Mm.
While the crypto market is trying to brush off its worst liquidation event in history, over $19 billion in positions were liquidated on Friday as Trump announced additional 100% tariffs on China.
Now Bitcoin is seeing wild swings.
It was trading above the 121,000 level on Friday morning and briefly fell below 105,000 in the afternoon and reclaimed 1150 on Sunday.
New York time and we are looking at the crypto major trying to hold that level again this morning.
Meanwhile, Ethan Solana also saw huge drops on Friday but soared over 10% in the last 24 hours.
Geopolitical pressures from US-China tensions are uncertain as regulatory momentum in Washington remains stalled.
The government shutdown does mean the Clarity Act and ETF filings won't be approved while it lasts.
Friday's chaos also dashed October hopes with Polymarket posting it's October.
Well, joining me to weigh in this morning is Matt Siegel, portfolio manager of the Vanek on chain economy, ticker symbol, N O D E.
Good morning, Matt.
Thank you so much for joining me.
Well, let's start out with the chaos we saw on Friday with the flash crash in Bitcoin.
So what was your reaction to that liquidation event in crypto?
Morning Remy.
I think that's a good reminder that that and Bitcoin don't play well together.
It's a bearer asset with a still immature ecosystem of financing partners and so you know, Friday at 5 p.m., you know, we think there might have been some Finance specific issues with their matching engine and you can see that with finance announcing they are going to make good on some of these trades, but in general this kind of reinforces our view that you stay away from leverage in this still immature as the class.
Yeah, and Matt, I think hindsight is always 2020 on some days we wish that we had a crystal ball, but we do not.
Now I do want to ask you about Bitcoin miners that have been transitioning into AI data centers, and this does come amid expectations for AI demand.
But what's going on between Bitcoin miners as well as hyper scalar companies that include Amazon Web Services as well as Microsoft Azure, Google Cloud, and more.
Yeah, this is still the area of the market that we really like the best, which is the intersection of Bitcoin and AI.
So so many of these Bitcoin miners have begun to diversify their business model and repurpose some of their data centers to serve the AI and high performance computing.
Markets and a number of these companies have announced deals with hyper scalers and this has the effect of lowering the cost of capital for these companies that historically have not been able to access the debt markets and as a result their stocks have soared, so in no We have roughly 25% of the portfolio exposed to this theme, and you can see this morning Goldman Sachs raised their estimates for the amount of power that will be required to serve the AI market from 72 gigawatts to 82 gigawatts.
It's really a big increase.
Stocks are responding this morning.
And that hybrid business model where you have two volatile early stage industries like AI and Bitcoin, it really makes a lot of sense from our perspective to diversify and serve both of both of those markets.
So yeah, that's that's an area that we still see tailwind.
Yeah, and I think diversification is the key word there, Matt.
So I do want to ask you about node and that is the ETF.
So give us a better understanding of what this ETF is focused on when it comes to DI and what does it actually say about institutional adoption?
Yeah, one of the biggest pushback we still get about this asset class is its volatility, and you asked about the sell-off on Friday.
Bitcoin volatility had reached its lowest ever level.
That it was unsustainable from our perspective.
And so for investors that want diversified exposure to both the largest cryptocurrencies, Bitcoin and Ethereum, via. and also the equities that are building real cash flowing businesses on the back of Bitcoin and digital asset adoption.
It's that sweet spot that we're trying to hit with nodes.
So I think what you'll see is that the performance has really outperformed Bitcoin, but it's done so at a very attractive volatility level because of this highly diversified approach.
So, um.
You know, many of the equity products in this industry tend to be overweight, the leveraged entities, the micro strategies of the world who have debt, and as we spoke about at the onset of this conversation, debt and crypto don't match.
So our investment thesis in this fund is we're underweight leverage and we're overweight, good cash flowing businesses that are going to make money or save money from the adoption of Bitcoin and digital assets.
And Matt, finally, while we have you here here in the US, it is Columbus Day, also known as Indigenous Peoples' Day, and that really tells you what part of the year we're in right now.
So as we head into the rest of the 4th quarter and into the new year, what price targets does Vanek have for crypto?
We still think that the seasonality is going to win out here that with the combination of better liquidity and sovereign adoption of neutral assets, and you can see gold making another all-time high today this morning, gold and Bitcoin tend to take turns.
So as the momentum begins to ease out of the gold market, it can't go parabolic forever, but the structural tailwind of BRICS countries, countries outside the US trying to find neutral alternatives to the dollar, we think it could be a very strong uh Q4 for Bitcoin and digital assets.
Yeah, and Matt, finally, before I let you go, I do want to ask you about the debasement trade that we've been hearing of.
So what's your take on that?
Yeah, I think there's a tendency for folks to want to counter trade this because once it gets a name that's the end of it.
But I would remind folks JPMorgan named this the debasement trade in October of 2024.
These are long term structural trends.
You can listen to the presidents and prime ministers of some of the developing countries, and they. to the US's irresponsible fiscal and monetary policy, printing money to largely, you know, oftentimes spend on nonsense.
It's destructive to their capital, and they're looking for neutral scarce assets that they can own for decades and centuries.
So for Bitcoin and gold, you know, we think these are multi-year tailwinds driven by demographics.
Yeah, and it's really interesting since this morning we are looking at gold close to all-time record highs yet once again.
So Matt, thank you so much for joining us and as always, thank you so much for sharing your insights.
