This podcast episode discusses whether Bitcoin has entered a new bull market, featuring guests including cutting-edge technology investor didier and macro hedge fund manager Griffin Ardern. Didier believes that Bitcoin's return to and departure from the 200-day moving average, coupled with widespread under-allocation and concentrated short positions, meets the characteristics of the early stages of a bull market. Griffin, however, is more cautious, believing the current situation resembles the late stages of a bear market, and a true bull market requires clearer signals from dollar liquidity, fiscal policy, and the US Treasury market. Both guests agree that the recent rise is related to low positioning, short squeeze, and changes in expectations regarding US fiscal credit, but they disagree on the outlook for US Treasury bonds and liquidity. The program also focused on the balance sheet of MicroStrategy: didier argued that STRC is a perpetual preferred stock rather than traditional debt, and MicroStrategy is reducing short-term debt repayment pressure through tools such as cash reserves, stock ATMs, and preferred stock, thus its potential risk to the Bitcoin market is decreasing; Griffin emphasized that Bitcoin has gradually become an independent macro asset, and MicroStrategy itself is not the core factor determining its long-term value. Regarding the competition for funds between AI and crypto, didier believes that AI trading is currently crowded, and short-term funds may gradually seek less resistant directions such as crypto, while in the long run, AI and blockchain may actually promote each other; Griffin believes that AI has indeed absorbed some technical talent, but crypto continues to mature in terms of financial infrastructure such as payments, transactions, compliance, and risk control. Bitcoin rebounds by about 40%, has a new bull market begun? Cat Brother: This episode mainly discusses one question: has the bull market in the crypto world truly arrived? Bitcoin once fell below $58,000 at the end of June, and then rebounded continuously, reaching a high of over $81,000, an increase of about 40% from the low point. Do you think this is a bear market rebound, or the beginning of a new bull market? Didier: My view is very clear: this is a bull market, and we are currently in the prelude or early stage of a bull market. The most direct evidence is that Bitcoin has regained its footing above and moved away from the 200-day moving average, which is an important signal that a bull market has begun. Another characteristic is that most people don't believe a bull market has arrived, which is often the case in the early stages of a bull market. Griffin: My assessment is more cautious. I think we're more in the late stages of a bear market, and a true bull market is still some distance away. Although Bitcoin has risen significantly recently, the market remains relatively neutral on the long-term outlook, with the core focus still on dollar liquidity. What we need to observe now is whether the Federal Reserve will gradually accept "fiscal dominance" and whether the Treasury will further intervene in the long-term US Treasury market. On the one hand, raw materials, energy, shipping, and trade frictions could drive up inflation; on the other hand, the Federal Reserve needs to maintain its own credibility and the sovereign credit of the United States, so we are still in a tug-of-war between fiscal and monetary policies. If the Federal Reserve truly participates in the Treasury's operations in the bond market in the future, then I would be more certain that the conditions for a bull market are in place. This is because it means more long-term debt is shifting to the short end, increasing market cash and supporting risk assets, but the cost could be a weaker dollar. Therefore, I am currently neutral to slightly cautious, leaning more towards the mid-to-late stages of a bear market. didier: At the beginning of a bull market, people are naturally hesitant. It's only in the mid-stage of the bull market that those who didn't believe in it early on gradually enter. Bitcoin is an asset heavily reliant on technical analysis because it lacks the clear valuation anchor of traditional assets, making chart patterns very important. A key characteristic of this round is that the entire market is underweight. Many people keep asking, what exactly is driving this rally? Actually, there aren't any particularly significant positive factors; the biggest positive factor is that people don't hold coins, and there are many short sellers. If the market believes that the US 10-year Treasury yield of around 5% is nearing a level that is difficult to sustain in the long term, then many people will start building positions in the 4.7% to 5% range, rather than waiting for all conditions to be fully confirmed before buying. When everyone simultaneously has the idea of "buying a little first," coupled with short covering, it is easy to drive prices up rapidly. Therefore, optimistically speaking, this is the early stage of a bull market; pessimistically speaking, it is also the final stage of the bear-to-bull transition. I believe that most people are still under-allocated, which is why Bitcoin has still risen by about 40% and broken through $80,000 in the absence of significant positive news. Moreover, many who missed out are still waiting for the price to return to the vicinity of the 200-day moving average. So from my perspective, the bull market pattern has been established, but it is still very early. Often, fundamental reasons are only discovered by the market after the price action has already occurred. It might start with a move above the 200-day moving average, and then various explanations will gradually emerge. Griffin: I believe the rapid rise over the past week or two largely stemmed from a short squeeze. Before this rally, trading in the crypto market was very thin, and implied volatility in Bitcoin options was also very low. When the market enters this low-volatility, low-liquidity state, a breakout is inherently easy. At that time, the market's Gamma structure was more favorable for an upward breakout, and many teams had been continuously making covered calls over the past few months, accumulating significant short positions. Just a little new information could trigger a strong upward squeeze. Another point I agree with didier is that the market is generally underweight, short, or even bearish. In a low-liquidity environment, prices tend to break out in the direction of least resistance, and this time the direction is upward. However, I remain more cautious about the future of the US Treasury market. In the past, when the US implemented Operation Twist, a key prerequisite was a relatively healthy debt structure with a low proportion of short-term debt, and the market was willing to lend money to the US government at low interest rates for an extended period. But the situation is different now. T-Bills, or short-term Treasury bonds, are being issued at an increasingly large scale, and the US government is becoming increasingly reliant on short-term debt financing. As short-term financing gradually shifts from a temporary tool to the norm, the market is not only concerned with liquidity, but also with the sustainability of US fiscal discipline and sovereign credit. If, with T-Bills already being issued in large quantities, the Treasury continues to influence long-term yields through short-term debt, the market may begin to question the credit structure of US Treasuries. This explains the recent significant fluctuations in long-term US Treasury yields. The real issue being discussed in the market is no longer just whether the Treasury can control yields, but whether the US government will further damage the creditworthiness of US Treasury bonds. As the size of the US Treasury continues to expand and its duration shortens, the market may demand higher yields as risk compensation. Currently, investors are concerned about the creditworthiness of US sovereign debt, and coupled with the Treasury's actions, the market is seeing a resurgence of debasement trading, or "currency devaluation trading." Even if the US government announces a crackdown on fiscal discipline, the market will not immediately believe it but will continue to observe whether the policies can be effectively implemented. In this environment, investors will naturally reduce their exposure to US dollar fiat currency and increase their allocation to alternative assets such as gold and Bitcoin. The recent surge is also related to leverage and low liquidity. In short, the market currently doesn't fully trust either the Federal Reserve or the Treasury, so investors will hold onto some gold and Bitcoin while continuing to observe policy changes. didier: I've discussed Bessant's Operation Twist with some friends. Strictly speaking, this isn't QE. The Treasury may want to release more funds from the banking system to buy bonds by lowering some leverage restrictions on banks, essentially allowing the private sector to expand its balance sheet, rather than the Federal Reserve directly expanding its balance sheet. This can be understood as a kind of "private QE." After expanding their balance sheets, banks are usually willing to buy short-term debt, allowing the Treasury to issue more short-term debt and further adjust its debt structure. But the core issue remains unchanged: with the current size of US Treasury bonds, the dollar and the US debt system can hardly withstand financing costs above 5% for the long term. Therefore, even if it's just an expectation of Operation Twist, the market has already seen part of the Treasury's hand: the US government is starting to worry about long-term yields. This is why investors are preparing for potential future debasement trades. Meanwhile, AI capital expenditures are substantial, and large tech companies are issuing large amounts of debt, continuously vying for liquidity. In this environment, Bitcoin's ability to break through the 200-day moving average is noteworthy. The crypto market's positions are now quite clean, with the vast majority still unallocated. The equity premium for micro-strategies has also returned to positive territory from near zero, indicating that some stock market funds have begun to position themselves for Bitcoin through micro-strategies. Therefore, I still believe we are currently in the prelude or early stage of a bull market. This stage has the least sufficient evidence and the most controversy, but also the highest potential returns. Will micro-strategies run into problems? STRC is perpetual preferred stock, not traditional perpetual debt. Cat Brother: In the past, the market has been worried about whether MicroStrategy would run into problems. You mentioned before that many people may have misunderstood STRC because it is not a traditional bond. Didier: I made that mistake at first, thinking STRC was similar to perpetual debt. But after carefully looking at the issuance terms, you'll find that it is essentially perpetual preferred stock. MicroStrategy currently has approximately $6.7 billion in CBs (convertible bonds). In the next year or so, a portion of this will enter a window where investors can put it back to the company, so the company must prepare cash in advance. I believe that MicroStrategy's recent accumulation of large amounts of cash is not only for paying preferred stock dividends, but also for preparing for the peak of CB repayments later on. MicroStrategy has previously redeemed approximately $1.5 billion in convertible bonds (CBs). Now, Michael Saylor may want to gradually replace the CBs requiring principal repayment with perpetual preferred stock. While many CBs are zero-coupon, they ultimately require principal repayment, and investors typically have put options early, making them less likely to survive the entire crypto cycle. Perpetual preferred stock is different. STRCs pay preferred stock dividends, not traditional bond interest. Under specific terms, the company can defer dividends under certain conditions, which doesn't necessarily constitute a debt default. Therefore, in extreme cases, MicroStrategy can prioritize preserving cash flow rather than protecting STRC holders. This is why STRCs experienced a significant drop after the market truly understood these terms. I think a major change in MicroStrategy over the past two or three months is that it's increasingly resembling a balance sheet management company. It now manages three things simultaneously: the price of Bitcoin, the price of MicroStrategy's underlying stock, and the price of preferred shares such as STRC. If these three conflict, I believe preferred shares are the most likely to be sacrificed. Because if STRC falls below its issue price, it won't directly cause MicroStrategy to default on its debt; it will only affect its ability to continue raising funds through STRC ATMs to buy more Bitcoin. MicroStrategy's primary concern is a rise in Bitcoin's price, as this would boost the company's stock price and increase the probability of converting CB into shares, reducing cash repayment pressure. Secondly, it wants the underlying stock to rise and maintain a NAV premium, allowing it to continue raising funds through common stock ATMs to replenish its cash reserves. The third step is to bring STRC back to around $100 and restore the preferred stock ATM. If these three things can be achieved simultaneously, MicroStrategy will form a better financing cycle. How to understand MicroStrategy's selling behavior? Small-scale selling may become the norm, the focus is on solving CB pressure. Cat Brother: If STRC's priority isn't that high, how should we understand MicroStrategy's recent selling behavior? didier: I think MicroStrategy's recent small-scale weekly selling may have begun to become the norm. It's gradually letting the market accept the fact that MicroStrategy is no longer just buying and never selling. After the market adapts, the impact of small-scale selling will become smaller and smaller. Michael Saylor emphasizes "net buying," meaning that as long as the final increase in Bitcoin is greater than the amount sold, it's acceptable to him. His biggest concern right now is the upcoming redemption or put windows for several CB tokens in the coming months. If the stock price doesn't rise and conversion to shares is impossible, he'll need to prepare billions of dollars in cash. So why sell cryptocurrency and stocks to accumulate cash? The core reason is to prepare for CB. However, this risk has significantly decreased. MicroStrategy has accumulated over six billion dollars in cash, which can basically cover existing debt. If the underlying stock continues to maintain a NAV premium, it will be more inclined to raise funds through common stock ATMs rather than selling cryptocurrency on a large scale. Therefore, MicroStrategy now has three tools: common stock, Bitcoin, and STRC, which can be used flexibly according to market conditions. From this perspective, I believe MicroStrategy has largely escaped danger. As a batch of CBs complete their conversion to shares or repayment, the debt it truly needs to repay will further decrease, and the perpetual preferred stock mainly needs to address dividends, not principal. Therefore, from the perspective of the Bitcoin market, the potential risks brought by MicroStrategy are actually decreasing. Griffin: Regardless of how MicroStrategy adjusts its capital structure, the core issue is that Bitcoin itself is increasingly being defined by the market as a Macro Asset. Even in the worst-case scenario where MicroStrategy encounters problems, investors will ultimately focus on Bitcoin itself, not the MicroStrategy company. MicroStrategy is now increasingly resembling an asset management company. Whether issuing perpetual preferred stock or adjusting its Bitcoin inventory, it is essentially managing its own balance sheet. As long as the underlying cash flow isn't breached, subsequent adjustments to the financing structure won't be a major problem. Will AI continue to siphon funds from crypto: Short-term funds may start looking for deals with less resistance. Cat Brother: During the previous crypto bear market, everyone said that AI was siphoning funds and talent. If liquidity eases in the future, will these funds still flow more towards AI than crypto? didier: I think many people in the AI sector are starting to feel anxious and are considering whether to shift some funds to other sectors, such as crypto. Currently, although the AI industry chain has reduced a lot of leverage, positions are still very crowded. Many investors are still concentrated in AI, optical modules, etc., and very few people are actually allocating to crypto assets. So now many people are asking: should we add Crypto? I think the AI industry chain may need a break in the short term. The industry itself is still developing well, but stock prices are trading on the future, and many expectations have already been priced in. AI now needs a new second growth curve, such as truly highly autonomous agents or new consumer-facing products, but these directions are currently still far from market expectations. For long-term funds, this doesn't matter. But many short-term funds have performance pressure and cannot accept underperforming the market for several consecutive months. When AI adjusts, while other assets such as gold, banks, innovative drugs, and crypto rise, these funds will naturally consider switching. So in the short term, I think there is an incentive for funds to move towards areas with less resistance. In the long term, I don't think AI will continue to "drain" blockchain. In the future, AI, autonomous machines, and machine civilization may become increasingly important, and these machines also require a globalized, machine-native financial infrastructure. Blockchain and encryption are perfectly suited to this need. Therefore, blockchain may be a technology that appeared too early. The perceived lack of demand over the past decade or so may simply be because the era of true need for it hasn't fully arrived. As AI becomes more powerful and machines become more autonomous, I believe the importance of blockchain will actually increase. Therefore, in the long run, AI and encryption are not mutually destructive, but rather mutually reinforcing. In the short term, looking only at the next month or two, I think many short-term investors sticking to the AI industry chain will become increasingly anxious about whether to start allocating to encryption. From a trading perspective, it's essentially the principle of least resistance; funds will flow where it's easier to make money. Currently, the encryption market is relatively clean-positioned, and many potential bulls haven't truly entered the market yet. Therefore, I believe some encryption assets and stocks may be in a position with less resistance. Griffin: This question can be broken down into two parts: Technology and Finance. From a Technology perspective, AI's talent drain on the crypto industry is indeed very obvious. Many people who used to do crypto development are now switching to AI because AI projects are easier to fund and offer better compensation. However, from a Finance perspective, the crypto industry has been continuously progressing. Since 2020, the entire industry has continued to mature in areas such as payments, transactions, compliance, and risk control—these are all aspects of financial infrastructure. Even with the rapid development of AI in the past year, crypto's ability as financial infrastructure has not stopped. Therefore, my view is: while AI has indeed absorbed some talent on the Technology side, the Finance side continues to progress, and this will not change the long-term value of blockchain as financial infrastructure itself.
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