Unbiased Ep. 3 | Charles Edwards: Bitcoin's Quantum Threat, DAT Leverage & Why This Cycle Is Different

In the third episode of the CryptoQuant Unbiased podcast, host Ben Sizelove and Julio Moreno sit down with Charles Edwards, founder of Capriole Investments, for a data-driven breakdown of where Bitcoin stands right now — and why this cycle looks nothing like the last one.

Charles argues Bitcoin is carrying two structural drags that didn't exist in prior bear markets: an unpriced quantum computing threat he estimates at a 30% discount to fair value, and 200+ digital asset treasuries (DATs) building leverage on an unsustainable model. Combined with the AI trade pulling capital out of risk markets, it explains why Bitcoin's "value zone" today isn't the obvious buy that 2022 was.

They get into why the four-year cycle may be coincidence this time rather than a driver, how institutional flows from ETFs and treasuries replaced miners as the real supply and demand signal, and why classic on-chain tops like MVRV and the Mayer Multiple never triggered this cycle. Charles also breaks down MicroStrategy's 12% guaranteed yield and why he sees the DAT model heading for consolidation the way the 1929 investment trusts did — plus the quantum roadmap catalyst that could reprice Bitcoin 20–30% overnight, and his framework for the average investor.

Follow the guests:
 Charles Edwards — x.com/caprioleio | capriole.com
Julio Moreno — x.com/jjcmoreno
Ben Sizelove — x.com/BenSizelove

CryptoQuant: cryptoquant.com
Research & Reports: cryptoquant.com/research

Transcript

SPEAKER_01 0:06

Everyone, welcome back to our third episode of Unbiased. Um, today we have Charles Edwards from Capriola Investments. Um thanks for coming. Great to be you guys. Uh yeah, super quickly, I was hoping uh you could give a background on some of the projects you're involved in and like generally where you're fitting in in the crypto space.

SPEAKER_00 0:26

Yeah, so I'm the founder of Capriol Investments. We've been in the crypto space, especially Bitcoin, I suppose, from 2019. So essentially systematic trading Bitcoin and crypto, and then the last three years equities and commodities as well. But um yeah, we've been navigating the space for seven years as a hedge fund, have a couple other businesses under that umbrella, primarily Capri charts and some analytics that we provide there. Um, but otherwise, we're probably known for creating a lot of on-chain metrics, some obviously on the crypto coin platform as well, um, to help kind of navigate the market, uh, Bitcoin and and other assets, but to you know, help navigate what when it's over and undervalued.

SPEAKER_01 1:11

And uh yeah, I think it would be a good place to kick off. Um, just quick on the macro. How much do you follow the macro in in your analysis? And generally, do you have a kind of stance on the conditions right now?

SPEAKER_00 1:22

I do follow it a lot. Kind of we we approach uh investing in data top down, so starting from macro or you know, really being decision making at the top. So Trump, the Fed, um, interest rates and that kind of thing, money supply, and then that kind of flows down and to affects all our assets and markets. So everything's trading in relation to every other asset. So there's this very strong relationship between Bitcoin and gold and equities. Um, so that that is a key kind of um data point to that that feeds into our models. Um-chain obviously is very important as well. Sentiment data is important, but yeah, various assets, even oil and different assets, they all kind of interplay with Bitcoin and crypto. So you kind of have to consider everything, especially these days. We've we kind of started that process pretty early on, about five or so years ago, but it's even more relevant once Bitcoin kind of hit the sort of trillion dollar mark. You know, when it was a couple hundred billion, it didn't really, it wasn't as relevant because as a small market cap asset, its intrinsic fundamentals were more important, so to speak. But as it now it's a bigger asset, it kind of slots into larger portfolios of banks and institutions around the world. You kind of have to consider how all these things play against each other and how these other other players in the market uh consider this data.

SPEAKER_01 2:44

So, in terms of metrics you look at gauging macro, I know like M2 has been a popular metric. Maybe you got oil interest rates. Do you have like a key set of like macro indicators you you monitor?

SPEAKER_00 2:56

Yeah, so definitely. Um the the ones I probably most closely look at on a day-to-day are the ones on Capriola charts, um, uh, which I could could share. There's also a bunch of others not on there, but though that's important. I think overall Bitcoin's still treated as a risk asset. So the fundamental drivers of that are obviously interest rates, money supply, but also the overall health and pricing of assets. So things like the advanced decline line is also pretty important. Um, want to see some good strength in that as a backbone to equities, which also plays into uh things like Bitcoin. The put-call ratio for equities is extremely good for Bitcoin as well. Um, and then how assets trade relevant to each other. So something we've seen a lot of in the last six, nine months, especially, is how Bitcoin's underperformed versus AI, um, primarily like semiconductors. And it's interesting when you see relative strength between those two asset classes for Bitcoin. So we're talking today, Bitcoin's just hit, I think, 63, 64k this morning on the back of um Sailor selling some Bitcoin. Um, and I suppose de-risking that model a little bit. Um, but what was interesting in the last few days is you had semiconductors kind of come down a lot last week, and Bitcoin had relative strength there, which it hasn't done for a while. So they it is interesting to see how that plays out, but basically, you know, semiconductors have been sucking a lot of capital out of the market, um, and at some point that may reverse. Um, maybe we're starting to see that now, remains to be seen. But those relative signs of strength are also good kind of indicators of where the market might be going.

SPEAKER_02 4:46

Charles, just a one question that you say you look at and some micro indicators like the Fed interest rates. Um, you know, with this new uh chairman of the Fed, what what are your expectations there? I mean, uh initially people think that he's more like more hawkish than expected. Uh what's your what's your take on that? Do you expect some some interest rate cut or or not?

SPEAKER_00 5:13

Yeah, look, I it's hard to know. He doesn't give away much when he talks. If you guys watched the uh FMC his his speech a few weeks ago, he basically uh kept his words very limited. Um originally he's talked about lower rates but kind of tighter being on the on the money supply, money, monetary policy side of things. So that could potentially balance out and and not have a huge impact in theory. Obviously, we did see rates being priced in as going up a lot in the last few months. I think a lot of that was on the back of obviously the Iran war and then oil prices going through the roof, and then we started to see some higher inflation ratings, as you guys know. And the market basically priced in rate hikes, and that kind of changed really quickly this year because originally when we came into the year, I think we were pricing one or two cuts, and now it's kind of flipped. Um, but the interesting thing now that you know the war is hopefully ending, or at least there's a pathway to a peace deal and a straight semi-open. Obviously, a lot can change in the next 30, 60 days. But provided that holds and oil's now trading below 70, um, that's really positive. Uh, so they have to obviously consider that as a factor that may impact inflation in the coming six, 12 months. It may bring it back down a bit. Obviously, there is a bit of a um bull whip effect, so inflation could go up higher before it comes down, but they'll be considering all these kind of factors. So possibly the market is being a bit too hawkish on where they think the Fed's going. Um I wouldn't be surprised if you know there's less hikes than expected, or even if it's just a pause and just wait for six or twelve months. The other factor is obviously he's doing these kind of um working groups, I think is called it, into all the different elements of the Fed and how they use data and make decisions. And I think the expectation is end of this year, early next year, they'll have some outcomes there. So he's essentially said that he wants to investigate everything and how they make decisions and then review that model and make some big changes. So it's it's kind of hard to judge too early until we get some outcomes there. That probably creates some risk factors if they're using brand new data or unproven methodologies that they think are more timely in decision-making versus what the Fed's done for you know almost 100 years. So yeah, it you have to kind of be pretty fluid with this. But I think if anything, maybe the market's pricing in a little bit too hawkish um for the rates in the coming six to nine months.

SPEAKER_02 7:54

So you you see that as bullish, let's say, for Bitcoin or or Risco on assets, if they if they if it is not that uh hockey.

SPEAKER_00 8:02

Yeah, potentially, but um I I s it's still not clear how he's gonna pull on the monetary supply levers as well. Like um, you know, M2 has been coming down a bit the last month or two. So I think there's a bit of uncertainty. We kind of need to see how the it all washes out in the next probably this year, right? As he just kind of transitions and makes big decisions. But yeah, if if anything, I think the rate side, yeah, it's probably leans slightly more bullish than bearish uh at this point, anyway. If I had to you know gump ahead make a decision.

SPEAKER_01 8:35

And then I'm I'm curious in terms of I guess the cycle theory, because there's I mean, there's always discourse on Twitter and crypto sphere about all these events, macro events and you know, Fed chairman's. And then Bitcoin always seems to follow this cyclical nature over time. So I'm curious if you subscribe to that idea or if there's just a little bit more nuance than just this cycle seasonality as it as well.

SPEAKER_00 8:59

I mean, yeah, a lot of people have been pointing to the old cycles and saying this one's timing-wise playing out pretty perfectly, and that's fairly accurate. Like we topped uh October last year, and that kind of lines up with past cycles. And if you believe in that, then we should bottom in September, October this year. So timing-wise, it's kind of playing out. I I kind of am skeptical of it. I think it's a little bit of a coincidence this time around. I think there's other factors uh like the dats um saturating the market about the same time last year, and um and the quantum threat to Bitcoin emerging in the next couple of years, which I spoke about in October last year as well. And I think that the market's basically been pricing that risk in, and then also the relative opportunity of of the AI trade, which is obviously obviously taken off, but it's a hugely um, you know, it it's a it's an asset class which we all know could have a massive impact on everything when we do in life, and we just haven't really had that in the last call it seven, ten years of Bitcoin. Every time it's been in a bear market or early stage of the bull market, there's never been like some massive ulterior trade that could capture attention that much. There's always been some things, but the AI one, I think we can all agree, is uh a once in a lifetime or a once in a couple of decade event. So that that's a consideration. But in terms of yeah, the cycle and the impact of miners and that sort of thing on driving price action through a four-year halving cycle, I don't really believe that is uh tangible impact going forward simply because they just have such a limited control over supply now and the institutions are the key players in the market. So ETFs, treasury companies, if they're buying or selling or how the capital is flowing across those, is a much bigger impact on price going forward.

SPEAKER_02 10:52

Yeah, for just uh one thing about the cycle. For me, I mean initially I do think that like the helping had a much higher effect, right? Um, because the supply was the helping was um higher relative to the supply, right? Uh so that it had an impact in the initial years of of Bitcoin, maybe two cycles. Now it's really, like you said, really um small uh compared to all the all the the Bitcoin that is main trade or or move on-chain. But I see you know cycles as cycles of demand, you know, demand um expansion and then demand contraction. And actually you can see these cycles, you know, with with on-chain data, or right now you can also uh look at the ETFs, right? And so that you know, that all that coincides with the four-year cycle that demand started to contract, uh probably because what you said, you know, we had these um these threats to Bitcoin, that's quantum or the the uh that bubble and then uh all the AI that suck uh capital out of out of Bitcoin, right? But for me it's more about like those demand cycles. I'm I'm just curious to to know how you see the cycle not being part of the halving, but you know, everything, everything else, all other things.

SPEAKER_00 12:20

Yeah, I think correct me if I'm wrong, but I think you're saying like you could you can track various demand and supply metrics and therefore see this pattern of a cyclical behavior, right? Yeah, exactly. Yeah, yeah. So I agree. I mean, there's plenty of on-chain metrics you can use to do that. And the question I suppose is what's the driving factors behind it and what are just kind of more correlated. So, and it does it doesn't actually matter. Um, so what this is a complex topic, I suppose, for those who are not in the in the on-chain space, but basically, obviously everything has a uh if you can drill down to it and you can't always find it, but everything has like a an originating or driving factor, you know, maybe it's interest rates, maybe it's Trump getting elected, or maybe it's uh you know Corona and then they're printing trillions of dollars. But there's always kind of some driving factor, I would, I would argue at least, which kick starts the other factors of demand and supply. But you don't always have to know the driving factor if you can see on-chain that you know wallet numbers are going up or or long-term holders are acquiring more Bitcoin, or if there's you know, billions flowing into ETFs and DATs every day, and it's outpacing the Bitcoin mining supply, for example. They're all big demand factors which push price up. So sometimes you don't need to know what why why it is that they're doing that. You can just observe many of these factors and say, okay, on net, there's a lot of demand coming in, that's bullish. Um, that's a new demand cycle, if you want to call it that. So um, yeah, I mean, I I I I think that's a really powerful way of doing it for sure. Um, I think if you've got a set of good factors like that that you're following and you're kind of weighting appropriately and you're looking at a lot, that is really a good way of doing it, um, for sure. So it's it's probably more risk-adjusted way of looking at it because you you you know, the macro factor or the driving factor or whatever it may be can change any day, but the net outcome is usually more observable when you look at a suite of metrics like that.

SPEAKER_01 14:26

Yeah, I think that's a that's a good point. And I think that's a lot of what we do here as well. Like if you can sort of forego knowing the exact why something happens, but have a set of metrics that shows that this is either fair value, good value, like that is what if you can avoid the extra um um yeah.

SPEAKER_00 14:44

And and sometimes the why is like not even knowable or it's really hard to to work out, or sometimes you don't even find out until later in hindsight. So yeah, I mean you gotta you gotta monitor a lot of things, as you guys know.

SPEAKER_01 14:59

So, in terms of uh, I guess actual metrics you look at, knowing when is like a a good good value zone, um, like what do you what are you looking at in general? Like, is it just suite of on-chain or also a mix of data and relative performance?

SPEAKER_00 15:14

I mean, I can share screen if uh if it's uh a little bit of a taste at least. This is our little um dashboard, strategies on it, and then some screeners. But if you scan down the metrics, uh we've got a section on macro, bitcoin on-chain primarily, uh, then institutional flows for ETFs and treasuries, also for Ethereum. We've got some different macro ratios and sentiment metrics as well. So it's kind of a taste for what we look at. Um, if we're talking about Bitcoin, it's all sorts of things across. So there's there's a mixture of on-chain and and just sort of sentiment-based data here. So, this, for example, HEDA is looking at the aggregate long, short weightings in futures, options, and perpetual markets, weighted by market cap. And it's pretty heavily influenced by options in the last months and pretty much years now, because it's become a more dominant market. Uh, but you know, when it's extended, when people are very bearish, it goes green effectively. So that's been a pretty good local bottom capture. Um, things like hedge ratio here, there's a few different metrics, ratio of Bitcoin to essentially stable coins. Um, this is also turned uh green more recently. There's probably a lot going in that chart to discuss here, but um, so some more you know classic on-chain metrics like NVT. I still really like it's one of the oldest ones. Um doesn't always work, but generally um when you get a green zone, it's been a local um deep opportunity. Um but yeah, it's just it's a kind of a numbers game of capturing a lot of metrics, um, focusing on what has higher signal. Um also got a put call ratio here for for options. So the options market's pretty important for Bitcoin these days. Some classics like Maya Multiple. This one's probably the oldest, I would argue, maybe the oldest Bitcoin metric. Um and yeah, every time it's been below 0.6 has been an amazing opportunity. And obviously, below one is generally a better opportunity, but um, we have seen the extremes trend down on this metric, as with many metrics, as Bitcoin becomes bigger. Um, so you guys are well aware of that, I'm sure. But for those who aren't, you see this pretty consistently across data that the the peaks or the extremities of every Bitcoin run has come down, both in terms of return and price, but also an extremity in the market. Um so this bull run was, as we all know, not that exciting. Only a 2x in the price cycle in terms of price. And um a part of that I think is to do with uh the the value asset class hitting the trillions, um, but also the other factors that we've just talked about, I suppose.

SPEAKER_01 18:21

So, in terms of those, I guess, metrics, because I I think generally crypto investment Twitter always looks at these like classic on-chain metrics, MVRV, and they model it against previous performance. And like picking a data point in the past and directly trying to apply it to this cycle doesn't always work, and especially in this last October, right? So I'm curious how you look at on-chain metrics now. Are you like transforming the data? How are you bringing them into the current cycle?

SPEAKER_00 18:50

Yeah, I mean, yeah, good question. I think that's the problem with a lot of these on-chain metrics. I think there's obviously probably thousands out there now, um, and 99% are not really useful signals. Um, so people who have been, and this is that happened at any stage of the last since I've been in Bitcoin, basically, but you'll always find people at different times point to a metric and be like, oh look, this is happening, and last time this happened, it was a bottom or a top, and they'll trade that. But then if you like study that metric, there might only be three or four data points, or it just you know, there can be coincidences as well that mean it's not that relevant, or the fundamentals behind the metric are just not very sound, or it's overfit the metric, right? And maybe they've built it by fitting many power laws and uh things like stock to flow, right? That just don't work. Um, so there's all those factors where I think experience um in quantitative analysis or or or just maths, right? And and and um fundamentals and drilling down is important. So whenever you see these posts on Twitter, various metrics, you know, most of them you think you you know you have to take with a grain of salt. And uh, if you think it's interesting before you do anything, you should probably investigate and deep dive that metric. Um, so that's one thing. In terms of how it's evolved, for sure. I think um, and this is the same with all models and markets, the more public something is, the more its alpha will leach away over time. And so metrics have a half-life, right? And that's the same in every asset class, equities, whatever it may be. And uh it's so therefore you need to, you know, be looking for the you know, new metrics and models and driving factors. Um, I think what you're getting at, like metrics like Maya Multiple here, how the peaks are declined. We you know, you want to apply some quantitative approaches like we do, which is z-scoring things, so that you can capture relative extremes, which may be smaller today than they were in the past, for example. So that's a process of basically normalizing the data, and there's many ways of doing it. You know, it could be normalized between zero and one, or it could be just standard deviation. But basically, um, you're just trying to find relative extremes which may not be fitting the historical mold precisely. Um, and that's a very common quantitative approach that we obviously apply to all our metrics. So that's one element of it, but I think it's less that normalization that's the big factor, but more the introduction of more, you know, the market's always changing. So we we didn't have in pre three, four years ago, we didn't have uh, you know, Sailor any institutions or ETFs or treasury companies, but now that's like the biggest data point, I would argue. So you kind of have to keep abreast with what's driving the market and what data impact impact that would be having. Um so yeah, it's basically more metrics um and more things to consider now. It's a more complex and more competitive market. You just got way more people looking at this stuff than we did a few years ago.

SPEAKER_02 21:58

Yeah, that's why you know. If you look at those type of metrics like the Myer Mort Meyer multiple or the MBRB or or any of the others, none of those, you know, went into extreme levels, right? This this cycle. So you you wouldn't if you only look at those, you wouldn't say that we uh hit a peak uh for the price and and then start a bear market because you will be waiting to to see those strings. Uh so that's why you uh like you said, it it changes how how you need to analyze it. This cycle I really focus on, you know, besides all those metrics, you know, trying to estimate demand, demand growth. And you know, now you we can you can do it you know indirectly with um ETFs and uh with uh the treasury companies, how much they were buying, and then on chain you can also estimate that. So I I really focus on mostly trying to estimate if demand was growing and so or contracting more than focusing on you know seeing those metrics at extreme levels. And so that's you know, like you say, that's that's one thing that you always have to be doing, you know, coming up with new new ways to to analyze it.

SPEAKER_00 23:22

Yeah, that's a great point. Rate of change can be much more important than the actual value of a metric. Um and you see that in equities too, right? Like you'll see companies like SpaceX has whatever a P of 100 or something, very little revenues compared to any of the Mag 7, and it's it looks crazy that it should be at multi-trillion. And you know, you see that you get a range of valuations for different assets, uh, some which look extremely overvalued or undervalued, and they can stay in that asset criteria or ranking for a long, long time. And it's really more about how that company is changing or how its earnings or revenue is changing on a quarter-to-quarter basis or year-to-year basis. So rate of change, like you're saying. Curious what you're seeing uh with demand at the moment, uh, based on your on your models. Well, the demand is still contracting.

SPEAKER_02 24:13

Um I mean, basically all these um entire 2026 has been contracting a different rate when when we hit uh 57 last week, that the contraction hit you know like a low or or the biggest contraction of the year. Now it has it's still contracting, but at a much slower level uh right now. But I but what I look is yeah, I mean the yeah, the the rate of change, of course, of how much is contracting or more or less, but also you know, that threshold in which it will indicate that we now switch to uh demand growing. So that's I think that's important.

SPEAKER_00 24:55

Yeah, the other thing is, and of course it depends what data you're looking at, because all these metrics can have different latencies and lags. Sometimes you know, key events are more important than what's in the data, um, if that makes sense. So, for example, the the day Trump got elected, right? Coming into that day, it was almost 50-50, or it was you know very uncertain. And then within within a matter of hours, it became a high probability that he was going to win. And obviously, the market was pricing in very different crypto outcomes on that. And at that point, it doesn't really matter what happened in demand 10, 20, 30 days ago, or even one day ago, all that mattered was that that that major event. Um, and so sometimes there's events or triggers like that which outweigh everything. Um, so that's important to consider. And the other factor, I think, is just technicals can be often as important as the fundamentals, um, because you could have hundreds of fundamental data points, but maybe you're missing something, or maybe it simply is just taking time for data to flow through those fundamentals, which may be lagging in some respect to impact the market. Whereas price can often respond immediately, or it can price things in straight away. And sometimes it's a a it can give you a powerful guidance of where things are going. So you'll have you know some of the best investors in the world, like Drucken Miller, Paul Tudor Jones, they will only make a trade or enter a position when it's confirmed with price as well, so technicals. Um, and that works in equities, it works in Bitcoin, and it often that can be dismissed as a simple way of doing it, but um it can be very powerful. And I think right now price is actually, or technicals are one of the better things uh that's we're seeing for Bitcoin. Um while we've talked about you know demand coming down, treasuries, ETFs are selling, the technicals are actually responding reasonably well at you know what I'd argue is sort of monthly support at 60k. Then we've had um Sailor selling today, price has actually gone up. And um we've seen the last week, you know, the AI trade has kind of struggled, but Bitcoin has is outperformed it. So there's some promising signs there. Obviously, it's not no guarantee, but they're the kind of things you want to see confirm bullishly as as well as fundamentals to help maximize the potential of an investment or a trade there.

SPEAKER_02 27:19

And no, that you see the technicals, Charles. Do you follow the or take a look at the 200 week moving average? That a lot of people talk about that. No, that we can always bottom around that.

SPEAKER_00 27:35

Yeah, no, I don't I don't believe in that. Yeah, people have talked about that as being like a bottom, and we never went below it, right? I think was the story.

SPEAKER_02 27:44

We yeah, but we went below that in after the FTX or around that. Yeah, that's right. Yeah, yeah.

SPEAKER_00 27:50

So we went below it. Yeah. No, I I find it's one of those things. You the problem with moving averages, obviously, firstly, is what duration you choose. And the longer and longer you choose it, the more and more it's gonna drift below price. So you can always find one that will tag every bottom really nicely or um every turning point really nicely. I prefer to see them where there's more interaction with price, to be honest. Um, I find this one's really slow, and you know, you've only had this is a good example we're talking about before when you've only got three or four data points, right? Where three or four points where it's touched or crossed really nicely, and therefore people think it's great, but it's just not enough to be meaningful, and it's probably more likely to be noise and coincidence, in my opinion. So I find the 200 day 200 week, sorry, is way too slow.

SPEAKER_01 28:42

And I do want to ask you about um digital asset treasuries, DATs. Um, because I think this this cycle, DATs and uh ETF inflows are two like huge new sets of of data points. Um so I guess broadly, are you are you monitoring all of that in your investment?

SPEAKER_00 29:00

Yeah, yeah. I'm I mean, I think we were the the first to publish the the net buying and selling metrics um for dats. The blue line here is the net buying and selling of treasuries and ETFs. Um the gray line is zero, so it's a percentage of market cap this metric. Orange is the datts, and green is the ETFs. So right, and red is the the Bitcoin mine per day. So when the blue line is above the red, this is green, and it means that there's more buying by institutions of Bitcoin net supply added to the market from mining. And that's where we've seen all the biggest price appreciation of Bitcoin since 2020, basically. So obviously it's it's gone kind of negative um more recently from about what is it, 80k, 78k or something around there. Um and that's been primarily driven by ETFs unloading. Um, probably a lot of that recently around the AI trade, second capital out. But the DATs kind of held pretty strong until recently. Um yeah, about three weeks ago, they really started buying way less than normal near some of the lowest accumulation rates in in the past. And so the net selling has been about 400% of daily mine bitcoin supply. So this is really important um for me. Like, I think if you want to position with size and capture a lower risk trend, then you want to be in the green zones, effectively, which is when there's net buying. Obviously, you're not gonna get every price run, but you get most of the major ones. Uh the market will usually bottom when it's red, like now, so that could be a potentially positive way to look at it. But you can also stay in these red zones for a long time, like we did for two years. So uh you'll often see people say, well, you'll they'll zoom in. That's the other thing on Twitter, they'll zoom in like to a period where it makes most sense to their argument and say, Oh, well, every bottom was when it was red, so it's bullish, right? And maybe they're maybe they're right, right? It could be right, but then if you zoom out for multi-years and lots of data points, you'll see it was red for years. So that's another area you have to be careful with what you see online and just do your own research. And also, we've got Sale now basically selling for the first time in proper size. What was it, today or the last day? So this is probably going to drop down again soon. So it'll be interesting to see where this all unfolds. But yeah, I'd like to see this flip green, and and price could be much higher at that point. Like we talked about, there is lag in some of these metrics. Um, but it's about the confluence of data points that you want to see. Um, yeah, you know, you can also track the buying and selling ratio, which is still a bit obviously red today. Um, you can look at debt ratios as well of these companies, which have been going up to their highest point ever. Um still not, you know, if you compare to normal equities, not deeply concerning. So it's just a trend that makes this whole industry, in my opinion, unsustainable long term. But right now it's not like it's not like a big price risk, it's just that you know, I just don't see a future for many of these companies. But yeah, we could talk about this for for the whole show, probably. So I'll probably just pause there.

SPEAKER_01 32:23

Yeah, I definitely wanted to ask your broad opinion on that. Um, like, do you do you think there's a actual innovation happening? Because you're obviously tapped into equities probably a lot more than than we are. So I'm curious your your take on on that. No, I don't think there's an innovation happening.

SPEAKER_00 32:41

Um yeah, so I've done a couple presentations on this. Uh, if people want to get more context, but basically, data are basically companies that are saying they'll raise money to buy Bitcoin. Uh, and that's not a new model. It's happened in the 1930s. They were called um investment trusts, and they did the same thing to buy equities. And at the time they were saying you know, equities were limited in supply, and they were taking on leverage to buy more, and you know, it was the same arguments just for a different asset. The problem is it's it's just not a sustainable model because it's a fixed supply asset, and the only way they can deliver a benefit to investors is if they have a Bitcoin yield, so positive growth in the Bitcoin per share. And the only way they can grow the Bitcoin like that is to either issue equity when the MNAV or the value of the company is more than the Bitcoin, or by taking on debt. And in a bull market, all these companies have a lot of hype and they try to hire multiples, and they could issue a deck, uh, sorry, equity and buy more Bitcoin, and that's great for everyone. Um, but then you get bear markets like this, and or you just get market saturation where you've got 200 dats like we have now, and um, the only way they can do that is by basically using debt. And I talked about this um back in October last year as one of the biggest risks for the market. And back then there was not much debt in the market, and it's basically just gone straight line up since then. You know, we see micro strategies a ton of debt and they've now got guaranteed yields with STRC, which is totally unsustainable. They're guaranteeing 12% return on an asset which must have Bitcoin outperform that to give that return. And historically it has, but it's there's no guarantee that Bitcoin's going to go up over that amount every year forever. And in fact, it's most likely not to in the long run. So they're incentivized to take on debt because if you don't, right, if you if you're a dat that does nothing and you do things very conservatively, you've got 199 other dats out there, and if they start using debt to buy more Bitcoin and grow the yield and give investors a better return, then you're gonna want to do it too. And at some point the debt ratios, I think, become really concerning and a massive leverage risk to the market, right? And we know if anything, we know that uh people in Bitcoin and crypto love to take on leverage risk and um and it always unwinds at some point. So I'm not uh expecting that to happen right now. Like the ratios, while they're the highest they've ever been for DATs, they're still below anything less. It's an immediate red flag, I suppose, versus equity. So I'm not expecting Mark Strady to get liquidated, right? But it's just not long-term sustainable. So whether it's this cycle, the next cycle, I think at some point this ends badly, as it did in the 1929 crash uh for the investment trusts. Um, I think we'll see a lot, a big consolidation of this industry. Like you just don't need 200 dats. The dats effectively for the everyday person is just another ETF um with some yield on it. And we don't need 200 ETFs in anything. Uh, we don't have 200 gold DATs or gold ETFs, it just doesn't make sense. Um, so I think you'll get a big consolidation, probably a lot of acquisitions, probably a lot will just shutter, and we probably end with maybe five or ten of these things in the next five, ten years. Um, and I think they'll become more of a bank kind of investment vehicle than what they are today. I think what they what you see today won't really exist in a decade.

SPEAKER_02 36:22

When you say uh the debt ratio, what's that ratio?

SPEAKER_00 36:26

Um the debt ratio, yeah. There's a few. Um, there's a few ways to cut it. So the chart I had up before is just average debt to equity, which is a kind of classic um way you do it for stocks. Uh, I also had debt to Bitcoin holdings, debt to enterprise value. So you can look at a few ways. And this is again a rate of change thing like we're talking about before. The current like value that they're at is not deeply concerning. Debt to equity is hit at almost one, which is not great, right? Uh, especially for businesses that don't have cash flow, like all the debts. But it's you know, if it was 1.5 or 0, that'd be very alarming, I would say. But it's more the rate of change, it's just going up, um, especially as price goes down. So yeah, there's it's it's something to monitor, I would say.

SPEAKER_01 37:15

I was gonna I was gonna ask, like, in terms of risk of these dates, do you view it in a similar way as last cycle where we had all these you know C Fi lenders going bankrupt, forced liquidations? And I guess the idea was that maybe these DATs were a little bit more formalized and smart money driven.

SPEAKER_00 37:30

Yeah.

SPEAKER_01 37:31

And yeah, I'm curious if you think it's gonna be like liquidation or just a slow kind of drag on like market innovation.

SPEAKER_00 37:38

I I don't think we're at a point where liquidation is gonna happen unless price drops a lot. Like if we, you know, if if if price is down at 40k or something in two months, maybe it's a different story, but um, and it'd probably have to stay there for a while. So I don't think it's a liquidation risk right now when we're in the 60k range. Like I said, the debt ratios are just not that high. They're still very serviceable for these companies. It means they have to sell Bitcoin like Sailor is doing. Um, and that's obviously you know not good for price because of sell pressure. The biggest risk in terms of an unwind would be from confidence, right? I think we've already seen that in the last month or two, where you know, I would argue sales not at risk of liquidating right now, but the confidence in his whole model and the structure, and people know that you cannot guarantee 12% yields on an asset forever that doesn't have any cash flows, right? So yeah, people are obviously very concerned about it, and uh that's forced his hand. You know, just months ago he was saying to sell your kidney to buy Bitcoin or to mortgage your house to buy Bitcoin like a year ago, right? And never sell, right? And now his selling is Bitcoin and his average price is much higher than where it's selling. So he's bought high and selling low. Like it makes no sense. The whole model is crazy. Um, but it doesn't mean that you have to have a leverage unwind necessarily unless you know price um gets way lower, or there's just a massive confidence unwind in the whole structure, which we just don't have at this point. It's harder to have like a liquidation like you had in those crypto events you talked about than these structures. Um, obviously, there's there's much more investor protections. Um, as I said, the leverage rate's already lower and more serviceable. Um, but it's just like, yeah, a bit of a drag, I think. It's I've I've said recently, it's like this whole dat thing is like a ball and chain on crypto. If we didn't have any dats, I think we'd be in a much better place and price probably be higher than where we are today. So yeah, it's probably just something we have to go through for a while until they kind of consolidate a bit and um become more sustainable. And I think the first step of that has probably happened today with some selling of Bitcoin because the sales model just does not work the way it is. If he's smart, he'd probably get rid of all the debt. Um, probably it's not going to happen anytime soon, though.

SPEAKER_01 39:57

Yeah, I think uh you've mentioned AI a few times, and I definitely wanted to get um your take on that, and specifically in crypto and how you view it, because we have AI in terms of like technology that we use, and then like the equity markets where there's you know AI trends, um, and then crypto where there's I don't know, some AI use cases or chains or projects that are sort of trying to implement it. So I'm curious how you're kind of viewing the general AI trend.

SPEAKER_00 40:23

Yeah, I I don't know much to add on the crypto side of it. I think crypto will always try and create a product out of the the hard narrative, and most of the time they're not uh meaningful. Um, so I wouldn't give any value to that right now. Yeah, I mean AI is is massive, right? Like it's I don't know where to start. Like it's we've we've you know we've been using AI at Caprioli for many years, even before ChatGPT, we were you know doing some reinforcement learning work, and we're kind of just for me, it was obviously going to be the next thing that was coming up in the sort of late 20s, as in 2020s, 2030 sort of marked being the sort of potential singularity range um where AI is potentially smarter than all of humanity in the next sort of five to ten years. So yeah, I mean how how do you price or value intelligence or superintelligence? It's a pretty hard question. No one's ever had something like this to navigate, but it's pretty obvious that there'll be a huge value unlocked from that. Um the question, I suppose, on the nearer term is is the asset class more over or undervalued relatively? And that's more tricky to answer. It really is kind of case by case with some equities which are really extended and historically at major extremes have had 100x run-ups. Obviously, the the you know, some of the semis and the memory trades. Will that continue? I think you'll need to see really consistent demand on the AI trade, but there can also be a bull whip effect where we have more supply saturation come on online. So we've seen, for example, Apple has been engaging with some of these memory companies in China, which have potentially been or sorry, historically been like blocked for them to use. But you know, if the you you see a lot of these semiconductors and memory chips trading at huge multiples that they have at the past, you're gonna get more people trying to copy that and create supply. And that's where you get some kind of question marks about what will happen in sort of 12, 24, or 36 months. Um, and it's not not an easy one to to to um project.

SPEAKER_01 42:43

Exactly. Yeah, but I think you mentioned earlier you mentioned that AI could have been one of the reasons, or the I guess the investment opportunity in AI might have been some of the reasons why some capital didn't flow into crypto. So do you you follow specifics on on that, like specific metrics, or is it more of a kind of viewing a trend you're you're seeing?

SPEAKER_00 43:02

Yeah, I mean you just have to look at the market caps. You know, Bitcoin was over 2 trillion, and we've just seen massive influx of you know tens of trillions into the AI trades and random AI supply chain companies in the last 12 months. So there's that. I think that wouldn't necessarily have been a huge problem for Bitcoin if it didn't have the whole ball and chain we're talking about, which is the DATS and the quantum threat. Because now you, you know, in every other bear market, for example, FTX, obviously that's sucked. We had lots of frauds and scams, and it was really kind of depressing to go through, no matter how you're positioned. But at the end of it, you know, in November, December 2022, prices at like 16k, you look at it and you're like, okay, all these bad actors have been eliminated. Um, on chain were deep discounts and valuations that happen once every four years. Um, all the fundamentals are still there, the outlook for Bitcoin is still there. This is an obvious value trade, right? Like for me, it was really obvious. We wrote quite publicly about it and positioned for it. Um, I don't have that for Bitcoin now, right? Like Bitcoin is still in a value zone. It's not as good as 2022. Maybe that will happen in a month. You know, if we drop to 40k, I'll probably be pretty noisy about it. But right now, it's in a value zone, which is pretty good. But at the same time, you have to think about okay, next two to three years or four years, is Bitcoin gonna upgrade to be quantum proof? Not sure if it will uh at the current rate. Um, hopefully it will. Uh, you also have to think about these 200 dats that are growing leverage and running a business model that's not sustainable and guaranteeing interest when they don't have any cash flows, um, and how that's gonna unfold and might be fine, but um it's just something you have to think about now. You didn't have to worry about before. Whereas before it was like, okay, everything's been flushed out, and the upside is okay, now maybe institutions will enter the market, maybe they'll buy, maybe we'll have ETS launch in a year, all these positive kind of forward-looking demand drivers, and you just don't really have that right now for Bitcoin. Um, that can change really quickly. So, tomorrow, if the Bitcoin core team comes out and says, this is our 18-month or two-year roadmap to deploy quantum-proof upgrade to Bitcoin, and we're working on it right now, and it's a top priority, like that whole messaging changes completely, and Bitcoin probably jumps 20-30% overnight because I think the market will just price out a lot of the risk that we have today. So a lot of these things can change really quick, and I would be obviously really bullish if that happened. But right now, it's just been like completely kicking the can down the road on all these fronts and outright ignoring some of these risks. And I think most investors see that. You see many Tradfire investors talking about that. Even Paul Tudor Jones, he was one of the biggest supporters of Bitcoin in 2020, is the fastest horse, and now he's talking about the quantum stuff. So it's like just something that makes it really much harder to position right now until some of these matters are addressed, especially when you've got this relative trade of AI, which doesn't have those kind of heavy drags on it at the moment.

SPEAKER_02 46:14

Yeah, just uh following up on that. I mean, you're talking about some of the maybe bullish catalysts that you may want to see, like uh Bitcoin upgrading to quantum resistance. What other catalysts would you be looking at, you know, for the next bull run to start?

SPEAKER_00 46:31

Yeah, good question. It could be a lot of things. One would be very simply price, right? If we kind of reclaim 70k. I think that would be, regardless of what's happening, the telling sign, um, flipping key levels and resistance um amidst all of this kind of negative stuff. Usually, if that happens, there'll be something else to back it up as uh other than just price, but remains to be seen. Maybe it means strategies just sold down a lot of their debt or they've you know cashed up a lot, you know, and that that has de-risked the dats. Um, I'd much rather see, I think it's the biggest catalyst would be the quantum one I talked about. It doesn't even have to be tangible action, just some kind of roadmap where key members of Bitcoin core are aligned. Um, I just genuinely think that is the biggest risk Bitcoin has ever had and has right now. I price that risk today as a discount factor in Bitcoin about 30%. Um, if you kind of just collate, which we've got in our also in our charts and an article where we analyzed it. But basically, if you collate all of the top quantum companies and quantum physicists in the world and when they believe Q day will happen, 100% of the estimates are within eight or nine years with a high probability around the four or five year mark. And if you discount that back, assuming no code changes or anything, that's about it, you know, there's an article to go through this, but essentially a 30% discount rate. So that's the biggest opportunity, just a roadmap there. The data, some kind of change there. It could be a macro factor, right? It could be the peace deal signed in Iran and the Fed's like, we are not raising rates, and it's basically in their forecast roadmap at all. There's no rate raises, and maybe they're even adding money supply to the market, right? Or you know, it could be the whole equities AI trade completely tanks, uh, and then again the printer turns on. So there could be a few factors like that. It's hard to really guess which one it will be, but it doesn't have to be any of those. Um, but some kind of major factor like that would definitely, I think, really help.

SPEAKER_02 48:39

Do you see the um the strategic the strategic Bitcoin reserve in the US being some of some of that catalyst? Or how do you see the probability of that?

SPEAKER_00 48:52

Do you see that is it are they is there news there they're gonna be buying soon?

SPEAKER_02 48:56

Yeah. I mean, there's there has been some chat recently. Uh I don't remember who from the US government said that they were working on you know all the legal stuff. But do you think that's uh catalyst? Well, I mean, it will be a catalyst, I think, but how how probable is that?

SPEAKER_00 49:12

Yeah, I don't know. I don't know. Um I mean if if Trump says they're buying and they actually start buying, I think that would be a major catalyst. Yeah, I wouldn't want to ignore that. But yeah, the extent of it, how long it lasts, all that is is very unknown. And if it actually happens, there's been pretty little done there. I saw some rumors as well recently, um, but there's been very little the US election, maybe. Do you think that will be good or bad?

SPEAKER_02 49:41

I mean, depending on who win wins, I think.

SPEAKER_00 49:44

And we've still got uh a couple years, right?

SPEAKER_02 49:48

Yeah, but I mean the the November election, like if the Democrats.

SPEAKER_00 49:52

Yeah, the midterms, yeah, I don't think it will matter because the market already knows Trump will be gone a couple years. So even if I don't know, it it'll probably have some impact, right? Like all these events have some impact, but I I don't think it'll I doubt that the outcome will have a measurable impact on Bitcoin.

SPEAKER_01 50:11

I did have one, I guess, follow-up question on the quantum risk. I think it's so so interesting. I guess I'm curious in terms of like the organization of this, like as quantum attack, how do you see it? Do you see like nation states or these private companies, or like how are you viewing the actual risk playing out?

SPEAKER_00 50:30

Well, basically, most of the top companies are projecting to uh have a you know quantum relant machine by 2030, 2020, 31. And we don't basically insurance we don't know. For example, we don't know anything about the roadmaps for Chinese quantum companies, but we do know that they have some of the best quantum machines in the world and they're spending almost double the US on quantum. Um so it could be that China builds one and then does some experimenting and maybe some attacking. It could just be that these quantum machines are broadly available on on any cloud platform. Like right now, you can use a quantum machine on AWS, Google, cloud, Azure, right? You can just rent one user and they're not that powerful, but in three to five years they'll be very powerful. So it could just be at some point, basically as far out as you go, at some point everyone will have the quantum power to do what they want with that, um, with that power, right? It's kind of like the mythos fable thing that we see in AI right now. It's being constrained. So maybe in a few years, quantum machines will be restricted to government level for some time. But it you know, eventually all those technologies come out. So it's hard to predict where the attack comes from. And I don't think it even needs to have an attack, it's just more that the presence of something which could be an attack risker will cause the market to reprice. So, you know, Bitcoin won't will is not gonna die, it's not going away. But if you have the a major threat of quantum that enough people believe in, it's gonna get a massive repricing and probably the worst bear market ever. And then if you do have an actual attack, obviously it's gonna be really bad. Um yeah, so uh the obvious risk is there's yeah, there's a few elements to it, but it's the the old coins, uh lost coins, Toshi coins, um, where the public keys are available and these machines can just grind away at them and expose the public key. Uh Google did some research that they think that you could basically do a nine-minute attack, so it could be within the actual blocks, so it'd affect everyone at some point in the coming years. So it's pretty widespread, covering a lot of angles. And um the main problem is just that there's no traction. Like ETH, for example, I think I saw yesterday that well, ETH had already set up a team to investigate the quantum risk and work on it as a top priority. And I think it was yesterday basically laid out their roadmap to implement that in the next uh two, three years. So that's what we need to see is that from Bitcoin. But at the moment, you've still got a lot of the core Bitcoin team saying it's not in their top 100 priorities. So that's a major issue, especially when every asset allocator in the world is looking at this and saying they don't want to touch it until it's addressed.

SPEAKER_01 53:30

So yeah, that's super interesting. So, not even the necessarily the intent, but just generally how AI develops, undermines like the fundamental security of Bitcoin and uh quantum, yeah. Yeah, quantum. And then um, yeah, we're kind of rounded up on time here, but I had one, I guess, final question I'd like to ask uh all our guests is really what advice would you give to the average crypto investor? Like what framework um could they follow? Because I think we all speak about so many you know individual metrics and macro and all these different factors, and it seems like so much to actually like tell someone how to implement. I'm curious if you had what would you tell the average crypto to look at?

SPEAKER_00 54:12

Yeah, I mean, well, firstly you have to I think just really love it, love crypto and and finance. If you've got the passion, I think you'll work it out. Um, but you need to you know do a lot of deep research and and understand the data and drivers of everything. I think if you're if you're talking about crypto broadly, most crypto tokens, as we all know, just don't survive. They'll have some kind of hype mania if they're lucky, and then they'll bleed out minus 99% within three to four years. You can just check any altcoin and you'll see that. Um, in 2025, the all the if you just there was an analysis I was it was on Twitter you would have seen, but if you just invested in all of the new listings on Binance, you would have been down 95% on average. So you got to be really careful and sparing, I think, with how you position. It depends if you're an investor or a trader. Obviously, they're two very different ways of managing the capital that you need to consider. Um, but uh in terms of investing, I wouldn't really invest in anything in crypto outside of Bitcoin unless it kind of has really strong tokenomics and some kind of either you know proven revenue, like growth in the product, and ideally a buy and burn. So, what I mean by that is a lot of these tokens go down because they have just endless token supply hitting the market unlocks from VCs or what have you. There's very few have fixed supply or or you know supply burn. Um, like you could probably count them on one hand, and they're the only ones probably I'd want to first be looking at long term. And then secondly, you need product market fit, and the easiest way to assess that is if they're making revenue and they're growing it. Um, so obviously hype fits in that category where they're you know established grow strong and growing revenue and they use that to buy and burn their token. So hard tokenomics, diminishing supply, uh proven product fit, right? That's the the best example. There are others that have been that in that category at different times. Um, but they're probably the two or three most important things I'd say for crypto if you want to be a long-term investor.

SPEAKER_01 56:25

Awesome. Thank you so much for coming on. I think you're our third guest at this point. So um, yeah, we look forward to having you on again. Hopefully, being your an all time high.

SPEAKER_00 56:35

Yeah, yeah. No, it'd be my pleasure. Yeah, maybe uh this is a nice bottom signal, hopefully.

SPEAKER_01 56:41

Yeah, yeah. Yeah, thanks again. We really appreciate it. Uh my pleasure, thanks, Julio and uh Ben.