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Hi, I'm Ral Pal, and welcome to my show, The Journeyman, where I travel on that journey to the nexus of understanding between macro, crypto, and the exponential age of technology. These three things are the most important factors in our lives, not just our investing lives. But I know most of you are backing the fastest horse in the race. How do I put all of this together and make as much money to unfucker my future? The answer to that is obviously crypto. And so what I've done is something special. I've brought Jamie Coutts, who's our chief crypto analyst at RealVision, who also is part of RealVision Pro where myself, and Julian Le, and also Andre Steno are all part of the team producing really some of the best research in the world for you to navigate these times. Jamie is an extraordinarily good crypto analyst. He does things differently than me. I'm very top-down, but he is bottoms-up detail-driven. And he has some incredible insights that I wanted to share with you. I haven't caught up with Jamie for a while, so I thought we'd just catch up, have a chat, get his thoughts on what's happening in crypto, how to allocate our money, and where it's all going. I hope you enjoy it.
Join me, Ral Pal, as I go on a journey of discovery through the macro, crypto, and exponential age landscapes. In the Journeyman, I talk to the smartest people in the world so we can all become smarter together. Jamie, good to see you, my friend.
Hey, nice to be back on.
I know. No, it's good because we haven't caught up in ages, and we're both part of the of RealVision Pro now because we've combined the macro and crypto. So, I think it's just a good chance for us to catch up, and I want to see what your thinking is and you know where it compares to mine, stuff like that. And I think people find it super interesting.
Yeah. Look, I mean, I was at drinks here in Sydney. I think it was last week, and everyone was like, "So, how often do you speak to Ral?" Like, well, every time you see me on his show, generally, but so we'll do the catch-up now.
Yeah. I don't know why we don't we should we used to have the standing call, and then we've stopped doing it. I don't know what's happened back. I'll reinitiate it.
So okay, let's let's go through what you're thinking about markets now because it feels to me that things are about to get really interesting. So I don't know how you want to go through the flow of this. I know you've got some decks and some other bits and pieces because you have a very unique way of looking at it. It's very detailed, and I think it's really helpful for people.
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Well, it's been an evolution. So, I mean, I sort of start with the framework of thinking about everything. You know, asset prices are driven by liquidity, but there has to be a very much a use case or a utility for a technology or experience, sort of exponential adoption. And I think blockchain has that inherently. Bitcoin: store of value, and in a world which is becoming much more fractured, geopolitical risk and just the absolute palava that is, you know, sovereign debt, um, in the US, but all Western governments right now. So it's now coming into its own. It's, you know, its destiny seems to be pretty much, um, sealed as the emergent, you know, reserve asset of the world. You know, everything else outside of that has a lot more risk and a lot more beta, um, because it's much more like early venture, um, or or early VC or VC, um, style investments, but you get to sort of trade it on a 24-hour basis. So you can see the you can see the adoption rate taking place, and now you've got sort of top-down regulations and, um, you know, advances made by nation-states to really embrace digital assets. So all that's great, but I look at the data more than anything because the headlines can really throw you off track, whether it's a positive one or a negative one. I look at adoption, look at the metrics that, um, you know, once back-tested and regressed against the prices have some kind of signal. There's nothing perfect in crypto, is like there's nothing perfect in equities or fixed income, but there is definitely signal in the data, and I just try to build models which, you know, sort of highlight statistical significance and provide us with some sort of, sort of framework for thinking about where things could potentially go and, you know, when things when risk is particularly elevated.
So last couple of months I've been working on really two things, but it's, you know, it's it's crypto-wide, but it was, you know, starting with Bitcoin specifically, looking at the sensitivity of Bitcoin to liquidity. Um, so you have done all this work with Julian on liquidity analysis. I just thought I'd dig in a little bit deeper and start thinking about, okay, so traditionally, Bitcoin does this when, you know, liquidity increases or decreases. Um, when has been the exceptional price rises or, um, movements in the Bitcoin price, and what has that sensitivity to the uh global liquidity situation been? And I found that, you know, it's very clear that we've had like these, you know, these very bullish regimes where global liquidity expands very rapidly. And when it expands very rapidly, but also when it sort of breaks out of a period of contraction, generally Bitcoin sensitivity to the increase in global liquidity increases. It magnifies, and with a lag, so does crypto. So, it's kind of something that we already knew. We looked back, and we could look at the price charts and go, "Yeah, Bitcoin rallies first, and altcoins rally next, and you know, so be it." But this is like just trying to really quantify it. So, we've got I think, um, a stronger guide in terms of what the potential price will be uh during this expansion period in global liquidity. And, um, you know, on top of that, for the Pro community, I built a, um, something that's been irking me for like two years, which is well, even longer. It's like some kind of risk model. So okay, so you can sort of understand where the upside is if liquidity increases at a certain rate. But you know, there are other factors at play as a market. Like if you think back at the last cycle, everyone's got PTSD as to, you know, why Bitcoin didn't reach somewhere close to $100,000. That's what everyone was calling for really without any sort of quantification of like why. But there's, you know, there's other factors at play; there's behavior, there's leverage, typically like these are the two big things. So if you've got, um, ways of sort of tracking those things, and if you look at the past, then you've got a framework for understanding when market when Bitcoin is risky or potentially near a top, and that was sort of like the model framework which, um, you know, the Pro community, um, saw. I think in the last sort of like two or three weeks we released that, and hopefully, it's going to go up on the platform as a live ticking, um, you know, risk framework that everyone can use on on a day-to-day basis.
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Fantastic. So there's a lot to dig into. Before we start, just observationally, I was out in the Middle East what last month I think it was, and sitting down with like the sovereign wealth funds, and the mandate across the entire region from Saudi to Abu Dhabi to Dubai to Bahrain, um, to Qatar is AI and blockchain, and not just using Bitcoin as a reserve asset but also building the entire government infrastructure on blockchain: driving licenses, property deeds, you know, the whole bloody lot. So, it's like it's fascinating to see. And then a lot of people say to me, well, if all of this money is coming in from the sovereigns, that may produce an outside return. And I'm thinking, well, if we're going from $3 trillion to $100 trillion, which is my estimate by just extrapolating out the trend rate of growth, you need larger players each time because the market cap is bigger, right? There's no way you're going to get to $15 trillion this cycle unless you've got bigger players. Um, so it's kind of I don't think it's what people think it is. I think it's just a function of the size of the market. The bigger it becomes, the more that those people are involved. Uh, and the more blockchain technology gets used, the more it uses the alts for infrastructure, rails for new forms of compute and storage, and all the other things that are coming. So, I just thought it was interesting because everyone's like, "Oh my god, it's a super cycle because of this." I'm starting to lean towards—well, we've talked about this before—a longer cycle just because a) the business cycle is still below 50, so generally it takes a while to climb up, and then we use the GMI financial conditions index, um, and that has a 9-month lead, and with the dollar breaking down even today, it's starting to suggest that this could not—this may go even into Q2 2026, so it's like the whole cycle got shifted big because rates didn't get adjusted, and the dollar was sideways for a period of time. So, it feels that potentially there is a chance, and again there's no guarantees in this world, that we're more like 2020 than we are in 2021.
Yeah. Or it's very also it's spooky similar to 2017 for me. So, so let's let's go through some of your charts, some of your framework because I think people are going to love to see the work that you put in. I don't know where you want to start with with that deck or whatever you think the best narrative.
Well, I think we could I think we could sort of start with just the, um, the actual risk framework that I built, um, looking at global liquidity first. So, it's interesting what you're saying about, you know, the the sovereigns in the in the Middle East because, um, it's very much when you when you hear about the Middle East and crypto, it's really it tends to be very, very Bitcoin-orientated, right? So you've got, um, United Arab Emirates and I think Bahrain are heavily investing into Bitcoin mining, and it just seems to be sort of very, very Bitcoin-focused, but like you're not hearing the stories like what you're relaying here coming out about the usage for in government departments. Um, so that's extremely interesting.
Very man, it's been mandated by the Sheikh. You know, the ruling families have essentially said the future of the Middle East. I've always been bullish on the region because I think they're figuring out, you know, what the world looks like without the oil, and how do you invest the oil capital more efficiently? And they are just like our future is AI because we can, we've got endless energy right now, so we can do endless compute and data centers and all of that. That obviously plays for Bitcoin mining, but they have a lot of free cash flow, and they want to become a more modernized economy. So, they're like, well, we'll build on blockchain rails and use AI in government. They're already using it in government in asset allocation models, also. So, it's it's really interesting to see how fast they're moving. But, yeah, you're right. Most people don't understand that they're going to be using a lot of underlying blockchain technology that's not just the storing of Bitcoin for a sovereign wealth fund.
Yeah. Yeah. It's just such a contrast to some of the Western countries that, you know, are constraining themselves on the energy side, whereas, you know, in the Middle East, they're overbuilding their energy grids, and because of that, they've got just all this extra use. So I mean, they can basically monetize all that surplus energy with Bitcoin. But yeah, it's fascinating 'cause, you know, you can see where this is going to go in in the next 10-15 years. The Middle Eastern countries are going to leapfrog a lot of other emerging markets. But, you know, they could even well overtake some of the more established developed markets as well.
Um, well, look, I mean, uh, let's sort of bring it back to our friend liquidity. Um, so what I've got here is just my version of global liquidity index, which is, you know, an aggregation of, um, private credit through, you know, um, global N2s or the global money supplies of large countries, central bank balance sheets, FX reserves, US net liquidity. Uh, and this is similar to our uh GMI total global liquidity.
Yeah. Yes, it is.
Yeah.
Yeah. So what's your number roughly? Do you remember?
I don't I don't know actually.
Yeah. Well, it's, um, you can see that there's a very tight correlation, like depending on the data set you use, the regressions, um, the R-squared or the, you know, the expansion factor of global liquidity on the Bitcoin price movement is very, very high. It's like one of the strongest, um, relationships in financial markets.
Yeah, we get using ours we get 90%. 80 88 88%.
Yeah. And I'm in that ballpark as well. But what what's interesting is that that's, you know, that's a relationship that's a sort of linear relationship over the time period. But there are periods where Bitcoin becomes hyper-sensitive to the changes in liquidity. We've had these periods where, you know, global liquidity goes sideways, and actually, Bitcoin usually tops before global liquidity tops out. So it's yeah, when the rate of change of global liquidity slows down, it starts to
Yeah. Because this has been driven by in the past a lot of central bank activity as well. So central banks move very, very slowly, but the market detects when inflation starts when break-evens start to break high, the market starts pricing in higher inflation that the central banks will have to pivot, but they don't pivot on a dime unless it's an emergency when they're adding liquidity but never when they're withdrawing. So usually Bitcoin will sniff it out many months in advance and we'll see the top form, and, um, and then global liquidity will roll over. But the the the contraction periods in global liquidity traditionally have only been sort of 24 months; like 2 years, and that was in 2014 and 15, then in 2018 and 19. The one that we've just gone through has actually been 3 years. So to your point earlier about the cycle being elongated. If you look at global liquidity here in in white, you know, it's been sort of it was down sharply in 2022, and then we just had this sort of contraction period, like a a a wedge pattern that we've sort of been squeezing into and now breaking out of. So a longer buying that buying that low in the first—that's what we did, and it worked really well end of back end of 2022 when global liquidity—it doesn't give the strongest price action, but I don't know, Bitcoin's up 6x since then, so it does work just by getting the bottom of it, but the breakout is when it really counts, right? Yeah, so the tops are harder, but the bottoms are easier actually because, yeah, you know, at the bottom, it's it's usually sharp central bank actions, and that is that's the signal. Um, you sort of don't have to sort of second-guess that. And now that we're starting to break out and you look at the sort of breakout of the last contraction period, and obviously 2020 was exceptional. So, we're not looking to repeat that. But generally, if you look at the previous times we've gone out of a contraction period, that that has been what I define as like the super, super bullish liquidity regime. So, you know, global liquidity can only contract or, um, go sideways for a certain amount of time because the whole system is so indebted that a risks that default risk rises and also just the interest cost on debt becomes too excessive. So there is an impulse, there's always an impulse to add liquidity. And so like a beach ball under the water, you know, if you keep it down for too long, it's going to burst out. And we're starting to break out now. And so in the past when we've seen a breakout of the previous all-time high in global liquidity, Bitcoin's sensitivity to the changes in liquidity triples at at least sometimes four or 5x. So in my in my analysis, you know, global liquidity goes up by 1%, Bitcoin usually rises about 7%. But in these particular regimes, that goes to 20 to 30 times. So a multiplier of five. And what's really interesting is that we got the breakout in global liquidity in early April as the markets were sort of tanking. So that was this here, this low that we went through, which really wasn't much to worry about like in terms of Bitcoin pullbacks, but it felt it felt pretty nasty at the time. Massively outperformed the S&P, massively outperformed the equities on a volatility-adjusted basis, even though, you know, it was down 30%, and the S&P was down 20%. On a risk-adjusted basis, massively outperformed equities. And so when it broke out, when global liquidity broke out in early April, Bitcoin rallied 40%. Global liquidity from that breakout is up about 2%. That's roughly what it has done in those previous bullish regimes where global liquidity breaks out to new all-time highs. You get a sensitivity factor that is multiples factors higher than it typically is. And so for me, it's interesting that, you know, we're not overbought, you know, based on liquidity. Every new dollar that's created, whether it's even through like the US dollar weakening or depreciating is an easing on financial conditions, it all adds liquidity into the system or makes financial conditions better. And the relationship is strong. And so, you know, I'm looking at now a market that is not overheated at all. In fact, it's doing what it should be doing, and it's not doing anything excessive. So I talked about a a framework for sort of modeling
The risk. Um, what I did was I converted that relationship into a risk score, and the risk score for global liquidity is just this one here. You know, it correlates pretty well to the tops in Bitcoin. So what you want to see, it's a it's a it's a rating system of one to five, but I've also got percentiles, and we'll we'll be publishing them onto the RV platform. So if people want to get a little bit more granular, like if if we're at a four, does that mean we're at the 82nd percentile or the 88th percentile or the 90th percentile, we'll get that granularity shown as well. But what it's designed to do is to say, okay, anything below a four is sort of just neutral, normal conditions. When we're at fours, you have to start thinking about, okay, if there is chips to be taken off the table in Bitcoin or crypto, and this is not necessarily the full cycle top, it can be sub cycles within, right? Because I'm looking at the got to fives a couple of times, backs off again. So, you kind of use it like a weekly RSI kind of idea, is like an overbought, oversold indicator.
Yeah. Yeah. So, what you say is like perfectly correct. It's like you've got to use it with some context. Like an overbought RSI at the beginning of a breakout of a long-term downtrend is not a sell signal; it's a buy signal. But this is a little bit more calibrated to knowing when things are really stretched relative to the, you know, the one financial relationship which really seems to matter, which is liquidity. So if it becomes extremely stretched versus liquidity even in a mid-cycle uh scenario like we saw in early 2024. So we got that read when Bitcoin was around 51, 52,000. It topped, you know, within a week or two at sort of 73,000. So it doesn't catch the top. None of these are going to catch the top, but it tells you when global liquid when the price is stretched versus global liquidity. And of course, and that's how I think about this to explain to people is there's a call it a 90% correlation roughly. It's when you look at the what's the other 10%, it's often the fear and greed, the elements where the market gets over ahead of itself, which is what you're picking up here is like the the the deviation from the trend versus liquidity, right?
Yeah. Yeah. So when it gets too obscene, people have taken too much risk, and then you've got other scores like leverage that then you would add on to that and say, "Yeah." And the leverage is built up, and that's why we're in excess.
Yeah. Yeah. Exactly. So like I probably should have said this from the outset. It's global liquidity, it's leverage and positioning, and it's um it's unrealized profit. So when you get it's broader, it's broader than just deviation from from uh liquidity.
Yeah. And that's important because that tells the other side of the story. So okay, you can say that okay, it's stretched in terms of where it is relative to global liquidity, but is there excess of leverage in the market? Like if that is also happening at that time, boy oh boy, do you have a very strong signal for a looming market top because derivative like open interest and and the the the factors that go into the um the leverage component, the derivatives risk score are very finely tuned to tops and also bottoms. So that plus also unrealized profit which you can see on-chain come together in a very good way like in terms of the confluence that you can get from it to give you um sort of high probability zones of when things will top and bottom as well. So this was this was indicating, you know, that in the early part of 2024, you know, just a couple of weeks before we had that top which I'll show you with the next chart on the derivatives one was really driven by the derivatives market; you just was so excessive in Q1 with the launch of the ETFs that it was, you know, it was destined to correct; it only corrected by 25, 30%, a pretty normal correction, but it, you know, it did take about six to seven months to unwind all that positioning. And then we also got an overvaluation read on the global liquidity risk score in December as well. And if you remember back then you were talking about it, I was talking about it like the dollar was strengthening, like liquidity was tightening as we rallied very very sharply into Christmas, and of course, then we had the fallout, the fallout for the the next sort of sort of three to four months. So now where are we? We're at, you know, we're at three; we are neutral. There is sort of that 40% rally off the lows of um April is just the normal um, you know, the normal relationship playing out.
Okay, super interesting. The next score, that the one we refer to is called the derivatives risk score, uses several inputs, mainly on perpetuals futures. I'll be pulling in sort of options and other metrics when I can. But here you can see that the timing of this signal um you have to kind of ignore the 2020, 2021 market; that was extraordinary. Funding rates remained elevated for, you know, 12 months, and that simply was just a function of a of an immature market and also the type of investors that were trading it back then. There's just no way funding rates can, you know, remain at sort of double digits, you know, weeks and weeks and months and months on end. But if you look sort of more closely to what happened in 2022, it picked the bottom very very well. And in early 2024 again when the ETFs were launched, the actual top, the the risk score of five came very close to the market top and then again in December of 2024 as well. So this tells that other side of the story. So if you're overvalued versus global liquidity, is it driven by spot or is it driven by leverage and derivatives? If it's driven by the latter, that is a much more serious problem because that unwinds more quickly.
So I mean, again, brilliant work. Um, so looking at the liquidity risk score, we're neutral. Looking at leverage, we're kind of low. Not even neutral, we're pretty low. um which is suggested as we go through more of your work that, you know, we've got a potentially larger move at play here because there's we've got very little headwinds.
Yeah. Yeah. So it's exactly very little headwind if the positioning was so one-sided at this point, especially around an all-time high like we got in this one here back in Q1. This was pretty much level with the old 2021 high. So you had old resistance, but you also had far too much leverage and positioning all one way right at the top. So it was just a, you know, it was a recipe for a pullback. Um, we don't have that now. So it's just, you know, it's very, very muted, which is great to see. If we rally to 140, 150 fast and that all builds up, that changes the sc changes the situation, you know, altogether. But if we get a nice market move where leverage doesn't get as ahead of itself and that positioning isn't sort of all one way, then this actually provides the support for higher prices and a longer cycle.
And do you look at leverage in terms of percentage of the overall market cap? Um, because the the natural leverage number will will expand over time as more people come into the market using derivatives. But we've got these larger players as well. So as the market cap goes up, it becomes we have to measure it as that kind of percentage like we do with short interest in stocks and stuff.
Yeah. Some, it's not exactly. Um, but you like it's very coincidental like so Bitcoin goes up, open interest goes up. So there isn't much signal there. So for me, the signal is the rate of change.
Right. Okay. Okay. Makes sense. Too much too fast.
Yeah. And then there's funding rates, and there's options, and there's, you know, options skew, and there's, you know, um other things we can use as well, but generally that's kind of the way I look at it.
Okay. So what what next? And the third one is network profitability risk score. So this is the on-chain metric. So this, you know, there is like a multitude of of metrics to choose from now. Um, there's some great providers out there. You know, I use CryptoQuant, Glassnode, obviously another one. There are others, and there's lots of different ratios and metrics that have been devised over the years that have been pretty good indicators of market tops. So this is a really a synthesis of quite a few of them brought together, and this is the other part of the equation. So you've got global liquidity which, you know, just from a first principles basis, we understand drives asset prices. So you want to study that relationship. Number two, regardless, leverage can ruin a trend, and they can provide opportunity. So, you've got to understand like how the market is positioned on that front. But then you've also got to understand the on-chain spot holder basis. And so metrics like MVRV, um, NUPL. So MVIV is market value to to the realized value, which is essentially it's thought of as like the uh, you know, measuring the cost basis of the entire network. What is what is everyone's like holding cost, and therefore what is the unrealized profit um between the market price and that cost basis. Another metric, NPL, unrealized profit loss, does sort of the same thing, but it's sort of um, you know, it's bounded to zero to 100%. And there's another metric which I find quite useful called SOPR or spent output profit ratio. And this tells you when a certain segment of the holder base, namely long-term holders, which are statistically significant when they are doing things um or when they're um, you know, either buying or selling in mass, then that has um correlated very much to market tops and bottoms. So, you know, all of these things together right now at a score of three is saying it's pretty bit, you know, it's it's normal; it's not excessive. So, the unrealized profit of the network isn't too high. The long-term holders aren't dumping coins, you know, which will spot they typically will at a market top. And so, you know, that is not happening excessively right now. Again, if we go to 150, 160 quickly, then that could very much, you know, spike up, and we start getting a score above four.
Super interesting. Put all those together. So, I haven't I haven't sort of put distilled it down to like one score, but I'll be doing that. And um that's where it's going. Obviously, you'll one kind of mega dashboard. Don't give me the don't give me the three scores and the percentiles; just give me the one thing. So, we'll do that.
Yeah. Great work. Now the other dashboard that you use is the one that's on the Real Vision platform, just running through, you know, some of the key tokens and stuff like that, and also if there's anything else you want to add about Bitcoin. I mean, what what you've shown us is it's super neutral from here, so we can have a run and let's see what leverage and other things build up. What else should we be looking at?
Um, so looking outside of Bitcoin, so we are in a super bullish liquidity regime right, so and Bitcoin is going to be breaking the all breaking the all-time high; it already has in the last week or so; it's retraced, and you know, you could chop around here, but I don't think we're going to see a hell of a lot of like downside, not a large move given those three risk scores where they are, then none of them being excessive um, and so you know, through the analysis that we've There's obviously this sort of lag that it that occurs with the rest of the crypto complex, and you know, unlike previous cycles, the adoption's coming through, and now we've got sovereigns and nation states endorsing, attracting businesses uh that are focusing on blockchain. So there's a whole new element or dimension to it, but it's still a very hard asset class to trade because, you know, most people by now would have thought that it would all be on mass a lot higher. Um, but it's been very selective so far. So the way I've tried to think about, you know, adding a new lens on crypto market and the broader sort of altcoin market is to sort of just adopt some of the traditional market breadth, you know, analysis that we've, you know, we you and I have been using for 20, 30 years and bring it to the um crypto market, and the only way you can do that is if you start using sort of index data on crypto. I've partnered with this company called Bit Performance, and we've created the top 200 index, market cap weighted, equal-weighted, then we've done sectors and subsectors. And so that allows me to do all sorts of interesting things from a market breadth perspective. But this is just a chart showing the top 200 equal-weighted index. So it's a pretty good proxy for like altcoins. Every single asset in the top 200 weighted equally. And you can see it's been stop start, stop start. It's, you know, the, you know, the opposite of of the Bitcoin chart, which has pretty much been up to the right. Um, we've had these bursts of activity. So, what I've created is an advanced decline line. So, equity traders and investors are familiar with this one. So, equity, you know, the advanced decline line should be going up as the market goes up. And if it starts to trend down as the market's going up, that just means that less and less assets are participating. In crypto, we've had a structural bare market ever since the 2021 bull market where you can see here that prices have sort of tracked sideways up to sideways, but the ADL, which is this white line in the subchart, has been going down. And this can also be I'm guess correlated with Bitcoin dominance.
Yes, is another simpler way of looking at it. Um, it's a um because of the market cap aspect of Bitcoin dominance, it doesn't tell you as much about breadth as like the ADL does.
Yeah. Yeah. It's just another it's another you use; I I use the Bitcoin dominance chart as well. But what I'm starting to see is um, you know, I was calling this back in March and April that the bottom was forming in altcoins. And so it doesn't look like much now, but we we are starting to move higher with higher lows. The oscillator which I've created like a MACD really does do a great job of coinciding with a typical alt seasons or bursts of outperformance. And so that triggered in April, late April. Now it feels like a shitty alt season because if you look at sort of the DeFi coins, some of them all round tripped in the last, you know, couple of weeks. Um, but it's structurally looking like we are building an alt season right now. And this is just one of the clues that I look at to show me that, okay, we've got higher lows on the ADL. Um, the MACD is positive, and even though we've pulled back over the last couple of weeks, it's still positive. And so instead of these short bursts like we saw in Q4 of 2024 and um sort of does this chart go back to 2021 so you can see what a full alt season looks like.
Yeah. So yes, you can much faster. Look at that 2020. So 2020 and 2021 was extraordinary because we actually had a rising advanced decline. So that just meant that the number of assets in the top 200 that were making new highs every day was positive, you know, in a cumulative basis day on day out. And then really in this bull market, it's been sort of a structural bare sorry in in this sort of market. Does this go back to 2017, which is I think the most similar to now? I don't know if your data goes back that far. It starts to get a bit wonky because the index construction going back to 2020 was was pretty hard. Um, yeah, so I don't even trust it. You can see on the chart here it just does a there's a rebalance here. So I don't tend to use it. I wish I could; it maybe if we sort of created a top 50 um it would be a better data set to work with in that 2017.
Yeah. There was just less around, right? You had a bunch of ICOs, but you didn't have a lot of alts really. Not like now.
Yeah. Yeah. You couldn't have even really put together a top 200 back then.
Yeah. Agree. Okay. So, this is the start of an alt season you're seeing there.
Yes. Yeah. Yeah. It is the early early signs, and the um alt season indicator, which is the number of assets in the top 200 that are outperforming Bitcoin, you know, bottomed again in sort of March, and it's been sort of a tepid rise. So it's now at about sort of 17%, which is to say only 17% of the top 200 have outperformed Bitcoin in the last sort of 90 days. You know that you can see that, you know, a good alt season will see a broad multi-month rise in the alt season indicator, whereas we've seen sort of very narrow sharp rallies um but not not to the sort of levels that we saw back in 2021. And look, I I actually don't think we're going to see, you know, broad-based outperformance of Bitcoin across the entire market. I mean, you'll see periods over the next year and a year and a half maybe where you've got like um, you know, you know, 80% of the assets in the index outperforming, but I honestly I think the market is starting to act with a bit more discernment. Um, you know, I say that in light of the fact that like meme coins have been doing some of the meme coins have been doing really really well right now. So it's not like fundamentals are everything; culture still matters, but as this market becomes much more sophisticated with the type of um asset owners and investors that are coming in, they're going to start using fundamentals. And if there is no net worth growth either in a protocol or in a layer 1 or a layer 2, you know, it's not going to rally just because bitcoins rally. Um so because also I think of it as a function of the amount of capital and attention available, right? So like attention times capital, right? That's the whole game in this. And there are so many coins now. Ignoring all the meme coins for now, but just generally speaking, there's a lot. So we don't have enough capital to drive all of the speculation and all of the things. So the market has to focus where the attention goes. And so yes, you'll see pockets of memes doing extremely well because they capture attention and thus capital. But generally it feels like the mid-tier outperforms Bitcoin, but the bottom tier, there'll be cases of things that do because they're new and they're interesting and they get attention, but generally speaking, there's just not enough capital that flows that far out the risk curve.
Yeah, I'd have to agree. Um, you know, there's definitely going to be some mag there's going to be some big outperformers for the rest of this cycle. Um, so you'd want to at least be keeping a a fairly close eye just on network growth and adoption. Um, but yeah, I mean I think it's like meme is it one of the meme coins? Um, is it SBX 6000 or something? You probably know this better than I.
It's been Yeah, SBX6900. I get trolled all day because I once mentioned it and I don't own it, but
Yeah. Yeah. Um, so there's going to be stuff like that for sure. But um, you know, I think the there's there's ways in which, you know, investors can have exposure to the altcoins um and do it through sort of a much more rational fundamental lens. And we we just had actually um the head of data at Blockworks Research on RB like yesterday; I interviewed him, Dan Smith, you know, he's been doing, you know, quite a lot of work in sort of understanding, you know, new demand metrics, and so he instead of looking at just fees, you know, Blockworks are sort of promoting the use of something called real economic value, which includes fees but also me and I went and back-tested the data, and it's actually got a pretty high correlation um to to price as well. So, you know, this is all going to get understood very very quickly by, you know, the Franklin Templetons and the Fidelities and all the new asset managers um that aren't in the space or that will be coming into the space because they're sure as not going to start, you know, just following. They need to sign up for Real Vision. They need to sign up for Real Vision Pro. That's where you get all of this and all of the macro work that we do as well. That's what they need to do.
Yeah. Yeah. Absolutely. Good promo. Yeah. But it's, you know, I I don't think people understand the depth and breadth of
What we do at Global Macro Investor? Um, you know, the sheer amount of stuff we do on the macro crypto nexus and then what you do in a lot of statistical analysis, a lot of in-depth analysis, real depth in stuff. This stuff doesn't exist anywhere. I mean, I'm really proud of what we've all built. It's just very cool.
Yeah. Look, I mean, the degrees of freedom that we have at Real Vision to go explore like corners of the market and also bring the institutional lens to what's been a pretty cowboy-ish space really for the last couple of years is truly exciting, like no constraints and just also, you know, I guess bringing that more trad.
Yeah, I think so. And um, you know, just again I'm going to do a small plug because I think it's important is like, you know, if you are a hedge fund or an asset manager in the space, you can also contact us about, you know, getting specifically Jaime's research or the macro research and we can we can figure out ways of doing it. It's important for us; Jamie and I are driven by the same thing, is like to give as much information to as many people as possible and to help people in their journey. So it's a key thing.
So what else are you looking at here in terms of I see you got some other tabs open for alt season?
Yeah. Yeah. Just I mean, I what I might actually do Ra is because I know we're limited in time is just sort of bring up the dashboard for
Yeah. That's great. The blockchain economy. It's a great dashboard. Always we talk about fundamentals. So, you know, let's let's think about this. This dashboard's now real time on the Real Vision platform, right?
Not yet. Not yet, but it's coming.
Yeah, it's coming. We were going to we're going to get this one up and a couple of others which actually break down this information by the assets so you can do sort of cross asset analysis. Look, there there are data vendors out there that provide, you know, onchain data. The I think where the where the magic is is actually transforming that data, cleaning it up and showing the stuff that has the signal because there's no shortage of metrics to get sort of tripped up in. And if you know, unless you're building models yourself, dashboards need to deliver the things that that have the highest amount of signal.
So, you know, you can see here that I've got sort of R squares built in. So, you can see, okay, what tends to matter, but also like, you know, if we, you know, if we're analysts in the space or we're looking at it, we obviously are investing in assets, but we want to know what the ecosystem, what the economy looks like. And so what I've done is I've aggregated it across all the assets, L1 assets and L2 assets to give a sense of like the blockchain or crypto economy. And so here we can sort of see these aggregated numbers. And you know, in the last 1 month if we just look at this column here, you know, we've seen a surge in DEX volumes and that's really been driven by Hyperliquid which is, you know, an exciting project and um has been doing extremely well, outperforming every feels like it's going to be one of the horse, you know, I always think there's usually four or five things that run the full cycle. It feels like Hyperliquid might be one of them.
Yeah, I'm I'm there too as well. Um, I've got a report. I don't own any, but I just
Yeah, it's phenomenal price action.
Well, that's what
Yeah, this is what kills me, Ra. So, I'm going to put this in my report um because I have to own it. It's my chart of shame, which is I my my trend indicator triggered on um Hyperliquid in uh early May at about $17 and I didn't pull the trigger on it. I was like I was I was busy writing a report actually and I was like I'm writing this report. I'm going to get it done. The price isn't going to move. I'll be right. And sure enough, it just rips in my face. It's 40. Like that was 17. Now it's 42. I you know I look at I look at the fundamentals of it and I'm thinking no this thing's going to go you know this thing's going to rip and continue to go. It's got a market cap of like 12 billion, fully diluted market cap of about 33. So, it's big by crypto standards, but it's doing like a million dollars a day in fees. Like, you know, it's trades on a on a market cap to fee multiple of around 40 times, which you know, a high growth tech stock trades on multiples higher than that. What's Tesla's sort of market cap to sales or I mean it's you know most other blockchains are trading on thousands of like you know market cap to fee ratios so you know it's got you know it's got unlocks and everything else it didn't mean to turn this into a highly good plug but it's more of a case of just airing my um marrying my regret for missing that trade but yeah look I mean DEX volumes are up 95%, daily active address all these metrics took a huge hit in Q1 and they're bouncing back. So from just sort of like the network adoption or activity standpoint, these metrics matter that drives price.
There've been a pretty big sort of turnaround in the last month and you know you can see that you know we're starting to track back up to sort of the 98th 99th percentile of the history and most of these assets are well below their lows. So you can sort of think of that in two ways. You can think that maybe the market's becoming a lot more rational and is you know ascribing less of a premium that's I think is definitely true because you know we can't go back to the 2021 um multiples which were just completely unjustified um but at the same time at some point these assets are going to start to really move because there is I think they always I think they always decouple at the end of the cycle there's so much fear and greed that comes into crypto that it always decouples
Um, yeah, we just because look, the reality is is everybody's hopes and dreams are in this trade. This is the only way to unfuck people's future. And so it sucks people in too late. Obviously, it always does. Uh, and it's a problem, but it it's a feature. And the the indicators you built before actually really help understand where are you in the FOMO cycle.
Um, because it's basically those indicators put together basically FOMO.
Yeah. Yeah, pretty much. Maybe we should just relabel it that. So you're thinking Q2 when you put the single one it should just be you know the uh RV FOMO index because it it and if it's like 4.5 get the out.
Yeah, that's right. Or
Yeah. Realize that you should get rid of your spot positions and own a call option instead or whatever it is.
Yeah. Yeah. Um so you're you're looking at Q2 now is kind of like where you you've arrived at where you think not 100% but we're kind of leaning that way. I mean definitely Q1, but it's looking like it might run all the way through till, you know, end of H2, which kind of makes sense. Again, the ISM, the business cycle is kind of is the driver of speculation, risk, excess capital, all of that stuff because people have higher earnings. We're not positive yet. So although tech stocks have done well, um stock markets have done decently well, Main Street has not, businesses are still struggling.
Yeah, but once that turns and I think the Federal Reserve will be cutting rates because as we've been saying for a long time, Julie and I, inflation is coming lower and it is then we will see Main Street or people with mortgages, household income increasing and that pushes people out the risk curve and that's what drives the real cycle particularly the alt season. So alt season we find is highly correlated with um ISM and it makes sense. It's just got to start growing into the market. The chart on Bitcoin or Ethereum Bitcoin too is very uh is very interesting.
Right. So you can see it's impulse higher sideways range right now. It just looks like that is a flag ready to break out again.
Yeah. And I've got the same it's the same as the Bitcoin dominance chart to me. It's either forming a large head and shoulders top um or a GMI crash pattern which is the fall, the rally, the failed new high and then big move lower. Um and it would make sense, but we need the ISM. We need disposable income or disposable earnings to rise so people can recycle capital into more speculative things because right now they're still struggling to pay for a steak dinner because it's $150 dollars for a steak in the US. You know, it's a big it's a big issue.
Well, we're there's tax cuts, you know, in the second half of the year. That's going to help.
Yeah. Yeah. Well, it's pretty scary. We um we're paying about 120 bucks for a steak down here as well.
Yeah. It's amazing. I'm in Spain right now and you're not it's a lot cheaper. But there again, earnings are a lot less as well. So, let's um go. You've got a version now of network activity across different chains, right? I think that's useful.
Yeah. What's looking interesting to you?
Well, let's look at ETH for example because ETH is starting to move. What are we seeing in ETH via your lens?
Yeah. So, I mean fees are up 100% in the last month. Okay. So, you know, it's fees are a bit tricky because they're denominated in the, you know, the underlying token price. The token moves that also moves the, you know, the the fees as well. But it's correlating as well to, you know, a 30% increase in in DEX volumes. Um, you know, the the fees in ETH are up 60%. So that's pretty substantial for ETH. And sorry, are the fees in ETH going up because of the restructuring of ETH to accrue more to the to the base chain? Is that what's going on here?
No, I think it's been just a general it's combination definitely activity on the chain is increased. So that's what you see, you know, from the daily fees in sort of native ETH, right? So that's non sort of um US dollar denominated um fee growth, but it's also it's also partially due to price as well. So this sort of dance that activity and price do together. Sometimes they're very very sort of intertwined. You don't know which one leads what. Generally you would I I would say that you know you can see that overall activity on the chain has definitely increased and that is a major driver of the increase. It's also interesting because you know I I still like the daily active addresses way of looking at things as well and you can see how little it grew in two years four years it's only grown by 2%. So, you know, Ether's been relatively dead in compared to, you know, if you were to compare daily active addresses growth across different chains, you'd see very different numbers, right? And that's one of the things that happened to ETH.
Yes. Yeah. We've got a dashboard for that as well. Did you include the layer twos in this or is just just layer ones?
No. Like, no. So, the answer is no. Um, I did uh Bloomberg Intelligence. I've just got to recreate that as well. and then think about like how to um you know how to uh adjust it for um you know what that means for the ecosystem. I tend to think I try not to over complicate it. So you could look at the ETH economy overall, the Ethereum or EVM economy, let's call it that, and then look at the total wallet growth, the the total value transacted. Those kind of things might give a broader perspective than just what accrues to the base chain. I I don't know. You know, we all kick around this idea for a while and nobody's quite sure how to do it yet. You know, well, this is something that we were talking about offline. So, but I'll mention it here. I went out and looked for uh transfer values, which I know you got your hands on a couple years ago, and I used a data provider at one point that definitely had Bitcoin, still has Bitcoin, and has ETH, but doesn't have every other L1. And it's just bizarre that we don't have that metric from the onchain data companies because that was your used to have it. Msari used to have it. Total value transacted.
Yeah. Yeah. They don't anymore, trust me. Um I don't know why but yeah it's just it's just a basic metric but yeah um yeah you know it's also the other the other thing is positioning no one owned ETH. It was probably the you know the the short side of a lot of pairs and if you look at the ETF flows now they're starting to really pick up. So, you know, combination of increased activity, you know, timing in the cycle and just so much negative positioning or underweights. Let's have a look at any of the others because observationally you've looked at this stuff. What are you finding amongst the change that is interesting?
Okay, so what I find interesting is a couple and this is um you know I put this into the last couple of notes. Um if you look at le let's just take what um blockworks are talking about in terms of rev when you look at you know the the total value that a user uh is prepared to pay to be active on a chain which includes the base fees all the tips and the meme meal looks extremely strong and growing relative to ETH undervalued. It's really compelling. Then you've got, you know, chains like, you know, in the last couple of months, the activity on BNB, which I kind of ignored for a while, has really started to pick up as well. And also Tron. Um, you know, Tron, I've written about Tron and how I, you know, I used to on it all day long. You can't walk away from the fact that it's doing around $9 million in fees. And again, speaking to Dan Smith from um Blockworks yesterday, I asked him the question was like, "How much of that do you think is wash trading or um is, you know, fraudulent activity?" And he was like, he's tried to unpick it every single which way to try and answer that very question. and he's sort of come to the conclusion that no I mean there could be some but at that level this is like legitimate transfer value there's very little activity there's you know the the defy activity on Tron is you know very very small which is a all it's all stable coins then yeah yeah it's all it's all tether and and uh Tron's native stable coin um so you know if you look at it from like an ecosystem standpoint what you want is you know Metcalfe's law and um rethaw, right? Well, basically, you know, number of interconnections and all the and then sub communities creating like Bitcoin has with lightning and mining and you know, all
Yeah. Yeah. Um, Tron is very uniform. It's a it's a stable coin platform, so it doesn't have some of those aspects you look for from a network effect, but it does the one thing and it does the one thing very very well. And so, you know, it makes you know more from uh fees alone than any other than any other chain. So, you know, if you look at the chart on Tron, it's exceptional. It is, you know, it's up and to the right with very very low volatility. So, it doesn't move as much when the market goes up, doesn't go down as much when the market goes down. And, you know, it's got a massive burn. So, Tron looks, you know, pretty interesting for the rest of the cycle. It's probably
How about How about Ton? I had um uh Manny Staltz who's the head of the Ton Foundation. Now Ton's got this weird thing that it's got a massive network, but it's got to get that network to use its native token. You seeing anything in in Ton at all?
Not in the last couple of months to be honest. Like I mean there was pretty good onchain activity in the middle of last year uh during the sort of pullback bare market that we had. Um and I thought that was interesting, but that kind of leveled off. So there's a lot of incentive driven activity which hasn't really followed through. I think it's got a lot of it's got a ton of potential. I mean it's got a captive almost 1 billion user base. Um but again like the activity the the the adoption metrics I'm looking at it hasn't come up in like the top quintile um of of um assets in the screens that I've been running.
And what about um Sui after the satus hack? What happened with that? Because you know there was that the defi protocol that was built on top that's a you know separate business that got hacked the you know it all got made good in the end but activity went has it come back are we still seeing strength in the SU ecosystem?
It's leveled off. It pulled back and then it sort of regained about 50% of the pullback um pretty quickly, but it hasn't got back to the the highs that it was doing in you know when was the hack? It was probably sort of mid-May.
Yeah. Yeah. So it's I would say that the performance since the hack has been robust but because of that knock to the relative performance like you know as you know like it's like it's the momentum it's the rate of change and Sui's rate of change of network activity was really moving Q1 and it was the reason why you know I wrote about it in one of my reports in April where we doubled down on it because during the bull during the bare market as things were capitulating. TVL, stable coins, DEX volumes were all going up and there was like the one there was two chains that were doing that at the time and the other one was Sonic which was heavily incentive driven. So the fact that all this activity was happening right into the the lows of like the capitulation of that um bare market was a massively bullish sign. So it massively outperformed exploded out of that.
What's that?
Sorry. Yeah, it exploded out of that low. I mean, it was shocking. It moved so fast.
Yeah. And so then we had the hack and it slowed it down, but it still I mean, it still looks fine for the rest of the cycle. Um, and finally, uh, how does Hyperliquid stack up on the way you look at I don't know if you're looking at that yet, but um, it's killing it.
Um, so I mean, look, I haven't used the platform. I was actually speaking to Chris, you know, one from RV Crypto um Blasto Plus uh and he started using it um and he loved the experience of it. I have to take it from the the the um network adoption and metrics that I'm looking at like people love it and so it's starting to really become a competitor even against some of the some of the DEXes as well. The problem is um it's not really a problem right now but like what do we know about crypto where you know the moes are very very small um it's hyper competitive we're going to see a ton of competitors come in in the next 6 months looking at what Hyperliquid is is minting um which I think is great because you know Hyper what did Hyperliquid do they came to market with no VC funding a massive of you know fair launch well you know a public um offering of a large part of the um of the issuance about 30%. And so finally we had a token who actually had product market fit that gave the investors, the public the right to access it early, right? And and didn't sort of, you know, not sell out but like have massive VC insider holdings. And so I think they've set the benchmark, right? If you want to come to market, you've got to sort of adopt a better policy around your token launch. Also, their burn mechanism, their token economics are good.
Very good.
Absolutely. And that's driving price. That helps.
Yeah, that's right. Because you're you're it's essentially share buybacks. You know, you're you're rewarding your token holders for activity on chain.
Yeah. Yeah. It's it's you know, it's the perfect tokconomics model. Maybe not perfect, but like it's been the one of the best ones that I've seen so far. But it it's all for N if you don't have product market fit. But they have a great UI and they have a great um you know the great business and that put together is you know you're going to see it I think do rather well. There's a massive amount of unlocks that happen around November. So people have to be aware of that and the assets getting you know pretty chunky relative. So that's also a factor but I still think um based on the growth that we're seeing that it's you know got a
Couple of couple of multiples from here. Um, so finally, looking across all of the stuff we've talked about, it feels that the market is not really positioned. Liquidity is rising. We're getting to the point where the liquidity multiplier in token prices goes up. We're also getting to the point of alts outperforming Bitcoin, where market breadth is improving. We've got activity across the space growing. We've got the narrative of people trying to build big things or storing wealth in Bitcoin or building big things on other chains.
Smells to me like there's a yellow fruit hanging around here somewhere. This is definitely getting fruity. It's definitely getting fruity. You know, you from my from my work, as you know, you know, we just think for us it's kind of straight up from here. I don't know where Bitcoin gets to by kind of August, but we got a decent run. I think I think we'll be surprised to the upside, uh, in how fast stuff runs. Um, then we'll cool off for a for a bit, but even using Global N2 as a forward indicator, it barely went sideways for a period of time. So that feels like some chop in mid, you know, late summer. Um, and now Global N2 is rising again and it's got an extremely good correlation. And it won't be perfect all the way, but it just feels to me that, you know, from here on in, basically we got a really good run. And structurally going through your very detailed, um, data data driven approach is telling me the same thing. It's kind of adding to my conviction that yeah, we're about ready.
Yeah. Yeah. And if you know those things change, leverage spikes or something else happens, hopefully we'll pick it up in those, um, in those risk scores. Yeah. And leverage will spike because people love sex and leverage. They're the two things they love the most in the world. Yeah, it's never going to change. It's never going to change.
Jamie, fantastic. That was really, really helpful, and uh, thank you for everything you do in Real Vision Pro. You're really adding value for people and giving people a framework of understanding this new asset class. So, I applaud you for it.
Oh, thank you, Ral. Thanks very much for having me.
So, look, lots in there from Jamie as ever. You can see the quality of what we do in Real Vision Pro. You know, you get that research plus you get Julian Battel and myself's research from Global Macro investors' lens and Andreas, which includes the geopolitics site. It really is that all-star team of mentors that you get to be able to talk to and ask questions. That's the incredible thing about Pro. You're not just reading research. You get to ask me a question or Julian or or um Jamie. Jamie, like me, is fundamentally bullish on where we are going forwards in the crypto cycle. Alt season is pretty much upon us, and the time to lock in is here.
So listen, good luck. Remember, don't mess this up. Don't use leverage. Don't FOMO. Safeguard your assets. Don't fall to any scam. Just be careful out there and just let the ride the wave ride out. You will get corrections on path. Some of them will feel nasty, but over time the number should go up. Anyway, good luck out there. See you next time.
Hey, thanks for sticking around to the end. Uh, look, if you enjoyed it, hit the subscribe button and check out the video here on the right-hand side. I'm sure you'll enjoy that one as well. And if you're ready for more, go to realvision.com/join. I'll see you there.