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Our weekly show is hosted by Michael Nadeau (The DeFi Report) and Ryan Sean Adams (Bankless). Each week, we discuss how we approach managing our own portfolio and the data, research, and analytical frameworks that inform those decisions — for educational and informational purposes.
Ryan Sean Adams:
[0:10] Welcome to The Report. Is AI entering its DAT season? You guys are in crypto. You know what DAT season means and all of the emotions and memories that raises. We're going to talk about that today. It's August 19th, 2026. We are 10 plus months into crypto winter. Bitcoin just closed the week, a shade below this all-important 200-week moving average. How is it going to close the month? Today's report turns directly, though, on the AI trade. And Mike, you always find a way to often on the weeks, like, it's exactly what I wanted to hear about because the AI trade has been on my mind. It's all through my podcast feed. Which way is it going to go? And you address that today, including the new financing structure that Wall Street has just committed to and is building out with NVIDIA. The question, of course, is, does this look a little bit like crypto last year when Wall Street started entering in DAT season mode? Or is it a massive mistake to continue fading AI? I don't want to miss the last part of the AI cycle. We're going to talk about that. NVIDIA teaming up with BlackRock, Apollo.
Ryan Sean Adams:
[1:21] The buy wall that seems to be in effect for Bitcoin in the 60 to 65K zone. What's fueling that? How long can that hold? And of course, you guys know we're heading into September, which we've pointed out has historically been Bitcoin's worst month. The number to watch, the one we'll return to to the end is 64K, 64.1K. That is the 200 week moving average. We'll talk about that at the end too. Mike, quick vibe check for you. Why does the AI trade remind you of that season? Why did you call on that analogy?
Michael Nadeau:
[1:58] It's the progression of leverage and credit is really what I'm looking at. New products coming to market. This is something, it's a very natural thing to see in like a hot asset class when asset prices are rising. We tend to find ways to create new products around that, create new leverage around that, more capital into that asset class. So it's really just the progression. This started with free cash flows from the hyperscalers that were really financing all this. And then we moved into debt. We've moved into equity issuance now with what we saw from Google. And now we've got this new financing structure that we'll talk about today. So it's just really the progression of it. It's not something that, you know, is like a huge red flag. It just tells me that we're really getting deeper into this process of pulling forward demand and finding ways to kind of keep the music going here. And when I saw the announcement of this sort of new financing platform that NVIDIA is coming to market with, with some asset managers, that was kind of the first thing that I talked about. We talked about cycles, we talked about leveraging credit and how that plays into cycles. And so that was immediately what I thought about and started kind of,
Michael Nadeau:
[3:09] you know, researching into that a little bit. So excited to get into that. There was also an interesting metric. There has been a ton happening with the on-chain data that we're tracking. It's very slow out there, but we did have an important metric that actually hit this week that I'd love to get into as well.
Ryan Sean Adams:
[3:25] Well, let's talk about both those things. Yeah, $500 billion by NVIDIA. I heard an investor, Gavin Baker, he's an AI bull, has been a bull forever, continues to be a bull. He called this NVIDIA the central bank of AI. All right. So you're going to be a central bank. Maybe you start to get central bank problems. We'll talk about that. But let's return to the metric you just mentioned. So when we initially went risk off, you at least in the TDR, in last October, you called for something lower than 65k Bitcoin. That was your fair market value price. And part of your thinking was that a lot of the coins would end up, the majority of coins would end up in this cohort. The cohort we talked about last week on the report, 56k to 66k, the majority of cost basis of all buyers and all Bitcoin in that range on chain. Last week we said, oh, we're waiting to see that. And now it's here. So we have flipped. So that happened. Can you talk about this?
Michael Nadeau:
[4:28] Yeah, that has happened. So happened maybe a little quicker than I was expecting. But we've got that cohort highlighted in red here, 56 to 66K. It now has 12.5% of the Bitcoin supply. That is the number one cohort. It was number two last week. So it's pulling from some of those cohorts above it. And we've gone from 7% of the supply now up to 12.5%. Um, this is an interesting one to be able to check this box that, that this has played out. Um, the other stuff that I'm, that I'm looking at is that 92 to 108 K cohort, which continues to climb in terms of the percentage of coins that are leaving that cohort. So it's down, uh, 21.5%. Now that sort of equivalent cohort dropped about 50% in the 2022 bear market. So there could still be some movement here, but we've kind of landed at where I expected us to land. So it's another, we've been looking at a lot of these high level metrics,
Michael Nadeau:
[5:29] Cycle metrics, and able to kind of check some of these boxes. I think, you know, over the last few episodes, you've been asking, you know, if the cycle were to end today, does this data, the sort of turnover of the coins, a lot of these high level metrics, would you be comfortable with that's it? But, you know, it's played out. And I think, you know, this is another one where we can check the box and say, yes, we're deep. We're deep into this bear market. It should be coming to a close at some point. And I still kind of just remain anchored to this idea of like the macro setup isn't looking great. We can get more into that, some of the stuff that I'm tracking there.
Michael Nadeau:
[6:07] But the on-chain data and the sort of healing of the market structure continues. And that's really like, that's a good thing for when liquidity conditions ultimately turn.
Ryan Sean Adams:
[6:17] This is a little bit of a victory lap, I feel like, that is well-deserved, Mike, because beyond the 65K price call in October and going under that, I think this was probably your most important prediction, your second most important prediction. And you've been calling for this for a while. And this is further validation that cycle metrics and the on-chain data, the fundamentals that you explore and really guides a lot of your investment thesis are kind of working out. So congrats that that box was checked, even though it's towards the bearish side. But people following the
Ryan Sean Adams:
[6:53] TDR hopefully capitalized on those low prices, maybe with more to come. Let's talk about what feels to be a bit of a buy wall. And you call it out in today's report. So you said you're watching the 60 to 65K zone. We are above the 200-week moving average at the time of recording. I think we're hovering at 65K. So feeling okay. And there has seemed to be some strength between 60 and call it 65K on Bitcoin. And I guess the question is, are we going to run out of gas on that? Is that your thesis? Or can this buy wall continue to mop up supply and even go higher?
Michael Nadeau:
[7:34] Yeah. So I think sort of the other side of what we just talked about with the sort of smart money, stronger hands coming in, buying up supply in that 56 to 66K cohort, that we can check that box and we know market structure is healing and getting stronger The sort of where my mind starts to go now that we've kind of checked that box is kind of looking into the order books a little bit and seeing how much, you know, buying activity have we exhausted. You know, I think if you went back a few months ago, you would have been able to see that there were that a lot of those buyers that have moved into that 12.5 percent have come out of the order, have left the order book. So they've been down there mopping up supply from people that are selling at those higher levels. And there seems to still be support there. I would say if we go to like 62K or so, that's where and we break through that, that's where you potentially could see some more weakness and potentially an air pocket there. Um but that's that's kind of how this works is like you're kind of we're sort of like depleting the strong hands now and i think that that's fine and there's there's plenty of people that want to buy bitcoin at these levels and the question is just really do we have is there another risk off move that you know where liquidity conditions tighten up and there's more people that want to sell does that that will buy wall get overwhelmed again at some point i I think that's kind of
Michael Nadeau:
[9:03] The sort of how we're thinking about risk management right now is, is there enough buying activity there? Is macro going to stay in place? And is it possible that the cycle lows are actually in and we can kind of sort of like shift out of this without another big, you know, 20% correction or so? So something to pay attention to. That's kind of where my attention is moving now that we've hit that cohort with the most buyers there from the prior cycle top.
Ryan Sean Adams:
[9:32] And your base case then, just to confirm, is that this buy wall does run out of gas?
Michael Nadeau:
[9:38] That's where I'm leaning right now because of the macro setup. I still think that everything that we've been talking about with yields and Fed policy and sort of the Fed letting the long end move up, I still think that's all in play. And I still think that's a big risk. When I think about the AI trade, I still think that we have seen peak speculation from the AI trade. A lot of the charts that I look at from the sort of kind of like the high flyer stuff, the memory stock, some of the energy stuff, those charts remind me of like the early sort of part of the Bitcoin bear market where you've sort of broken some key technical levels. The chart looks sort of broken. It's had a sharp sell off and now it's kind of doing the rebound. And we'll see if that rebound holds, right? That's kind of the key question. Has the spirit of the market been broken in some way? The market structure is broken. You have that same sort of market structure that we had in crypto where people came in sort of towards the end of the market and you have lots of new money, you know, at the elevated levels.
Michael Nadeau:
[10:50] It may be sort of like hot money that wants to get out and does that impact
Michael Nadeau:
[10:56] the market structure similar to what we've been talking about with Bitcoin? That's kind of my question. We did have an interesting development come out of the Treasury this morning. I don't know if you saw this, but there was just an announcement that they are actually going to double the size of buybacks on the long end of the yield curve. So this just came out like an hour ago. So I'm still sort of starting to process, you know, looking into what this means. But to me, I guess my initial reaction to that is that it's, we were talking about QE light last week and what's happening in FX and trying to plug holes in potential, you know, bond market volatility. This is another move by the treasury that tells me they're concerned about, you know, a rising long end and if they're doing more buybacks or they're doubling their buybacks on the long end of the curve,
Michael Nadeau:
[11:51] You know, we're getting closer to yield curve control, right? We're not, we're not at yield curve control, but we're getting closer. And does this mean that they are concerned about a disorderly, you know, rise of the long end and maybe this just tempers it and they're okay with it rising up or do they actually want to suppress it? Right. That's, I think I have to kind of, you know, clear that in my head. Is this, does this mean that they're actually going to start suppressing it. If that's the case, that's interesting. And that starts to point to maybe the lows are in and we're seeing a little bit of strength from Bitcoin. So an interesting development kind of in real time here this week.
Ryan Sean Adams:
[12:31] Yeah, that is a fascinating development. And you pointed out near the end in the macro section that 30-year yields is basically untouched, even though we had some pretty positive inflation numbers last week. But untouched to the upside, still at what, 20-year highs?
Michael Nadeau:
[12:48] Still at 20-year highs. It did. So when that came out this morning, I was watching it and it sold off. Or actually, I guess people were buying because the yield came down. So the Treasury made that announcement. It looks like people came in and actually bought bonds because now they're getting sort of comfortable that, okay, if they're going to prevent the yield curve from going up, My risk reward actually gets better because, you know, if yields are coming down, bond prices rise. So that's something I'll be watching for, just how are things reacting to this news? The stock market seemed to take it pretty well as well, but then it kind of reversed pretty quickly.
Ryan Sean Adams:
[13:25] So this all is kind of a debasement type setup, like a long term debasement setup, of course, once we get into the yield curve control by treasury type of route, right?
Michael Nadeau:
[13:37] It's a very good setup for Bitcoin and crypto. And I would say it looks really good if we can kind of get through this period here and we'll see if liquidity conditions can stay intact. I kind of think like the real yield curve control won't come until we get some more weakness i i really think that they want to keep this ai trade together um we're going to get into sort of financing and where that's going but if if we're getting these signals that that is just not acceptable to have even have a significant correction you know, then I think you start to have to get back into the market.
Michael Nadeau:
[14:13] You have to sort of take that signal.
Ryan Sean Adams:
[14:14] I spent a lot of time earlier this week kind of getting into the AI bull case and AI investor framework. And then I also spent some time like listening to, other podcasts and kind of the normie type communities and political podcasts too. And there's certainly a tale of two cities going on that we can get into.
Ryan Sean Adams:
[14:35] Let's start with this though. This happened August 10th. This is the big credit mechanism that you were pointing to, that you said, if you squint, kind of reminds you a little bit of DATS season. This is Wall Street going all in in credit facilities into the AI trade. So on August 10th, NVIDIA announced a partnership with six major asset managers. You guys will know the names. Apollo, of course, BlackRock, biggest in the world, Blackstone, Brookfield, Goldman, KKR. This is all Wall Street asset managers. They manage tens of trillions of and the goal was to mobilize $500 billion of third-party capital for AI infrastructure. So this, again, is what I mentioned to you.
Ryan Sean Adams:
[15:20] Gavin Barker on the All In podcast, some other podcast I listened to earlier this week, kind of an AI investor, called NVIDIA with this move sort of a central bank for AI. And it seems what they're doing is they're aggregating a lot of credit from Wall Street, pulling that into a leveraged type of position, we could argue in a responsible way. That's what Gavin Barker was saying. But in order to continue to fund the AI build out, which AI bulls will say, it's necessary. We need this because we don't have enough supply in terms of tokens that we can provide to meet the colossal demand that we've seen and the future demand that we see on the horizon. Can you get into first the details of this $500 billion deal and what NVIDIA is doing here? Because, I sort of understand it, but not fully.
Michael Nadeau:
[16:16] Yeah. Yeah. My understanding is actually, you know, I think a lot of times these types of structures come from Wall Street, right? So Wall Street asset managers know that there's demand, you know, from their distribution, from their customer base for these types of products. And then they'll be the ones that sort of put these deals together. My understanding is Jensen was the one that actually approached the asset managers on this. Um and i think that you know why does why is nvidia so focused on this why are they getting involved with wall street and like essentially creating like uh these financing vehicles for their customers right this is not for nvidia nvidia is not putting money into this and it's not financing for them to go out into the market and do anything it's really for uh people you know that are trying to get exposure to their products, you know, AI cloud companies, anybody who's doing anything in the infrastructure space in AI, not everybody has the balance sheet the size of some of NVIDIA's other large customers. And so it seems like they're being priced out of the market or there's too much work that has to come in to them being able to get the capital to then go out and buy GPUs. it. And so I think that's, you know, NVIDIA's incentive and their motivation.
Michael Nadeau:
[17:37] And then on the You know, I think for them, NVIDIA is sort of like, like you said, they become a central bank of all this or sort of the backer so that when they go to their investors and their capital base to go raise the money, they can say, oh, NVIDIA is the one that's sort of like administering this thing. And they're going to decide, you know, what these products look like and they're going to bless everything around this. And so it brings credibility to that product when they go sell, they go pitch this to their investors. And then of course, they're going to set up the special purpose vehicles, put these assets into it, create these products, and they'll take fees, you know, around all of that. And so now, you know, like we talked about before, when this build out really started, most of the cash was coming from free cash flow from the large, you know, large hyperscalers. As we got further into sort of the AI cycle and the AI boom, we've seen use of debt, right? So that's sort of the next phase of it. We saw Google issue equity for more capital. And now we're going into this place where we're actually sort of like decentralizing the access to that capital.
Michael Nadeau:
[18:52] Some people are talking about this as like a new asset class, starting to say that, you know, compute is starting to become sort of like a commodity with some of these new financing vehicles. So it's, you know, it's just an interesting thing to observe. It looks like a sort of late cycle type of thing. It doesn't have to be, you know, a bad thing. I think this is sort of a natural progression for any asset class, for any hot asset. I think if you went back and looked at any period of like rapid technological innovation, we've seen this type of stuff. I think GE had its own financing arm where they, you know, so that their customers could buy into what they were doing. So this is not something we've never seen. It's kind of a natural thing that, you know, finance would come into play here. For me, I just want to understand the incentives of everybody, where the capital is coming, how this is actually going to work. How long is it going to take for Wall Street to go out and start to pull some of this capital in? And then, you know, what does this mean? Let's say it all goes as planned and Wall Street gets the $500 billion, they create these vehicles, and then NVIDIA's customers have, you know, maybe they only need to come up with a billion of cash instead of $5 billion. And then the other $4 billion is coming from Wall Street. What does that mean for just sort of like the velocity of capital that can go into the AI space? So this can be bullish.
Michael Nadeau:
[20:20] And I think you were at a place, you know, with sort of investor psychology and sentiment where people are probably doing a lot of work that you're doing this past week trying to figure out where this is going. Maybe this gives more confidence into the market that there's still room to run here.
Michael Nadeau:
[20:37] I think that's possible. but I'm kind of just looking at it as like how much demand are we really pulling forward is it really a problem if you know NVIDIA's customers can't can't buy their stuff should the market sort of just work that that out or do we need to kind of just keep fueling this fire and if we keep fueling it you know is there some sort of breaking point where the demand on the other side the enterprise demand just isn't going to keep up and that's when you run into a problem I think that's the thing to keep an eye on is the enterprise demand. There is a spending going to stay where it's at. If that can be true forever, then you can finance anything, right? As long as you can keep demand on the other side of it. So something to keep an eye on.
Ryan Sean Adams:
[21:23] And I think at this point, beyond yield, beyond yield numbers that we've discussed, this is the other, big, massive thing to keep an eye on and to have a view on. And your line here, which you said again, but the line in the report is this is also a signal that the entire AI buildout continues to pull demand forward, pull demand forward in order to build this out. The way I understand this a little bit, Mike, is in similar to kind of DATS. It's just like Wall Street saying, hey, we have a lot of capital that you can unlock if we get kind of the aggregated demand and the credit facility right.
Ryan Sean Adams:
[22:01] And the AI industry is saying, we need more data centers. We need more tokens, by the way, and these are AI tokens I'm talking about. And every token that we produce, we can sell actually at a profit. And so this is all of the big Wall Street finance companies through NVIDIA saying, okay, well, we can unlock about 500 billion in credit for all of that build out. So long as we have a structure that allows that 500 billion dollars to be backed with GPUs, backed with collateral, backed with essentially tokens to produce. And that's what they're saying. It's just not, it's not a uncollateralized loan effectively or credit. It's backed by all of these GPUs that NVIDIA is providing. And that of course, unlocks not just the hyperscalers, but down market, all sorts of other opportunities for AI companies to continue this build out. And it all hinges on how much demand are we going to see in the future. This is why I was listening to a lot of the AI Bull podcast, people like Gavin Baker, the all-in guys, and they're just saying like, this is not a concern at all. This credit facility is not a concern because it's all backed by actual assets, GPUs that are in the space. And by the way, we know we can sell GPUs at a profit across the supply chain because we've seen.
Ryan Sean Adams:
[23:22] And we see a tremendous amount of future demand coming aboard too. So we'll continue to be able to sell tokens, AI tokens, at a profit. So they're basically saying, there's no reason to be concerned about this because the demand that we're seeing is already colossal and it's going to continue to be colossal. And I listen to those podcasts and I hear that story and it gets me bowled up on things like what's SpaceX doing with Grok 3. And I'm just like, well, should I have more allocated into the AI market? Then I turn on my normie channel to like, you know, whatever. What's going on in the world? Political podcasts. I'll listen to Ezra Klein or Tucker Carlson. And they are freaking the F out about AI right now. Okay.
Ryan Sean Adams:
[24:05] Their perspective is like, oh my God, hugging face just happened with ChatGPT. You have AI you can't control. Tucker Carlson is just like continuing to spout who's asking for AI. Like there's a massive political backlash that's building. I was surprised actually the hugging face incident didn't cause a broader sell-off. Maybe the next time an incident happens, there will be because investors will link that to regulatory backlash. Anyway, it's just like, I don't know who to believe at this point. And even the AI bulls will say, yeah, like we acknowledge yield curves don't look so good. Credit markets aren't so hot right now, but it doesn't matter because we are selling all of our tokens at a profit. So the build-out is being funded by free cash flow. I don't know. It reminds me as well, Mike, a little bit of, do you remember during the bull market of 2021 when we had gas fees of like, you know, $200 to mint an NFT? And we're looking at the P&L and the profit of all of the block space we're selling. And we're just like, this is super sustainable. This will last forever. We'll continue to be able to sell block space at a profit because the demand is insatiable. And then what happened? Demand kind of dried out. So it's, to me,
Ryan Sean Adams:
[25:21] this is all like, where does demand go into the future? And that's sort of an unknowable question at this point, or it's just hard to get a clean floor on it. What do you think of all of this?
Michael Nadeau:
[25:33] I think I'm processing it in a similar manner as you. It's great to hear your perspective on it as well. And Yeah. I mean, I think the demand is obviously the important thing. And I think looking at a lot of the messaging, so like going out and I'm actually planning on watching, I think there was a sit down on CNBC last week with Jensen and these asset managers that participated in this deal. So I want to watch that and see what is the messaging that's coming out. I mean, I find it fascinating hearing the messaging around the collateral and sort of what's backing, you know, these new financing vehicles. Yes, there's hard assets there that produce cash flows and things like that. But when you hear people saying there's no risk and things like that, I mean, this was the same view that people had when we were creating all these new products to access the real estate yields back in 2008. And the whole narrative at the time was that real estate prices don't go down. And if real estate prices don't go down, then these products are, you know, investment grade and there's nothing to worry about.
Michael Nadeau:
[26:38] You know, I think this is different for sure, but you still, you can't have that moment where there's, you know, people, human beings and markets don't work in straight lines. And that's the issue. So if there is some sort of issue, people will run for the exits and then that's when things get weird. And, you know, I think as long as everything, they can keep this all, you know, taped together, Then, yeah, it probably should. It should work in theory. Right. It should work in theory. But but we know that humans and markets are not, you know, rational and just like everything works the way you expect it to work.
Ryan Sean Adams:
[27:14] Do you see this generally as just like risk is building behind the scenes, almost similar to kind of DATS, right? So DATS were a new credit mechanism from Wall Street, effectively tapped into a new, you know, asset source and new funds. And all of the leverage there was collateral backed. Now, it was collateral-backed based on demand for... Bitcoin and ETH and all the assets and the tokens and all the block space and everything else, but it was collateral backed. And I mean, is that where you see kind of the parallels?
Michael Nadeau:
[27:49] I think so. It's really that the progression we talked about in terms of finding new ways to bring capital into the asset class. And that's the same thing that we saw with DAT season, a hot asset class? How can we find new investors, new products, new vehicles to pull people into this? And we know when you look at the incentives, so if you think about NVIDIA, does NVIDIA lose anything if this doesn't work out? They don't really lose any, probably not. The people who were actually funding those deals may get hurt. The companies that raise the capital, They may get into a weird spot where they've got bad debt, but NVIDIA really has nothing to lose. And then to the Wall Street asset managers really have anything to lose if they're just clipping fees from their investors on these products. So like when you think about it, the incentives of markets and pulling capital, like it's natural that this is playing out. Where are all the incentives? Who loses when it doesn't work out? And what are the incentives of the people that are pushing the gas on this? It's going to happen. It's probably going to go over its skis because those people are incentivized to just push it as far as it'll go. So that's something I try to think about a little bit.
Ryan Sean Adams:
[29:04] I'm genuinely torn here, almost as I was with Dat Season, because with Dat Season, it was just like, oh, Wall Street's here, and they're coming with hordes of capital and cash. And Tom Lee is buying 5% of all ETH, and Michael Saylor continues to buy. And that's bullish, of course. And also, it was bearish from the perspective of we were getting a little too late cycle with respect to the credit in our asset class and the demand ultimately could not support it.
Michael Nadeau:
[29:30] Yeah. And pay attention to the storytelling. When I was watching Jensen, they just have to keep coming up with this new story to keep investors excited, to keep telling the story. You can just see it when you hear them talk.
Ryan Sean Adams:
[29:42] What's the story now?
Michael Nadeau:
[29:44] The story, I mean, it's really about just how much demand there is. And we just have to find new ways to get capital into it. We have everything we need. We just need to, now we need to, you know, figure out the financing and this is all going to be fine. And I have to say, I kind of like had this flashback to like Tom Lee on CNBC telling the same story about Ethereum and you have to tell a story and, you know, so it's just kind of fascinating to observe it from that angle as well.
Ryan Sean Adams:
[30:11] I think Tom Lee will be right in the long term. I think Jensen will be right in the long term, but that doesn't mean that we're continuing a straight line to all-time highs.
Ryan Sean Adams:
[30:22] Let's talk a little bit about treasury yields again, because this is the other thing in the water. One thing you're adding to the story this week in today's report is real rates. I'm wondering if you could talk about real rates right now. Did you say, here's a line, And meanwhile, the 30-year real yield is currently above 30%. And you said the last time. 3%. Excuse me, not 30%. 3%. And the last time it was at this level was just before the financial crisis in 2008. And the national debt at that time was about $9 trillion. Now it's almost $40 trillion. Refresh us on real yield. Where's that coming from? Why does that matter? Why is it at highs here? from, and why are you bringing in 2008? That's like a cursed year. Why are you saying this?
Michael Nadeau:
[31:14] Yeah, so real yields are basically the spread between inflation expectations and nominal yields. So the reason the real yields have been rising is the nominal yields have been rising pretty fast. And actually inflation expectations have not been moving in lockstep with that. Inflation expectations have been staying a little bit lower. This is, you know, further out year two, three years out. And so you've got this gap on the, on the, that, that represents that real yield. When the real yields are rising, that tends to be liquidity negative for markets. And the 30 year real yield, as you mentioned, just went over 3%.
Michael Nadeau:
[31:56] Last time it was that high was back in 2008, you know, before the financial crisis. You know that doesn't mean that this is you know such a bad thing and part of the reason that um, you know, real yields or yields in generally are rising is because the economy's hot. Like things are, you know, there's all this, this AI capex in the economy. There's all this fiscal spend in the economy. There's a ton of stuff happening, um, in the military industrial complex in terms of, you know, built re rebuilding a lot of the things that we need to fight these wars. So there's just a lot of like capital, you know, in, in the economy, economy is running hot. ISM on the manufacturing side has been an expansion over 50 for the last, I think, four months or so. So it makes sense that the bond market is saying, you know, it's pushing the yields up. We're getting the higher real yield because actually break-even inflation expectations are not rising in lockstep with that right now. And ultimately, like, I think if they stay high like that, that is like liquidity, you know, negative and something to keep an eye on.
Ryan Sean Adams:
[33:02] And you think the big area, if I'm reading today's report correct, that where investors are being complacent is basically a spike in 30-year yields. Like a sudden spike in U.S. Treasury bond yields. The market's not really prepared for that. And maybe that, to your earlier point, that was the thing Besant was trying to dampen a little bit and show support. Like, hey, we're going to manage the long end of treasuries right now. So investors, you don't have to freak out. But that is the thing that's probably not priced in. And the thing that if it spikes, could cause this cascading sell off in risk assets.
Michael Nadeau:
[33:44] Yeah. And I think that would, you know, who knows if they would, how quickly it would take for the, you know, a potential policy intervention. I mean, it does seem like most of the interventions are coming from the Treasury right now. And the Fed is sort of sitting back and letting the market do its thing. You kind of have to think there's probably some level of coordination there. We know the Fed president meets with Besson once a week or so. So trying to get a feel for what is, is there a sort of unified vision here of what they want to happen if the Fed chair wants the yield curve to kind of like rise up in somewhat of an orderly fashion because he wants inflation to come down. He wants things, he wants growth to slow.
Ryan Sean Adams:
[34:29] And that was the case you made a few weeks ago that he does want that, right? Warsh does want that.
Michael Nadeau:
[34:34] That's the signal that I'm getting from the Fed at this moment, especially with sort of the jawboning about getting inflation back to target and trying to get credibility back. And so if you wanted to get inflation down, you probably would just sort of do what he's doing. But on the other side of it, he's got the, you know, the Treasury sort of fueling the fire a little bit with some of the actions that they're taking. And so where does this ultimately settle? We are still pretty far from like outright yield curve control. And I think we would get that if we had this moment where something disorderly happened, things tightened up, something happens in the sort of funding markets. And we have to sort of basically get liquidity moving again, that's where you could potentially see the rate cuts and those actions. That's how Trump gets his way, but it probably comes during a sort of slowing growth, risk-off moment. And when we get rate cuts quickly, And that tends to happen with prices falling, with equities falling. I think a lot of people assume that rate cuts, the market goes up, but it usually means growth is slowing and people are running for the exits. So it's usually after or somewhere in the middle where you're getting those rate cuts that people sort of take a pause and say, okay, wait a minute, now we need to look forward.
Michael Nadeau:
[35:58] And the setup to me looks really good if we can kind of get through this period.
Ryan Sean Adams:
[36:03] Here's how you sort of end it. we continue to believe the crypto bear market is coming to an end in terms of setting the cycle lows. So that's good. At the same time, the macro risks are rising. That's in the yield numbers, as you're saying. The AI trade feels stretched and we're heading into Bitcoin's worst month historically, which is September. So you seem to still be planning for and hedging for a final kind of risk-off capitulation event where some of this AI late cycle, you're calling it late cycle credit market, starts to break down and that causes some cascades. Bitcoin, crypto, CLO first, that being the final capitulation and that potentially happening September, October, November, December, one of those months toward the end of this year. Am I reading this correctly?
Michael Nadeau:
[36:57] That's still where I'm anchored for right now and you know We do have this. We've now two, two straight weeks of like sort of interventionist type policy that I'm starting to fold in. I would say I'm still, you know, I think you asked a few weeks ago, you know, what percentage I'm probably still at like 65% on, on sort of the odds of it playing out this way. We're seeing a little bit of strength from Bitcoin right now and the key levels I think are kind of in the upper 60s so short term holder cost basis around 68.5 the 21 moving average around that same level and then the 200 a day so if we start grinding up into those areas towards the end of this month I think that'll be interesting to see if we can get a solid monthly close at or above those levels Yeah. And sort of more signal of like how this is going to be managed. Is the Fed going to be hiking rates potentially in September? Those odds have actually dropped a little bit. They're about 35% right now. And then we've talked about just like how these wars are impacting other markets and sort of the game of whack-a-mole that potentially has to play out. Yields are not only rising in the U.S., they're really rising, you know, all over the world right now as well. So, yeah, still anchored to, you know, most likely path is probably
Michael Nadeau:
[38:26] Another correction for Bitcoin. And that would be when I think we would see more shuffling of the coins, more volatility, more trading volumes, all the things that have been very sort of impaired over the last month or two. See all of that kick back up, that would kind of give me like the final check. I think that like, okay, this feels like we've kind of hit the lows. You can start to see where macro is moving from there. So stay patient. I know we've been saying that a lot. You know, we have been getting into some nice positions and where I'm long the market, but still kind of like want to be patient here towards the last,
Michael Nadeau:
[39:01] towards the, going into the final few months.
Ryan Sean Adams:
[39:04] Final question, we'll close this out. So you were staying patient. You were waiting for the next fat pitch and you like to swing when there's a fat pitch moment. What does a fat pitch look like on Bitcoin? So can you paint a picture here? I mean, is fat pitch for you 60K? Is it 55K? Is it lower? I know at some element, you'll know it when you see it because that's how you play things. But you must have an idea in mind for what the fat pitch, the next one looks like in this final chapter of the bear.
Michael Nadeau:
[39:39] I think that if we move up to those levels, I think it kind of depends on where we come from. So if we, let's say we go up to 68K or so and we've got these QE light policies, now we've got more buybacks coming from the treasury, that starts to become the narrative. If we see STRCs trading closer to par, you know, I'm looking for like these, some signals in the market and then the narrative around that. And then how does the price actually respond to it? So if we get up to 68K or so, I think if we came down to 50 from there, that would be that would be like a 25, 26% correction. I could see a scenario like that. For me, a fat pitch would be, I'm probably going to be looking to accumulate, you know, if we come back in towards 60K or so, but I'll be looking to really like buy more if we go to deep value, which is 55K. So I feel very comfortable, like, you know, if it goes to 55K, that's a good place to buy. If we go even, you know, lower than that, which is definitely a possibility. You know, we haven't talked about the sort of real lower deep side potential as well. But yeah, I think, you know, mostly allocated or roughly 75% and keeping some of that cash back for that opportunity. And like you said, I'll know it when I see it.
Ryan Sean Adams:
[41:05] Ha ha ha ha. And you guys will be the first to know, of course, TDR listeners, when Mike sees the next fat pitch opportunity, especially if you're a TDR pro, you'll get an alert right in your inbox when he is hitting the fat pitch. So make sure you take a look at that. I want to ask a favor for anyone who has gotten value from the podcast so far, from the TDR, you've followed us for weeks or months now and you've gotten value, do this. Like this episode, whether YouTube, Spotify, wherever you're listening, write a review, engage with it somehow. That's how we get the content into more hands. I got to say, a lot of dedicated listeners listening every week, I know you hear from a ton. We got to get those YouTube numbers out. I think that the TDR podcast on YouTube is criminally undersubscribed right now. It's about at 6K. I think we should get that number to 10K. and you guys can play a role in helping us do that. Thanks a lot. As always, gotta remind you that none of this has been financial advice. This is an investor journal, and we're on the journey right alongside you. Until next time, stay curious.