Transcription
Last cycle was an 80% decline. Since then, Bitcoin volatility has fallen by about half. So for my simple view, you know, if volatility is is down by half, then maybe the correction is half as big and 40% feels like a reasonable chance to take a shot on a riskreward basis. It has the added benefit of also being
What's going on guys? Today we got a great episode with Matthew Seagull. He is the portfolio manager of the VANC onchain economy ETF node NODE. In this conversation, he gives us a better understanding. How are institutions thinking about Bitcoin? How are they thinking about the market action? What are the three things that he's doing to evaluate whether Bitcoin is going up, down, or sideways? How's he thinking about buying Bitcoin when there's lots of chaos and uncertainty? And then we talk about public equities that relate to crypto. What is he interested in? What's he buying? What are the correlations? And what are the risks? And then of course, we got to go and we got to talk about the debt. Who does he think are the winners? Who does he think are going to be the losers? And how should you think about these in your portfolio? And then we finish up talking about the rest of the crypto ecosystem. Everything from smart contract platforms, stable coins, and much, much more. This conversation's filled with insights. Matthew Seagull is here, and this is our latest conversation.
All right, Matt, I thought a great place to start the conversation is everyone's wondering how are institutions thinking about Bitcoin right now. There's a lot of mixed signals, some positive data points, some negative data points. Price action is pretty ugly. People are feeling a lot of pain. How are you, Van and kind of institutions in general thinking about Bitcoin and an allocation to the asset at the moment?
>> In terms of investor interest, I would still describe it as very high. The number of requests for educational content, for insights around portfolio construction, and also for small allocations. But look, we're we're this is a 30% plus draw down that we're in the middle of right now. and uh volumes in some of our listed products have come down. So I think there's some evidence that people are sitting on their hands when it comes to actually making trades but their engagement with the research of the topic is is very high. That's kind of how I would frame it.
>> Got it. And when you start thinking about some of these data points like what do you put in the category of positive data points and what do you put in the category as negative data points?
>> Yeah. So we generally look at Bitcoin allocation through three lenses. There's global liquidity where you can see that B bit Bitcoin's you know really only persistent correlations are a negative one with the dollar the DXY. Um and so issues around risk appetite, leverage and deleveraging. This is kind of the 100,000 ft uh uh topic that has moved Bitcoin since CO more than it used to precoid. And unfortunately the Bitcoin miners are kind of at the center of this because the recent de-risking and tightening of of credit conditions is in my view predominantly because of all the debt that the hyperscalers companies like Oracle are raising to build out their AI capacity. The Bitcoin miners are the tip of the spear sphere on this because they are actively repurposing their Bitcoin operations to address this market opportunity, but it requires a lot of capex. The capex is debtfunded if they're lucky, convertible funded, equity funded, or frankly funded from Bitcoin sales. And you can see that the miners through October were really pretty aggressive sellers of Bitcoin in order to fund this AI buildout. And so you get into this kind of double whammy situation where if credit conditions are tightening because the market is doubting the return on investment from the hyperscalers and if Bitcoin is correlated to global liquidity and those tightening credit conditions and it starts to fall for the same reasons then the miners who need that debt in order to make their AI economics worse better work rather they actually end up as bigger sellers of Bitcoin than they otherwise would have been and that leads to this vicious cycle that I think we're seeing right now. So long answer to your question, the first lens that we look at it through is is global liquidity and I'd say there the evidence is mixed. These you know these projects are still getting funded but spreads are widening and it's a more questionable outlook on that front.
>> What are the other two? You said there's three.
>> Yeah. So the other two uh the second one is leverage in the crypto ecosystem. Um there we describe it as a green light right we had a wash out in the middle of October which brought leverage levels in crypto down funding rates have collapsed there was another you know I think it was 1.7 billion of liquidations over the last 12 hours so we're not seeing optimism in the crypto leverage market I would take that one as bullish right the first one would be kind of mixed to bearish and then the third one is onchain activity, what's happening with transaction fees, what's happening with onchain addresses, number of transactions. Uh, that one we would describe as negative.
So, how do you evaluate? You've got um global liquidity, let's call that a yellow light. You've got leverage in the system as a green light, and then you've got onchain activity is a red light. You would I hope or I would think you want all three to be green or all three to be red. And it's very clear you get mixed signals. How do you think through? Do you put more weight on, you know, global liquidity or leveraging the system or like how do you kind of like maneuver when you're actually getting green, yellow, and red across the three things that you guys care about?
>> Yeah, I mean, it's a personal uh decision. It goes back to the answer to my first question that volumes have come down. So, we're noticing just people not making that call. For me personally, in the onchain economy ETF that I manage, we sold about 15% of our Bitcoin mining position about 2 or 3 weeks ago, just noticing a lot of optimism and the beginning of this credit tightening uh situation and the Bitcoin miners had driven a large percentage of our gains and so it felt prudent at year end to kind of derisk that a little bit. uh we have not yet redeployed that. Uh there are some levels for Bitcoin that I'm thinking about. One of them is in the kind of 7778 range. So what that would be that would be a 40% decline from the peak and last cycle was an 80% decline. Since then, Bitcoin volatility has fallen by about half. So for my simple view, you know, if volatility is is down by half, then maybe the correction is half as big and 40% feels like a reasonable chance to take a shot on a riskreward basis. It has the added benefit of also being the uh breakout of the post-election uh
>> 69,000. It was it was in mid70s where we really got that election day move and then April of this year we retested that high7s level. So there's a fair amount of I think technical support that has been built at that level. Uh, and then below that a lot of folks are looking at the 55k level which is the 200 week moving average. God forbid we talk about if we had another 80% decline then you're back into 27K or so which is actually right at the level when Black Rockck filed their S1 for Bitcoin ETF. So that would wipe out all the ETF gains. I really think that's unlikely, but the 40% decline, the high7s, that feels like a good shot to take a stab with a positive risk.
>> Now, we touched 80.
>> Yeah.
>> Uh 80K. And you know, one of the things that I always think about is as a as an individual investor. You can kind of lick your fingers, stick it in the air, right? 77 80 drop from 126. It's kind of all the same, right? Uh you don't play an institutional u riskmanagement game. You're not doing with other people's capital. you're not having to rebalance, right? There's a lot of things that are somewhat constrictive to a uh institution when they are deploying capital here. Uh but also they tend to have a lot of data tools and experience that maybe the individuals don't have. And so how do you think about the difference between like I'm going to wait till you know $77,500 to deploy versus 80 is close enough and you know we'll take a shot at 80 um because we don't know if it'll actually get to 77. How do you think through the specifics of putting a position on when you're in a fairly volatile, pretty emotional, you know, extreme greed is or excuse me, extreme fear is single digits. Uh volatility in the stock market, VIX hit 28. I mean, like there's a lot of stuff going on here. Do you just take a shot or do you stay try to stay as disciplined as possible and kind of have a a price target and kind of set like a limit order or something?
>> Yeah, for me, I I like to go slowly. uh so dollar cost averaging from a certain level even doing that on a time basis every 2 days by a certain amount we are privileged in that I have a couple traders who are there I can literally message them from here and they will hit the buttons and find the liquidity for me so I think that's an advantage that you know the pros have where um you know we have infrastructure to help us execute on this disciplined approach but I don't think there's a really a right or a wrong answer. Uh, it's about answering to yourself and answering to your clients that you've made decisions that are prudent and based on some logic. Right. My personal style is to go slower.
All right, let's talk about uh public equities that are related to Bitcoin and the crypto industry. Um you've got this ETF Node NOD uh that you guys have done a pretty good job of since inception. I think it's up like 28 to 32% somewhere in that range. Um it's significantly outperformed Bitcoin. Um, but you're kind of actively managing public equities in the industry. And so I think a lot of folks have historically thought the Bitcoin or crypto assets themselves should outperform the public equities. We kind of see some different stuff happening over the last year or so. So talk through, you know, the the public equity approach and how are you guys thinking about allocating right now into these different names that you've been talking about.
Yeah, I think there's a really large audience of institutional and retail investors, frankly, who just like getting exposure through equities because the information disclosure is more standardized and the assets fit into their normal brokerage account. One of the the biggest change since the election uh from my perspective was that the investment banks are willing to underwrite this stuff and that's why we've seen so many IPOs and spaxs pipes secondaries throughout the last year and we were fortunate at VANC to pivot a little bit after the election and move away from altcoins into the equity space. I guess in hindsight rightly uh appreciating this this dynamic and so this this product uh you mentioned the performance bitcoin's down 16% since we launched and these equities are up significantly so we've been able to um I think identify that AI was going to transform specifically the bitcoin miners and then build a portfolio that is not hyper volatile so I mean we've still had a draw down here but relative to some of the competing products in our index, we've managed to preserve some of that downside by being disciplined around position sizing. I feel like in an industry that is as early stage as this one, a lot of small cap companies, a lot of companies would leverage um there's execution and operational risks as well. I just don't feel the need to be a hero and take a bunch of 10% positions. I'd rather huddle my exposures in the like 1 to 4% range uh and then use the volatility to our favor. So, we took an expansive view of what it means to be a crypto equity. We're not only focused on the companies that have a majority of their business exposed to the space because a lot of the names that are adopting tokenization or selling into the Bitcoin value chain are doing it as much for cost-saving reasons as they are for revenue generation reasons and the impact on the multiple can be considerable. So my style is smaller position sizes, highly diversified, and on the margin trying to sell greed and buy fear in the market. So far, it's it's playing out.
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Now, you said companies that are not necessarily majority of their business in the crypto industry. Give me an example of like what would be a company that is either selling into the industry or is using the technology but people wouldn't think of them as a crypto company.
Yeah. I mean, so one example of a name that we bought pretty well is Heinix. Heinix is a South Korean maker of memory that sells into the semiconductor industry. So they compete with Micron and Sandex, SanDisk. It's really an oligopoly. when Bitcoin mining machines are selling well this uh DRAM business the memory building blocks uh Bitcoin mining has been kind of singledigit mid singledigit percentage of the DRAM industry so on the margin it moves the needle but it's not the dominant force but when you combine the impact that AI is having on this business it actually has really tightened the supply supply demand dynamics and company like highinex sells at something like five times PE. So that's an example of uh like a 1% position that we think is peripheral to digital assets but riding some other structural tailwinds as well with really good valuation. So I think that's that's one example.
>> Yeah, it's interesting because it's basically like Bitcoin and AI in a weird way uh in that example are actually like the overlap is highix, right? And so looking at what are two major trends and finding that overlap could be an interesting way to play it. Um I know the Bitcoin miners they've drawn down s maybe substantially since uh uh Bitcoin peaked. Um what reverses that right? You know, one of the things that we've been talking a lot about in the last couple of days is um Howard Marks has this great uh interview that he did in 2018 at Wharton. And they basically ask him, you know, like uh how do you avoid catching knives, falling knives? And he's like, "No, no, I catch falling knives." And you know, he's got a very eloquent way of saying it, but essentially what he says is, "Look, at some point I decide to start buying. I know it's going to continue to fall further. I keep buying and on the recovery I keep buying, right? And so like I'm not trying to bottom ticket, but when I'm near the bottom, I want to be accumulating both continuing down and on the way back up. What reverses the trend of the Bitcoin miners to have them turn around and and kind of head in the direction everyone wants them to.
>> Yeah, I'm happy to hear that quote because that's kind of what I just described, which is, you know, uh once you're going to buy, there's no need to do it all at once and just, you know, take your time. It's okay not to not to bottom ticket. Um I think there's two major things that are going to turn around this market. one would be topline revenue surprises from open AI.
>> Um so you know one of the big controversies in the market is is there going to be a return on this AI investment. In my view a lot of it won't be seen except on the cost side right the math of taking costs out of your business flow more directly to your earnings per share than adding additional revenues. That's kind of a dystopic view of the economy that a lot of folks are not quite willing to embrace and instead they want to see topline revenue momentum from open AI specifically on the enterprise front. So they they announced a big deal with Target this week where Target is going to integrate OAI infrastructure into their app and their store assistance and the checkout process and but that's one deal. It's probably a nine figure deal, but it's one. And given that OpenAI is private and the information doesn't come out of there in a standardized way, uh, you know, that's an overhang, I think, for for the markets until we get more clarity there. Uh, and then the second would be, uh, the Fed cutting rates. Obviously, a lot more skepticism has now been built into the markets and there seems to be a really a perhaps politically polarized view on the FOMC board about rate cuts in December. So I I think those are the two things that would turn around the liquidity, you know, the the first of the three elements that we look at when analyzing when analyzing Bitcoin.
And when you start looking at some of these other public equities, so you've got like, you know, hardcore things uh like the Bitcoin miners, but there's stable coin provider and you know, Circle, you've got Gemini, you've got Coinbase, like you started to get infrastructure, maybe some of these other themes. How do you look at some of those companies?
>> Yeah. Um, well, let's take a company like like Circle, uh, you know, came public in the middle of this year at $30 a share. It hit 300. So, at 300, we we were out, right? And there was this enormous IPO lockup uh, that actually just hit in the last week or two. Stocks now down in the 60s. I would argue that if liquidity stays tight and the macro environment is a little trickier, which is what the equity market seems to be discounting, then competition in the stable coin market may actually be less than people think. It's going to be really helpful for Circle to be a public company. Even if the stock price is $40 or $50 with the IPO lockup selling in the rearview mirror, they printed a pretty good quarter um just last week. Uh that's an example of a name that had a lot of euphoria that made it unreasonably valued from our position. Now we're kind of going through that trough of disillusionment. Meanwhile, they actually are taking market share. Uh so I wouldn't be surprised to see a name like that be a higher weight in our portfolio going forward. And just going back to the Bitcoin miners, I think one of the really interesting um things that we're going to learn from this shakeout is how much the cost of capital matters. Almost all of these companies have raised money in the last 3 months to try to build out their AI infrastructure. It's very capital intensive and we're starting to see a dispersion where a company like Cipher that just announced an expanded deal with Fluid Stacked backed by Google this week and they're able to raise straight debt now to build this out whereas a smaller company like a bit deer uh had to do a convertible. CleanSpark had to do a convertible. Much more dilutive events. So that cost of capital could start to diverge and we could see some more kind of winner takemost characteristics emerging out of the Bitcoin miners which would tell you you know buy the big guys really with with the capital that you have for the space.
Scale does feel like something that uh historically was not part of the conversation but now um and and maybe it's just the industry was so small right both in the private market in the kind of liquid crypto assets and also even some of the early public companies. Now, Coinbase is a really big company, right? Strategy has become a very large company. Uh the miners, there's a couple that have really kind of broken out as large scale. Um scale is very important in the traditional world. It does feel like now through the maturation now you're going to either get scale or kind of die of irrelevancy.
>> Yeah, I think I agree with that. Uh in the early days, Bitcoin mining was really around hunting out the cheapest electricity and uh bootstrapping your way to domination in that individual region. But it was very hard to get economies of scale because Wall Street wasn't funding this these businesses. Uh that's changing now with the intersection of AI where um you know Terra Wolf Cipher you know they're able to to raise debt and it's junk rated but it's a step change in terms of the impact on minority shareholders. I still think it's a regional business largely. You've got Iron and Cipher down in Texas. You got Tara Wolf up in New York. You've got Bit Bit B bit bit farms in in PJM. they're not stepping on each other's toes too much yet, but the signs are on the wall that they're going to start to. So Terra Wolf was hinting uh last week that they're going to start regionally diversifying, maybe following they they already did in Texas. In fact, following some customers to Texas. U so I think a a little more benefits of scale, but like the utility business, there's still a large regional element to it as well.
>> I see. um strategy obviously has incredible scale when it comes to putting Bitcoin on their balance sheet. Uh there's a number of companies that have now come to market. Some of them were existing public companies that started to put Bitcoin or other crypto assets on their balance sheet. Some of them have gone public via RTO's. There's some that are coming via spa. How do you think about this entire digital asset market and kind of where value may acrue over time?
>> Yeah. Uh we've I'd say we've been pretty vocal bears in the space. um skeptical that there's going to be a long tale of smaller cap digital asset treasury companies that can sustain a premium. And uh not to say there will be none, but that there's kind of no reason for for the long tale. And I I started my career covering like Asian equities. There's a lot of NAV type companies out there that own assets and >> it's not unusual for them to trade at 50% discount to the NAV especially when there's no clear path towards a change in control uh or there's no way for the minority shareholders to get their cash back. So our our base case has been to avoid these companies with with a few exceptions. I think now with valuations quite a bit lower, uh, some of the small caps starting to sell their coins and buy back stock, the emergence of some activism in the space, there there could be a play on some of the smaller cap ones. The things I'm watching there, uh, is the Strive Semilar deal actually going to close? There's a lot of complexity around, uh, getting that deal closed.
>> Do you think it will close?
>> I don't know. Um, so I um I think that Semilar has the better riskreward if it does like so there's a lot of skepticism in the Semilar price that the deal will close. So from a riskreward perspective, it's it's not a terrible bet to make. Um, but the price of Bitcoin moves around so much that uh it's really hard to tell. Um, and then the other thing that I'm watching in the DAT space is how these preferred securities are architected. Uh Sailor has done an incredible job of getting an entire yield curve out into the market. And I think that his relationships with the convertible bond arbitrageers is very very powerful. uh and over the cycle uh they should be able to um trade at a premium for for some of the time. But if there's a nitpick to make about how they built that yield curve, it's that many of these preferred investors, they can still be taken out by strategy. They still have a call option strategy does to take out these debt issues. Um, and so it makes it tougher to calculate your upside downside if you're if you're a debt holder.
>> Uh, and when Strive came to market a few weeks ago with their preferred, they had a slightly different architecture where the takeout price, the call option that Strive has is defined. It's at 110 and it makes it easier for the fixed income investor to measure his upside downside. and then they sold it at $75, you know, par is 100 and they're going to manage the interest rate to achieve that like 95 to 105. So, and I look at who's running that company. It's a former Kalpers fixed income guy. I think that they've rearchitected that company around the preferred holders and what the equity holders have now is actually less valuable. Uh, and other DATs may have to make that tough decision. I think there's some evidence that MetaPlanet is actually doing it if you look at what they announced yesterday around how their preferred is going to be built kind of closer to the Strive edition. Uh but that might not be a positive for MNAVs. So I kind of like the preferreds here on uh on a risk.
>> Why do you say it won't be positive for the MNAVs?
>> Uh because the the bond holders getting more power essentially, right? So they're really getting paid first. um the uh the the option value for the equity piece kind of disappears if you're the bond holder. You're really in it for the cash at that point. The price premium that you you know you're not getting the same torque from the price of Bitcoin going up or the equity going up. Um it may it may be better for the sustainability but worse for the MNAV. It might be what's weighing on some of these companies. One of the critiques I see online and I always say, you know, there's sophisticated critiques and then there's kind of uh very smooth brain critiques and everything in between, but one of them is uh how are all of these companies going to be able to pay back uh what they owe to investors on these preferred? And I think we've seen Sailor talk a little bit about, you know, hey, if Bitcoin just goes up, I think it's like less than 2% a year, then they can fund it for a long time. If it doesn't go up at all, they can fund it for something like 70 years or something by selling stock.
>> Well, I think that there's a couple of different things because they also have the Bitcoin on the balance sheet, right? There's all these kind of different components. With that said, um I do think that there's a fair question to each one and each one's going to have a different answer. But how do you guys think about are the right or wrong answers for people who are offering these preferred as to how they plan to uh continue to pay the interest?
>> I when Micro Strategy says that there's 70 years of dividend coverage, I think what they're referring to is if Bitcoin goes up, their unrealized gains allow them to borrow more, all things equal. So it's not really um a cash accounting. It's more of a theoretical accounting. Whereas the smaller companies have the benefit of just being able to say, "Look, we'll sell Bitcoin. If this doesn't work, we'll sell our Bitcoin." That's what Strive's saying. That's what a bunch of companies are saying. And that gives the minority shareholders a lot more confidence that they would eventually see cash out of this business if the MNAVs fell too steeply.
>> Mhm.
>> So, I I think that's more sustainable, but it also raises questions around like what Bitcoin would do in a bare market if all of these DATs were selling their coins.
>> Um, what do you think would happen?
>> I think it ex it exacerbates the downside clearly.
>> Yeah.
>> And do you think that they'd be forced sellers? Like, you know, people continue to say Michael Sailor will get liquidated, right? And I think that there's been a lot of push back from people who are investing in these saying like basically there's almost no point at which he could be liquidated. How do you start to evaluate, you know, what I would consider like true forced seller, not from a half the fund my preferred, but more so the price has fallen so far that then you get like capitulation.
>> Yeah, I I think Sailor is is more right than wrong that if if Bitcoin's down 50% peaked trough, he doesn't have to sell and he can get his bond holders to fight each other in in creditor violence, so to speak, and then he refinances, right? But I think the risk as I see it would be if if the stock's trading at a 50% discount to their NAV and you start to get activists who are uh looking for board seats and suing the company for not acting, you know, as a fiduciary. That may be less likely for strategy where he controls such a large percentage of the voting. But we're already seeing some activism emerge in the smaller caps. You may be familiar with some of it. Uh and there um it's going to get down to the governance of the company, how easy it is to oust management and essentially liquidate the company and return value to shareholders. That's going to be a long process, right? A lot of executives want to keep their paychecks. The board members want to keep their seats on the board. Uh and it it could take a year or two for that to play out from the first time that the lawsuit is is filed.
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>> Mhm.
Now, when you think about uh companies that are holding Bitcoin, but not considered part of this, Tesla, there's a couple of others. Block I think has some Bitcoin, right? Um do we think that that will become more and more popular or are we getting a bifurcation in the market? like there's like regular companies and then if you're going to put this stuff on the balance sheet, you pretty much end up as let's go do the financial engineering and and kind of, you know, Bitcoin backed credit or or whatever.
>> Yeah, great question. I remember last time we we chatted um we kind of talked about this topic and and one of the things that we learned uh from managing the the node ETF when it launched, we had a few of these names in there. I mean Tesla we have but like there's a coal mining company in Kentucky called Allied Resources uh AR LP. It's the only coal miner who also mines Bitcoin. They actually own you know a considerable stake. Market doesn't pay anything for it. All the companies that have small amounts of Bitcoin as a percentage of their balance sheet have basically underperformed. That's starting to reverse now. And with yesterday's news that MCI is considering removing Micro Strategy from some of its indices, it could be that these companies that take a small bet on Bitcoin and they are still able to get index inclusion because I think MCI is considering a 50% cut off. If more than half of your assets are in digital assets, you may not be eligible for these indices. So a lot of companies may go for that like 49% uh and then they would get some benefit if Bitcoin works. Uh so it you know markets are always changing and uh that's one thing I'm kind of on the lookout maybe the market will pay more for these smaller bitcoin stakes.
>> Interesting. It's like uh you know most of the metaplanet strategy it was kind of like the hail mary that always got caught right. It always worked right. You still the hail mary and and stock goes up. Um, for some of these other companies like coal mining business or whatever, it sounds like that's not what they were doing. They weren't doing it as a Hail Mary as much as they were essentially either hedging or they they started to participate in mining or whatever and they were just keeping it on their balance sheet. So, it's more of like the organic acquisition of it. Um, that may be a different way to kind of approach getting the balance sheet. Right.
>> Totally.
>> All right. Let's talk uh altcoins. You guys have spent a lot of time looking through both on the like actual crypto asset side but also maybe some of the public equities that touch this stuff. What's your current view kind of on everything else outside of uh outside of Bitcoin?
>> Yeah, uh objectively we've been less aggressive than some of our ETF competitors at bringing some of these single coin solutions to the market. We've had less demand from our traditional client base for those solutions. Um, fortunately after the election last year, we took some profits in some of those coins that acted really well and anticipated that maybe the equity markets would be the place to be for 2026. That's largely played out. You will see a couple of single token ETFs from us. It's public that we filed for a BNB ETF. There's no Binance ETF. That's still pretty a tough coin for the market to get its hands on in the US. So, we think there's some scarcity value in that one. We've also filed for Avalanche uh AVAC ETF. There's a DAT, but there's no ETF yet. So, uh we're we're taking some rifles approaches in the space, but candidly the uh the market is oversaturated. The inflation rates are still very high among the altcoins and with a few exceptions they haven't really found the product market fit beyond the speculative characteristics. So you know we've been we've been less less aggressive in the space. I mean things have obviously sold off a lot. I was at the multicoin summit yesterday. Um, you know, I think Salana has done an incredible job of really building an economy across so many different sectors that are using that blockchain as as the architecture. But the as we're seeing from some of the corp chains like Tempo or Circle, these are companies that have a sales force, right? They're going out to acquire merchants and they're paying their employees in stock to incentivize them to go and hit the pavement. And the the decentralized blockchains just like don't have that salesforce. They have community and they have the hope of being money. So so that you know can catch some waves but there's not that transition mechanism where you have a salesforce who's getting paid a certain amount to go and convince a merchant that they should adopt Visa Rails, Mastercard Rails, Square Rails, Salana Rails. like it's a less direct transition mechanism.
>> Yeah, that's interesting. What about um performance against Bitcoin? I think that's another question I hear a lot is like, "Oh, cool. This thing went up, but you know, Bitcoin went up more." In some cases, actually, the altcoin has gone up more than Bitcoin. And so, this like denomination in Bitcoin or, you know, Bitcoin dominance. Like there's these things in the crypto world that I think the relative comparison is a very different thing than like, hey, how much did it go up in fiat terms?
Mhm. I mean, Bitcoin's outperformed everything in in in both in fiat terms, right? Uh I'm not sure I'm getting the question. Sorry.
>> Yeah. Well, so like in a bull market historically, the altcoins have outperformed Bitcoin. Smaller cap, right? Now, there are some select things that have outperformed Bitcoin, but for the most part, Bitcoin has actually outperformed most of the altcoins in this bull market. And so I think that surprised a lot of people because the whole idea is you're going into a bull market, you push out on the risk curve, you go up, you come back, you know, you get into a bare market, you kind of consolidate back into Bitcoin into the blue chip, and that should be, you know, maybe it's an 80% draw down, but it's better than a 99% draw down type thing, right?
>> It's not what we really saw this time. Yeah, I think I think the Trump uh deregulation may have actually hurt the altcoins by eliminating decentralization as a >> uh as a feature, right? Um so in the last regulatory regime like Ethereum had a clear advantage among decentralized alternatives. That distinction I think was like obliterated with the change in regulation and everyone is now kind of on a stable competitive platform. Uh, and that's what that's part of the reason why we're seeing I think these corp chains emerge that have really kind of undefined decentralization, right? Like they're not decentralized right now. Their road maps are not particularly decentralized, but they're able to do things with tokens that would have been illegal in the last administration and it makes the truly decentralized projects like ETH or to a lesser extent Salana kind of less differentiated.
Makes makes sense to me. um explain a little bit about Node and kind of what your guys approach is. So for those that don't know.
>> Yeah. Uh so it's uh an actively managed ETF that can own up to 25% of our holdings in crypto and we do that via ETFs. So we have currently 11% in the Bitcoin ETF and about 1% each in Ethereum and Salana. And then the rest of the portfolio is equities that are geared to the space. So uh our hunting ground is any company that has articulated a strategy to either make money or save money from the adoption of Bitcoin blockchain or digital assets. My personal conviction u is that the Bitcoin miners are being transformed into AI companies and it's bringing down their cost of capital and opening up a different investor um who can buy those stocks. So that's probably the that's the largest uh portion of our fund by exposure. It's probably about a third of the fund is exposed to those those types of names. 15 or 20% in in these tokens via via ETFs. Uh and then the balance across fintech, e-commerce, energy infrastructure. uh and that really kind of uh smooths out the portfolio a little bit than than if we had isolated only on pure play companies and then we would have you know 10% of Micro Strategy 10% Coinbase like very volatile levered companies and if I've gotten any feedback from institutions it's that the volatility is the biggest sticking point to this space. So what can we do to smooth that out a little bit and still give investors the tailwind of digital asset adoption? So that's what we're trying to do in Node.
Amazing. N O um I enjoy talking to you. I'm an investor in Node now. I tweeted that out. I say I like talking to him. He's smart. Let's see what happens here. Um and you done a fantastic job. So I appreciate you taking the time to do this. We'll do it again in the future. Thanks mom.