Market Survey

In partnership with the Medici Network, we are conducting a client survey on DATs, ETFs, and broader sentiment. Aggregated results will be shared with clients. The survey takes ~5 minutes, and broader participation will make the insights more valuable. Thank you in advance for your participation. CLICK HERE TO COMPLETE THE SURVEY.

Our Quick Take on the Crypto Market:

• Gold’s push to all-time highs is a constructive signal for BTC, as both assets act as liquidity valves. Historically, gold tends to front-run Bitcoin.
• My medium-term view remains that the Fed will ultimately be cutting into a sound economy, with above-trend inflation and a labor market that, despite recent jobs data, is on reasonably firm footing.
• However, short-term downside risks are building in the crypto market as (1) liquidity conditions deteriorate, (2) negative seasonality persists, and (3) the market debates the potential for a “Fed mistake”.
• Recent mNAV compression highlights ongoing outflows from crypto.
• Given these dynamics, we think “playing defense” in the immediate term makes sense.
• With that in mind, we are increasing our BTC allocation in both our token and equity model portfolios.

Core Strategy

Notes on Changes:

• Increased BTC allocation by lowering ETH allocation. We still think that ETH outperforms into year-end but will adjust our weightings back once we get a buyable dip or a resumption in momentum. Note that AERO, our preferred ETH beta name remains unchanged.
• We are removing HNT. While there were hopes that the recent halving and the burn of MVNO revenues would spark renewed interest in the token, it remains unclear how much of this burn is truly protocol driven. Based on conversations, it appears the burn is being subsidized by the Helium treasury rather than instantiated in the protocol itself. In other words, revenues are not being used to buy and burn HNT, but the treasury is simply burning its own tokens. This is preferable to not burning any HNT from MVNO revenues, but it does not resolve the inherent value accrual conflict between Nova Labs and the Helium protocol. Should this dynamic change, we would revisit the name, as it continues to represent a compelling example of crypto making a real-world impact. For now, however, it is simply taking up space in the portfolio.

Crypto Equities Portfolio

Notes on Changes:

• We simply adjusted the ratio of ETHA to BITB in our equities portfolio to be aligned with our token portfolio.

Comments on Nasdaq Rule Changes

Yesterday, there was an article released that suggested that there would be rule changes for digital asset treasury companies listed on the Nasdaq. DATs sold off dramatically on the news, spot crypto followed suit. This was the reason for divergence between crypto and equities on Thursday.

To get right to the point, we believe that the reaction to this was overdone. Based on the information available, the changes appear limited: companies raising private capital to seed a crypto treasury strategy will require a shareholder vote, and perhaps face some additional disclosure requirements.

• This does not affect any companies already trading on the Nasdaq
• It does not put the brakes on any ATM sales from these companies
• Overall, it doesn’t seem to be a dramatic headwind for pre-launch DATs either
• Thus, all else equal, we would be a buyer of any weakness specific to this selloff.

However, “all might not be equal,” right now, as we’ll discuss below.

The Good News: Gold is Breaking Out & Cuts are a Near-Certainty

With inflation breakevens climbing and nominal yields rolling over, the likelihood of further declines in real yields has increased. Historically, gold rallies when real yields and the dollar soften, and unsurprisingly, gold has pushed to new all-time highs since Jackson Hole.

Meanwhile, the labor market has weakened further, reinforcing the case for rate cuts. Following Friday’s NFP, where job creation (22k) missed expectations (75k), revisions were negative again, and unemployment rose to 4.3%.

Fed funds futures now fully price a 25 bps cut in September, with some probability of a 50 bps cut, and ~75 bps by December.

The Bad News: Gold is Breaking Out & Cuts are a Near-Certainty

Bitcoin is often called “digital gold” because of its provable scarcity, fungibility, and track record, albeit shorter, of preserving purchasing power in fiat terms. Many assume this makes gold and BTC correlated in the short run, but that is not the case. Since early 2023, the 90-day correlation of returns between BTC and gold has oscillated around zero.

However, there is an observable lead-lag relationship, with rises in gold often foreshadowing rises in BTC.

Looking at rolling 60-day returns, gold rallies have frequently preceded BTC rallies since 2023. The one exception came in late 2023 and early 2024, when both assets rallied together, a move likely driven by BTC ETF enthusiasm pulling forward demand.

So, for those wondering whether this cycle has already peaked, gold’s resurgence over the past week is a strong signal that BTC’s run is likely not finished.

However, we may need to be patient and let the shiny rock do its thing before BTC regains its momentum.

We remain bullish on crypto in the medium term because the Fed will be cutting into above-trend inflation, a still-sound economy, and a labor market that (while slowing) is effectively at full employment. But in the immediate term, weak data (NFP, ISM, JOLTs) is raising “Fed mistake” fears, similar to July 2024.

A couple of interesting charts that express these fears:

• The 10y–2y spread has narrowed this week after weak ISM manufacturing and JOLTs data showing jobs per unemployed worker falling below 1. The latter is a metric the Fed has flagged as something they look at to determine the level of labor market weakness.
• If the market starts to brace for potential acceleration in labor weakness, this would drive capital away from the riskiest assets (crypto).

Forward-looking indicators, like improving new orders in both Services and Manufacturing PMIs this week, suggest resilience ahead. But the path to get there might require some patience.

Other Risks to Crypto Surfacing: Seasonality, Liquidity Drain, DXY Consolidation, mNAV Compression

Investors remain divided on how much weight to place on seasonality in driving asset performance. While the causal link is debatable, variables that consistently correlate with returns deserve attention.

• September Weakness – Historically one of the softest months for both crypto and equities, often bringing elevated volatility and choppy consolidation.
• October Divergence – Unlike equities, which can remain mixed, crypto tends to flip higher in October, with BTC showing strong historical returns.
• Today’s Read – We are about halfway through the negative seasonal stretch, consistent with recent chop. If the pattern holds, October could provide a seasonal tailwind as consolidation and liquidity headwinds ease.

Liquidity Conditions

Liquidity remains a key factor for crypto. While central bank liquidity flows are not the sole driver of performance, sustained shifts in reserves and treasury issuance patterns often coincide with meaningful moves in crypto.

• TGA Refill – Ongoing Treasury General Account replenishment has drained liquidity from the system, pressuring bank reserves.
• RRP Exhaustion – The Fed’s Reverse Repo Facility, a key buffer over the past two years, is now nearly depleted, reducing its role as a stabilizer.
• Upcoming Issuance – Heavy bill and bond issuance in the coming weeks may further tighten conditions at the margin.
• Today’s Read – Liquidity is not yet at levels that pose a clear risk-off impulse, but pressures are building. This dynamic could amplify volatility during seasonal weakness before easing in Q4.

DXY Impulse Weakening

The dollar’s path remains a key variable for global risk sentiment and crypto performance. While not perfectly causal, inflection points in the DXY have historically aligned with BTC turning points on a lagged basis.

• Recent Trend – Rolling 70-day returns in the DXY have rebounded from deeply negative toward neutral, signaling fading downside momentum.
• Today’s Read – The DXY/BTC relationship is not flashing a strong signal. The skew tilts modestly positive for BTC, but directional impulse remains muted in the near term.

mNAV Compression

Digital Asset Treasuries (DATs) have been one of the most important sources of flows into crypto this year. Because they function as leveraged beta to the underlying tokens they hold, their trading multiples (mNAV) provide a clear read on sentiment at the speculative end of the market.

Over the past few weeks, we have seen meaningful compression in these multiples, even before the Nasdaq-related selloff on Thursday. This signals that investors have been de-risking and trimming exposure to DATs, which in turn reflects waning risk appetite for crypto overall. In practical terms, falling mNAVs reduce incremental demand for underlying coins and can weigh on spot markets.

We do not believe the DAT trade is finished. DATs should be viewed as structural vehicles for capital flows in and out of crypto. They play a similar role to ETFs in equities, although further out on the risk curve. Just as ETFs reshaped market access in traditional assets, DATs are becoming a central on-ramp for capital markets participation in digital assets. Their long-term role as flow intermediaries is not going away (see: MSTR).

What we expect to see is greater market differentiation. Not every DAT will succeed. The leaders will be those that combine a few essential traits:

1. Underlying asset selection that is tied to desirable and liquid coins.
2. Coin-per-share growth that can be consistently demonstrated over time.
3. Scale and liquidity that allow efficient ATM programs and sustained access to capital markets.
4. Credible leadership with a track record of operational competence and market trust.

In short, multiples may compress when sentiment weakens, but the structure of DATs remains intact. Investors should be thinking less about whether DATs are viable and more about which issuers are best positioned to emerge as long-term winners and positioning into/out of them when the market turns.