Latest / The Paul Barron Crypto Show / Fed Aftermath🚀Crypto Rallies🔥Matthew Sigel Van Eck

Transcript

Fed Aftermath🚀Crypto Rallies🔥Matthew Sigel Van Eck · The Paul Barron Crypto Show

• 0:00
  Speaker 1: All right, so welcome in everybody. We're going to get
• 0:02
  Speaker 1: into it today all about what chair Pale was doing
• 0:05
  Speaker 1: yesterday and reference to a quarter point basis rate cut.
• 0:09
  Speaker 1: It's going to be a good one. My name is
• 0:10
  Speaker 1: Paul Baron, welcome back into the show. Joining me today
• 0:13
  Speaker 1: is Matthew Siegel coming over from Vanak. You guys have
• 0:16
  Speaker 1: seen him on the show before, but Matthew, welcome in.
• 0:19
  Speaker 2: Hey, Paul, Hey everyone, nice to see you.
• 0:23
  Speaker 1: And of course, now that we are past the FOMC
• 0:27
  Speaker 1: meeting for September, we get a quarter point rate cut.
• 0:32
  Speaker 1: Whether you were expecting it or weren't expecting it, What
• 0:35
  Speaker 1: were you looking for out of Chair pal yesterday? How
• 0:38
  Speaker 1: did you deliver for you guys?
• 0:42
  Speaker 2: Yeah, the betting odds and the kind of options implied
• 0:47
  Speaker 2: move by the FED was kind of baked in the cake.
• 0:52
  Speaker 2: So I don't think this should have been a huge surprise.
• 0:54
  Speaker 2: But I think just how polarized the FED has become
• 0:58
  Speaker 2: that there was maybe like a vocal minority that thought
• 1:02
  Speaker 2: that Howel and the team would dig in their heels
• 1:05
  Speaker 2: and not cut. And so what we have here is
• 1:08
  Speaker 2: I think a relief rally, and the market's now implying
• 1:13
  Speaker 2: three rate cuts by the end of the year, up
• 1:15
  Speaker 2: from two, So a little bit of a marginal tailwind
• 1:20
  Speaker 2: on the liquidity trends and should be supportive as we
• 1:24
  Speaker 2: enter the more seasonably favorable part of the year.
• 1:28
  Speaker 1: Yeah, for sure. I want to share a story off
• 1:31
  Speaker 1: of Reuters where they were breaking this down. One was
• 1:35
  Speaker 1: this right here, and I'll zoom in on it for
• 1:38
  Speaker 1: you guys. Pal to temperiial enthusiasm in the markets. This
• 1:42
  Speaker 1: was really kind of on everyone on a more aggressive
• 1:45
  Speaker 1: path toward easing. He also noted the softness in the
• 1:49
  Speaker 1: labor market, which is interesting to me that he's at
• 1:52
  Speaker 1: least validating what we know has been a big problem.
• 1:57
  Speaker 1: And then he's talking about reserves, which is reserving a
• 2:01
  Speaker 1: larger cut for more serious conditions. I mean, gosh, you've
• 2:05
  Speaker 1: got jobs at loss, at all time high re reports
• 2:09
  Speaker 1: from the BLS. I mean, the only thing that could
• 2:11
  Speaker 1: really go wrong now for the FED is going to
• 2:13
  Speaker 1: be higher inflation, which only exacerbates bagflation. How do you
• 2:18
  Speaker 1: think power responds to this on the next meeting.
• 2:22
  Speaker 2: Yeah, I think what they were reacting to is the
• 2:24
  Speaker 2: now clear deterioration in the labor market, and you heard.
• 2:28
  Speaker 2: Some of the first questions in the press release centered
• 2:32
  Speaker 2: around the high unemployment rate for young people and for
• 2:36
  Speaker 2: people of color, So you know, to the extent this
• 2:39
  Speaker 2: institution is politicized, you know, those on the left are
• 2:42
  Speaker 2: going to be very focused on the job market, and
• 2:45
  Speaker 2: given that deterioration, I think it gave the chair cover
• 2:50
  Speaker 2: to start on this rate cut you know path. So there,
• 2:55
  Speaker 2: you know, there's a new forward, there's a new FED
• 2:57
  Speaker 2: board member, which is Trump's choice, so on the margin,
• 3:00
  Speaker 2: like that will be helpful towards his preferred path of
• 3:04
  Speaker 2: rate cutting. There's also I think a strong consensus that
• 3:07
  Speaker 2: at four and a half percent, monetary conditions were restrictive.
• 3:13
  Speaker 2: And given where the inflation rate is, yeah, it may
• 3:16
  Speaker 2: tick up a little bit, but clear deterioration in the
• 3:19
  Speaker 2: labor market. Inflation's you know, still not rising, so why
• 3:26
  Speaker 2: be accommodative. So I think it's you know, another quarter
• 3:29
  Speaker 2: point cut in October is you know, a very good
• 3:34
  Speaker 2: bet unless inflation accelerates materially or the jobs market improves.
• 3:40
  Speaker 1: Poly Market is kind of interesting because if you look
• 3:43
  Speaker 1: at polymarket right now, this is how many right cuts
• 3:46
  Speaker 1: in twenty twenty five, And if you kind of hover
• 3:49
  Speaker 1: over this right now, what you're dealing with is in
• 3:51
  Speaker 1: between three rate cuts this year, so that would give
• 3:56
  Speaker 1: us an October. Would that mean in your opinion, that
• 4:00
  Speaker 1: he bails out of a late year rate cut or
• 4:03
  Speaker 1: is it one of those things where he would come
• 4:05
  Speaker 1: in and do a maybe a boom boom boom. What
• 4:09
  Speaker 1: is your thought of where these would fall into twenty
• 4:12
  Speaker 1: twenty six.
• 4:15
  Speaker 2: I think that the next meeting, the rate cut is
• 4:20
  Speaker 2: pretty high probability, and then after that they're going to
• 4:24
  Speaker 2: let the data decide. So you know, I don't think
• 4:27
  Speaker 2: that market participants should be making a strong call on
• 4:31
  Speaker 2: December or even next year.
• 4:34
  Speaker 1: Yet, Well, it's going to be interesting because I think
• 4:38
  Speaker 1: we are everybody's leaning into this because of the cycles
• 4:42
  Speaker 1: that we've dealt with. When you look at the S
• 4:45
  Speaker 1: and P five hundred, all time high gold now performing
• 4:49
  Speaker 1: all time high Bitcoin as we're talking today nearing one
• 4:54
  Speaker 1: to eighteen, I mean, we've got a lot of positivity
• 4:57
  Speaker 1: in the market. Do you feel like this holds for
• 5:00
  Speaker 1: Are now as a very boom rich market as we
• 5:05
  Speaker 1: move into September, October, November.
• 5:11
  Speaker 2: In the strategies that I run, we are we still
• 5:16
  Speaker 2: have considerable exposure to risk, and we haven't lightened up
• 5:21
  Speaker 2: on some of our higher beta picks yet, so you know,
• 5:27
  Speaker 2: I'm focused on the bitcoin market and the equities that
• 5:31
  Speaker 2: surround it, and for bitcoin at least, we haven't seen
• 5:35
  Speaker 2: the type of euphoria that usually marks peaks. So a
• 5:40
  Speaker 2: couple of kind of tactical indicators that we look at.
• 5:43
  Speaker 2: We look at how much does it cost to put
• 5:45
  Speaker 2: on a leveraged position, so what are the funding rates
• 5:49
  Speaker 2: in the perpetual futures markets or to put on a
• 5:52
  Speaker 2: leverage position on the CME. And when those rates really spike,
• 5:57
  Speaker 2: you know, into double digits, that an indication of strong euphoria,
• 6:02
  Speaker 2: and actually the forward returns for bitcoin deteriorates significantly when
• 6:07
  Speaker 2: we're in that kind of double digit funding rate. That's
• 6:10
  Speaker 2: not the case right now. We also look at unrealized
• 6:13
  Speaker 2: profits in the bitcoin blockchain, so you can see when
• 6:17
  Speaker 2: every coin has transacted and at what price, and when
• 6:21
  Speaker 2: the unrealized profits are very high, that also augurs pretty
• 6:27
  Speaker 2: poorly for forward returns over kind of one to three months.
• 6:31
  Speaker 2: We're not seeing that right now now. One thing that
• 6:35
  Speaker 2: I think, you know, I am on the lookout for
• 6:40
  Speaker 2: is the AI trade because many of the bitcoin minors
• 6:45
  Speaker 2: have been the best performing stocks this year. Some of
• 6:47
  Speaker 2: them have doubled, tripled on the back of this AI convergence,
• 6:53
  Speaker 2: So the bitcoin minors repurposing part of their electricity capacity
• 6:58
  Speaker 2: to serve the AI market, and the you know, volatility
• 7:02
  Speaker 2: on those stocks have has fallen quite a bit, and
• 7:06
  Speaker 2: they're starting to kind of show parabala in the shapes
• 7:09
  Speaker 2: of their charts. So I wouldn't be a surprise to see,
• 7:13
  Speaker 2: you know, something like another deep seat moment that kind
• 7:16
  Speaker 2: of you know, creates some fear in the market and
• 7:20
  Speaker 2: causes a bit of a short term wash out in
• 7:24
  Speaker 2: some of those trades. And given like in video's role
• 7:28
  Speaker 2: in the S and P and the Nasdaq, you know,
• 7:30
  Speaker 2: maybe that has some some knock on effects. So I'd
• 7:33
  Speaker 2: say that if i'm you know, i'd be more cautious
• 7:35
  Speaker 2: around that part of the market which is showing some
• 7:38
  Speaker 2: signs of view for you, rather than Bitcoin specifically. But
• 7:42
  Speaker 2: given how the miners have become such a larger part
• 7:45
  Speaker 2: of some of the crypto equity universe, you know, that's
• 7:48
  Speaker 2: something to look out for.
• 7:50
  Speaker 1: I would say, yeah, I think, and obviously you're reference
• 7:53
  Speaker 1: to a lot of what you guys are doing in
• 7:55
  Speaker 1: the no DTF. Here's a quick list of your current
• 7:58
  Speaker 1: holdings around this and within this right now, there's a
• 8:02
  Speaker 1: handful of these that people would say, well, hey, mining
• 8:06
  Speaker 1: has been volatile to your point, is it time to pivot?
• 8:11
  Speaker 1: I kind of hear maybe that there's a pivot here
• 8:14
  Speaker 1: into some other risk assets. But how would you guys
• 8:17
  Speaker 1: play this out?
• 8:20
  Speaker 2: Yeah, haven't taken down the exposure in these stocks yet
• 8:27
  Speaker 2: they've been great performers. There's still evaluation arbitrage from our perspective.
• 8:34
  Speaker 2: When you look at some of the pure play AI
• 8:37
  Speaker 2: data center companies like core Weave or Nebuous, they're trading
• 8:43
  Speaker 2: you know, more than twenty times they're ebada. And when
• 8:48
  Speaker 2: you look at the bitcoin miners, they still trade at
• 8:51
  Speaker 2: you know, three to six times there ebada. So it
• 8:55
  Speaker 2: still makes a lot of sense for these miners to
• 9:00
  Speaker 2: continue to repurpose some of this capacity to serve the
• 9:03
  Speaker 2: AI market. It's clear that many of the leases that
• 9:07
  Speaker 2: they're signing are still ahead of us. In Q four,
• 9:11
  Speaker 2: we're expecting a number of announcements from some of our
• 9:14
  Speaker 2: holders in terms of signing tenants for their AI data centers.
• 9:20
  Speaker 2: So I still think this is a tremendous place to
• 9:22
  Speaker 2: be in the market, and you can see from our
• 9:25
  Speaker 2: exposure that those stocks dominate our holdings. But one thing
• 9:30
  Speaker 2: just to note about that this strategy, the Banac Unchain
• 9:34
  Speaker 2: Economy ETF the ticker is NODE, is that the volatility
• 9:38
  Speaker 2: of this fund is about half of what you see
• 9:42
  Speaker 2: from most crypto equity funds. When we designed it, we
• 9:46
  Speaker 2: were taking in the feedback from many investors who want
• 9:50
  Speaker 2: exposure to crypto via equities, but are just spooked by
• 9:55
  Speaker 2: the high volatility of the pure play miners, the exchanges
• 10:00
  Speaker 2: and the leveraged hotalers like micro strategy. So what we
• 10:04
  Speaker 2: did with this strategy is really take a diversified approach.
• 10:08
  Speaker 2: As you noted, the markets at all time highs, Bitcoin's
• 10:10
  Speaker 2: at all time highs. There's no need to be a
• 10:12
  Speaker 2: hero and take ten percent single stock positions. We're going
• 10:17
  Speaker 2: to for now stay very diversified and let the rising
• 10:20
  Speaker 2: tide of AI and bitcoin lift our stocks. And I'm
• 10:24
  Speaker 2: very gratified that since inception we've quadrupled the performance of bitcoin,
• 10:31
  Speaker 2: and yet we've done that with lower volatility than bitcoin.
• 10:36
  Speaker 2: So I can't promise that's exactly what will happen in
• 10:39
  Speaker 2: the future. But it's exactly what we design the product
• 10:42
  Speaker 2: to do, which is give exposure to the adoption of
• 10:47
  Speaker 2: digital assets that happens to be through the AII hybrid
• 10:52
  Speaker 2: bitcoin mining space right now, but do so in a
• 10:56
  Speaker 2: way where the ninety percent draw downs that we saw
• 10:59
  Speaker 2: last sight hopefully won't materialize because we just don't have
• 11:02
  Speaker 2: those huge positions in the leverage names.
• 11:06
  Speaker 1: I know. Van K has very expanded into a variety
• 11:09
  Speaker 1: of blockchain components. One of the big movers that we've
• 11:14
  Speaker 1: seen has been Avalanche. This was kind of an interesting
• 11:17
  Speaker 1: point right here on their TVL in DeFi now starting
• 11:21
  Speaker 1: to accelerate, Avalanche now starting to move in terms of
• 11:24
  Speaker 1: the token the potential for that market because this could
• 11:28
  Speaker 1: this could end up bringing in a lot of new investors,
• 11:31
  Speaker 1: not only in the Node fund, but in other funds
• 11:33
  Speaker 1: under van K. Are you guys looking at any of
• 11:36
  Speaker 1: those kind of scenarios that are playing out in the
• 11:39
  Speaker 1: market right now.
• 11:41
  Speaker 2: Yeah, we like Avalanche. We hold it in a couple
• 11:46
  Speaker 2: of our private strategies. In fact, my colleague Pronav who
• 11:51
  Speaker 2: runs Digital Assets Alpha, our liquid token hedge fund, he
• 11:55
  Speaker 2: recently launched a purpose built fund just to invest in
• 11:59
  Speaker 2: the Avalanch ecosystem. So what Avalanche is doing with these
• 12:03
  Speaker 2: subnets which make it very easy and affordable for anyone
• 12:08
  Speaker 2: to spin to spin up essentially a layer one on
• 12:11
  Speaker 2: top of Avalanche customize their validator set. You can make
• 12:16
  Speaker 2: it kyced, you can make it open, It's very inexpensive.
• 12:20
  Speaker 2: It really gives a lot of flexibility for tradi fi
• 12:24
  Speaker 2: institutions who want to build on crypto rails. So nice
• 12:29
  Speaker 2: to see AVAX catching up here, but it's actually the
• 12:32
  Speaker 2: best performing layer one to opn over the last month.
• 12:36
  Speaker 1: I'm intrigued to see how this is going to play out. Matthew,
• 12:38
  Speaker 1: what are you guys watching for right now? If you're
• 12:42
  Speaker 1: looking at the three month window here toward the end
• 12:45
  Speaker 1: of the year, is there anything that you're just keeping
• 12:48
  Speaker 1: a very close eye on for the market as it
• 12:51
  Speaker 1: stands today.
• 12:54
  Speaker 2: I think it still just goes back to the internals
• 12:59
  Speaker 2: of the bitcoin market. Are people super greedy or are
• 13:03
  Speaker 2: they super feel fearful? And you know we're not. We're
• 13:08
  Speaker 2: kind of nowhere near that greed markers, So we're going
• 13:12
  Speaker 2: to stay constructive. I know it's easy to be bearished
• 13:15
  Speaker 2: with stocks at all time highs, but that's the nature
• 13:19
  Speaker 2: of stocks is that they tend to be at all
• 13:22
  Speaker 2: time highs as money debases and corporations grow. So you know,
• 13:28
  Speaker 2: margins for the Fang seven are very high. They have
• 13:31
  Speaker 2: great balance sheets that the fundamentals don't look anything like
• 13:36
  Speaker 2: the dot com bubble in two thousands. So We've made
• 13:39
  Speaker 2: some moves around the edges to take down some of
• 13:42
  Speaker 2: our US exposure a little bit at the end of
• 13:45
  Speaker 2: last year. But you know, I'm just looking for signs
• 13:49
  Speaker 2: of euphoria in the crypto market and not seeing them yet.
• 13:53
  Speaker 1: All right, So do you think that is a twenty
• 13:55
  Speaker 1: twenty five event? Do you think we see the top
• 13:59
  Speaker 1: this year or do you feel like this rolls into
• 14:01
  Speaker 1: next year.
• 14:05
  Speaker 2: We're gonna have to wait and see, Paul, Like, I'm
• 14:07
  Speaker 2: gonna let the markets tell me the answer to that.
• 14:10
  Speaker 2: I still lean towards that the four year cycle has validity.
• 14:15
  Speaker 2: That as we move into the midterms, you know, the
• 14:17
  Speaker 2: pace of deregulation may slow. There'll be some uncertainty around
• 14:22
  Speaker 2: how that will shake out. Not all the elections have
• 14:24
  Speaker 2: gone the Republican's way in the last like six months
• 14:28
  Speaker 2: in terms of some of these special elections, So I'm
• 14:33
  Speaker 2: on the lookout for that, but I think it'll be
• 14:36
  Speaker 2: accompanied by more tailwinds first, is my guest.
• 14:40
  Speaker 1: Yeah, yeah, what's good news. I think in general it
• 14:44
  Speaker 1: tells us today, guys, if you're watching the show right now,
• 14:48
  Speaker 1: we are up again, and it looks like we are
• 14:51
  Speaker 1: going to see an upward trend right here based on
• 14:53
  Speaker 1: the tailwinds of what happened yesterday at the FOMC meeting.
• 14:56
  Speaker 1: Even though I still feel that Powell is a little
• 14:58
  Speaker 1: bit hesitant for whatever reason. The real question, I think
• 15:03
  Speaker 1: is what will he look like at the next FOMC
• 15:06
  Speaker 1: meeting going forward? So Matthew Siegel make sure and catch
• 15:10
  Speaker 1: him over on Twitter of course, and following there. Coming
• 15:14
  Speaker 1: in from Van k today. Thanks for coming out on
• 15:16
  Speaker 1: short notice. We appreciate it.
• 15:18
  Speaker 2: Thanks Paul, see everybody, you.
• 15:21
  Speaker 1: Bet all right. So you guys, if you're not part
• 15:23
  Speaker 1: of the Diamond Circle, I want you to take a
• 15:25
  Speaker 1: moment right now and join. It's very easy to do that.
• 15:28
  Speaker 1: All you have to do is click the link down below.
• 15:30
  Speaker 1: It's going to take you over the paging sign up
• 15:33
  Speaker 1: and what this gets you is our Bear Market Edge newsletter.
• 15:37
  Speaker 1: It also gets a lot of the insights from us
• 15:40
  Speaker 1: from our research that we do on hundreds and hundreds
• 15:44
  Speaker 1: of hours a week that really dives into crypto as
• 15:47
  Speaker 1: a whole, and of course it's all free for you guys,
• 15:50
  Speaker 1: so just check it out down below, follow me out
• 15:52
  Speaker 1: there on X at Paul Baron. We'll catch you next
• 15:54
  Speaker 1: time right here on The Paul Baron Show.