help us find a durable low and stimulate the the next leg higher for for Bitcoin and its its related assets. >> Well, that's the interesting thing. And I guess if I were to sex up the headline around uh what we're talking about, it's kind of like finding the best opportunities in cryptoreated names, which of course, you know, a lot of times people just think I'll buy Bitcoin, I'll buy ET, whatever. but kind of what you're describing and I saw you recently in your guys' model portfolio on the fund strat side kind of inching more into some of those names. I'm just bringing up the chart for Wagme WGMI the coin shares uh Bitcoin miner index uh kind of getting shellacked as you mentioned over the last few months and I noticed you rotated back into some of the names that are in this uh ETF as well. Um, and so I guess I'd call that out as maybe one play for the way that you're describing kind of where people could be looking for opportunity. >> Yeah, that's right. Um, I think that there have been because there's such strong cross asset correlations within the broader crypto um complex. If you're running a long only portfolio, it's, you know, it's tough to find areas of of, you know, sources of alpha, areas of outperformance. And um, the miners have been a great way to find this. Obviously at this point they're uh very loosely considered cryptoreated names but I still consider them cryptoreated names that is because they have been converting their grid access and and compute capacity from serving you know the Bitcoin network to servicing AI HPC compute and um [snorts] yeah they they've been a really good play for us this year over the past couple of really um did get a little b overbought you know a couple of months ago and I think you know with with the broader selloff in in tech they obviously took a big hit. They also took a pretty big idiosyncratic hit a couple of weeks ago uh on the news that Texas would be requiring an audit and so they suspend it for their buildout for their approval of capacity in Texas. And I think there's a lot of uncertainty there around um >> you know how how that might affect the the time to completion for a lot of these a lot of these queued up projects. And obviously you pair that with the idea that there's a lot of debt financing involved in building out this uh this capex building out this capacity and yeah [snorts] that's uh the cash flow from from the the interest expense on that debt is um obviously can get pretty cost prohibitive when the 10year looks like it's going to hit hit 5%. And so you pair those two things together and it's been a tough road over the past few weeks, but I think a lot of fear has already been priced in starting to see some details related to clarity around URKT timing um you know and audit timing I should say. And um you know uh like you alluded to at the outset of this of this uh of this session you know we um had some pretty constructive inflation prints this week and so you know I think if crew can chop here uh we get a bit of delvishness priced into the front end of the curve. Um you know you pair that with the fact that we've had a lot of fear priced into these names. I think we could see you know see those start to start to move higher here over the next couple of weeks. >> Yeah. No, I mean it's an interesting kind of bottom call within maybe less of a bottom call uh in terms of as you mentioned these are names that are now kind of levered to the AI complex and and it's it's been interesting though because some of those names have been able to tell that story well some have not. I think it was last week the Galaxy reported earnings we were looking at that stock as well. It's another one where it's like okay do crypto investors still respect what it's doing? Uh, and it's I guess it's a churn. Maybe that's fair to say. Or it's like you're kind of changing who is investing in these names because it's a very different investor maybe. I guess profile. >> Yeah, Galaxy is a tough one. Um because you know if they even remotely execute on their I I think they have about five and a half gigawatts of compute capacity in their pipeline. If they even execute on [snorts] half of that find find tenets for for half of that capacity you know they they should uh that stock should perform quite well from here. I think you know Galaxy is hurting from you know a couple things. Fundamentally I do think that they have been a bit behind on finding a tenant for their already energized capacity that was highlighted in their last earnings call. So I think folks are you know discounting their forward-looking ability to you know fill their capacity with you know investment grade tenants. So that's probably part of it. Uh, another part of it is obviously the the Urkott related delays that I just mentioned. And I think that the last part is is I think you were alluding to it earlier is, you know, they do have two very honestly unrelated unrelated companies at this point. And um I think that presents a challenge for investors that are looking for, you know, clean exposure to either crypto beta or AI beta. And so, um, you know, it's it's not a clean fit for either investor, right? And so, perhaps it does suffer from being stuck in no man's land with that regard. >> Yeah. Well, one of the other names, I guess, too, as we kind of talked about, there's those names on the Bitcoin miner side or uh I guess we'll just call them data center names. Uh but then you've got the other pieces that you're interested in and one of those is kind of a broader tokenization theme which I would actually consider one of the more interesting components of what is different this cycle is kind of tokenization companies that are actually figuring out how to make money by leveraging blockchains but not necessarily by virtue of being crypto companies if that's fair to say. And one of the names that you signaled out is Figure which also reported earnings today. I'll bring up the chart in a second, but some pretty impressive results. What's kind of the thinking around why you'd why you'd include uh attention on figure and for those who don't know, I didn't know this till I was looking at it, but the co-founder SoFi uh also backing this company and certainly a lot uh of background in terms of building tools that are necessary for capital markets. >> Yeah, that's right. Um, so I a big conversation for I think crypto investors as a whole is you know obviously beyond the macro and and you know when when the tides of liquidity change and you you could see beta perform is um you know where does value acrue outside of just monetary conditions becoming more accommodative and you know I think there are you know a few areas that I'm interested in interested in you know looking you know longer term and and one of those is um just companies that leverage the blockchain to improve their operating margins and increase growth. You know the I think a big you know a big bucket into which the value derived from blockchains is going to go is just consumer surplus and companies that leverage the that surplus and and deliver that to you know our vessel to deliver that to customers are going to be successful and figure is one of those a good example of that you know they're essentially building a um you know a blockchain based version of you can think of it as like uh Fanny May for parts of the credit market that I think that agencies would never touch. They essentially turn a loan into this standardized digital asset, you know, the moment it's created, then then owns the the actual marketplace where where it trades. And I think that uh just from a from a a Marcus perspective, I think, you know, they started out as kind of kind of eating their own dog food as as the lender, right, on their platform. term they originated loans and you know it's a a pretty capital intensive balance sheet heavy process and I think that the market still values it as such I mean it's trading around you know 11 it's called 11x 2027 IBIDA and that is a bit more in line with how the market would value a cyclical capital intensive balance sheet heavy heloc lender right but I think it is currently undergoing a transition leveraging the blockchain um to actually move from being an originator to just being a capital markets markets place that happens to have used those helocks as a wedge and their numbers have been impressive. You know, uh volumes on their marketplace have grown 130% year-over-year. They posted their third straight quarter of triple digit growth. Uh in those marketplace volumes, revenue um you know is up 95% this quarter, 55% even margins. So, it's uh I think it's a pretty formidable company and and I think it's due for a rerating uh whether that happens here post earnings or uh you know just gradually over the next couple of months. You know, I think you know I think that deserves a rebrating higher and I think [snorts] I think it'll get it. >> Yeah, that's the interesting piece. I I like the call and I also think it's you know the earnings again uh 226 million in net revenue for the quarter uh up 113% and uh net income up 192%. I think it's it is interesting to kind of spotlight how some of these stocks trade as we were kind of coming off the discussion around Bitcoin miners is how these stocks trade because you can look at I'll just bring up the comp between coin and Robin Hood as well and last time we had you on the show we were talking about how Robin Hood's earnings show that they were making more money off prediction markets than they were off crypto trading or stocks and so is it was a big change in the way that people think about Robin Hood maybe um but kind of the same concept here that you're talking about with figure as we look at that chart um relative to some of the the performance. I don't know. I think it's it's it's a good one to put on the radar. I appreciate you bringing it up because it's one of those names that I feel like I don't know the big question here is if you are in the camp and certainly a lot of our viewers are that we are about to see a strong end to the year. Uh what are the best ways to play it? There's the strategy, there's the Bitcoin, there are the actual coins and then there's these names out there that are actually leveraging crypto for things that are not just speculation but actually building a business. Um >> yeah and I guess just to add to figure because just to round out like the the why now because it has kind of drawn down from its say post IPO lowflat high FDV pump uh and it's been consolidating a bit you know I think it's uh you know it's 11 months post IPO I think that a lot of its underperformance over the past few months perhaps you know perhaps some of that is attributable to just like a lack of coverage and and uh you know mclassification of the company but some of that probably is due to you know supply overhang from IPO IPO unlocks and so I think that uh you know we should be through that now and I think if you think about things from uh not to tie everything back to macro but you know we we've been spending so much time talking about yields and you know we could debate what the next 50 bit move in the 10 year is going to be but I think most investors agree that we're in a a higher yield environment for the the foreseeable future which yeah should you know keep mortgage rates pretty sustainably high, at least higher than we were a few years ago. And so that that means that a lot of these ZERP era era mortgages stay locked in, it means that, you know, for folks those folks who want to tap into their home equity, you know, they're going to going to have to um, you know, resort to to a HELOC if they want to do that. And so, you know, you should see aggregate the aggregate market for HELOCs continue to move higher. At least that's my view. And um while figure is moving up and out on the credit stack, right, they just bought a fix and flip lender um which I think should be pretty accretive for the business and they're looking to, you know, integrate other securities into their their mark credit marketplace, but uh Helux are still a lion share of volumes on the on their platform. And so, you know, if that should that market continues to grow, I think that should be a pretty compelling tailwind for the company here. All right, we'll round out the thesis on that point uh as we as we continue. I mean, like look, the other names that have kind of come public in the tokenization and kind of I guess that's not even a fair way to describe what we're talking about here with figure um necessarily, but I was looking at securityize too as kind of one of those other recent names and they're down I think 22% today. Uh so there aren't a lot of things to point to when it comes to I guess companies in this cycle necessarily jumping into public markets and having too much success. Um, so maybe one piece of context there to round out the figure story. Uh, one piece that I also wanted to ask you about, Sean, too, as we kind of focus more on the actual underlying chains and tokens. I know you've been paying attention to the upcoming Salana vote, the inflation vote around that. Um, it hasn't been really we haven't talked too much about inflation tokconomics before, but uh, what are you seeing in terms of that maybe potentially being a piece of the investing story around different tokens? [snorts] Yeah, look, I think uh Salana's inflation is too high. Um it's about three and a half% right now. I'm probably I'm probably a bit off on that, but you know, I I think that that amount of supply coming to market is uh is a bit of a drag on price, especially in uh especially in a bare market. And yeah, I think if uh if you were to just hold right now, I guess just to summarize what the outstanding proposal um allows for, it will essentially accelerate the disinflationary trend that is already pre-programmed into Salana's supply schedule. Uh you know, it's it's programmed to eventually asmtote towards one and a half% inflation into perpetuity. And this just move bumps that schedule up by I think two and a half two and a half years. And you know if you just hold Salana's price steady at about $76 per token uh over the next say five years that should remove about 1.3 to$ 1.4 four billion dollars in supply overhang, which I think is pretty material. And obviously, if price were to go up, that that certainly would would add a bit that would increase the the dollar amount of of supply overhang. And so, look, I think that this would be uh pretty constructive development for Salana if it were to pass. It's not, [snorts] you know, it's certainly not 100% guarantee. There's always already been uh a similar CMD proposed and um and struck down. You know, the big you the big barrier here is that validators need to vote for this to approve and you know, especially in in a in a bare market where you don't have a lot of priority fees. These uh these validators need to pay for their opex and in order to do that they need to sell the issuance that is that is paid to them to operate validators. And look, I think that >> if I if I were a betting man, I think this does pass. I think there's enough momentum and and the larger stakers within the salon community understand that this is constructive for Salana longer term and so um you know I I I'm I'm net constructive on this passing and so I do think this could serve as a catalyst as we get towards the end of the month or into early September but um yeah we'll see. >> Yeah, I think it's it is I forgot that that first one didn't go through. uh which I guess maybe some things have changed in terms of other people within the Salana ecosystem understanding why this may be uh the right time to pass it but uh >> but yeah man I think all those things all considered again there aren't a lot of guests that we can chat uh things around both tokens tokconomics and public equities when it comes to watching this market any last words from the from the from the mind of Sean Ferrell before we depart >> um [sighs and gasps] yeah I don't I guess Uh I I I I I was on a podcast the other day and I I shared similar like um similar parting thoughts here. I think that there's just a lot of dispondency for folks that especially cryptonatives folks right now seeing you know the coins just kind of meander while um you know tech continues to rally to all-time highs. But there are opportunities out there, right? Uh whether it's, you know, in names that are spitting off earnings like Hyperlquid, which we didn't even talk about today, or Figure, Robin Hood, etc. >> Uh there are opportunities for for alpha in, you know, in this type of market. But I also think that, you know, we are, despite my base case for another leg lower, we are showing signs of that bottoming process starting. And and I do think that it is time to if if you have checked out to check back in and um you know start start paying attention, locking in and and getting ready for the broader market to turn because I do think that we are um you know getting getting to that point if not now uh you know soon. So >> yes, it's like >> I guess those are my parting encouraging thoughts. It's like the meme of the of the gamer guy inching a little bit closer on the edge of his seat is what we're watching play out here as opportunities may pop up. And you're right to point out, we didn't talk about Hyperlid, but I did see your note recently, which again, as we always close, I I encourage people to check out uh the research that you have at Fundstrap because one of those components was that Hyperlid may or may not be experimenting with a permission uh piece of their trading platform, which may bring some of their services to Americans and institutions here, which I think is not to be overlooked. >> That's right. Yeah. Um, I don't know if we want to chat about that now, but it does look like uh I think there's I didn't know if you're team me up or if you were uh [laughter] closing things out. >> To be honest, even I even I wasn't entirely sure. I'm like, is Sean have more time to say why he's bullish hyperlquid, but it sounds like you close out. >> I always have I always have a couple more minutes for you, Zach. Yeah, thank you. There was a report yesterday. So, if you go back a couple of weeks, there was actually uh I think it was Raja from framework. He actually made a really interesting discovery. There was some code on testn net related to uh you know permission networks rolling out on hyperlquid and uh you know this would essentially cordon off an area of the hyperlquid network for permission markets that would be you know be able to come into compliance with the CFTC and and be offered to to US investors while maintaining you know the permissionless non KYC markets and I think that would be the best case scenario for hyperlquid going forward you know you would be able to come into compliance without sacrificing you know your your core your core users [snorts] and um you know yesterday there was a report uh from the information you know discussing how hyperlid has stepped up its outreach to US regulators and uh I think this reflects a big push from hyperlquid contributors to you know bring hyperlid to regulated US institutional investors and so you know if if things start to develop constructively on that front I think that could be another tailwind for the token. And I think more tactically, you know, pairing my earlier thoughts about, you know, potential near-term jump in miners and and and broader the broader tech complex. You know, hype is uh like I like I alluded to a couple of minutes ago, you know, it is spitting off earnings and a lot of those earnings have come from the trading of RWA markets on it platform. And so, you know, Hyperlid has been pretty correlated with tech stocks as a result. And so if we see, you know, some continuation higher here in the here in the near term for uh for equities, you know, I think that hype hype should do pretty well. Um >> yeah, looking back on it is kind of crazy to think. I mean, this was always the dream. The dream would be that you would have kind of the crypto space start to evolve to the point where correlations wouldn't be exactly in lock step with Bitcoin. I'm not saying we're there yet, but it is kind of, you know, it's a long game to start to see some of the differentiation pop up in terms of certainly Hyperlids token price being more allocated or more correlated with with tech. Um, and even the oil trade, we certainly saw that as well. Let's not forget some of this too. >> Um, so or gold before that. So, it's been very fascinating to kind of see all of this start to uh diversify and again, not a lot of guests we can chat about all pieces of that aside from you, my friend. So, thank you again for the time. Appreciate it. Yeah, like I said, always a pleasure, Zach. Um, yeah, thanks for having me on. >> Right on. There you go. Uh, fun strat. Sean Ferrell weighing in on all things crypto and the best opportunities to be on your radar right now. Are we at a bottom? I don't know. We'll leave that for you guys to debate in the comments. But, uh, certainly more reasons to be optimistic as we heard from Sean there. For Sean, for myself. Appreciate you guys tuning in. As always, you can head to coinage. media. Check out the biggest headlines around the world of web 3 uh from the guests that we have on the show and our own original reporting and interviews as well. For Sean, for myself, thanks again. We'll see you again soon. I'm Zach Guzman signing off.