Game on: A New Era for Digital Assets

We Are Here. At Last.

Never in my wildest dreams did I imagine the political landscape for digital assets would be as bullish as it is today. To be blunt: Bitcoin was expensive at $60k under Biden/Gensler. Today, Bitcoin is cheap at $95k.

It’s hard to overstate how positive the current set-up is, and I am no perma-bull. I’ve been cynical and bearish for much of the last two years, serving on the front lines of the crypto wars—experiencing everything from debanking to regulatory crackdowns, to the fraud at FTX. We’ve been through it all. Many will glance past digital assets today, only to buy in at the top in a year or two. Unless you’re already unfathomably wealthy, take 30 minutes to listen and pay attention to what happens next. Price asymmetries rarely exist in efficient markets. But in markets with complex regulations and sudden shifts, inefficiencies thrive. It’s critical to pay attention now, not in two years. If you haven't read my prior pieces, I highly recommend Part I and Part III of this series. Both serve as cold showers, unpacking the realities of the last four years. Their contrast will make today’s write-up resonate even more.

In this piece, I’ll uncover two core drivers for the price action over the next three years:

1. Mapping out the new political landscape.
2. Mapping out the new flows of buyers and sellers.

In my next piece, we’ll return to technology, exploring the latest breakthroughs in blockchain—from the first AI x Crypto experiments to early successes in Decentralized Science. But for now, this is the single most important thing you’ll read. If you miss the big picture, the nuance is a waste of time. If you get this right, it might just be the greatest 2-year trade of a lifetime.

It’s time to lock in.

A Game of Thrones: Toppling the Old Guard

The past four years in digital assets were defined by survival: banking crackdowns, lawsuits, and outright persecution by federal agencies. For many crypto entrepreneurs, this was the darkest period in the industry’s history.

But the war is won, and the tone has shifted drastically.

The previous administration sought to kill crypto because of its inability to control it, aligning itself with traditional banking interests. The new administration values crypto for its freedom and stands to profit from its success—whether for better or worse.

Here are the key political shifts:

Out: SEC Chair Gary Gensler

As I wrote six months ago, "If Trump wins, expect Gensler to be resigned at worst or in jail at best." One down, one to go. Gensler was one of the most corrupt SEC chairs in recent years, reprimanded by both the courts and Congress for his abuse of power. Removing him from the chessboard is the singular most significant move, likely unlocking meaningful guidance for crypto companies, clearing up what’s legal and what’s not, instead of continuing with regulation by enforcement.

In: Howard Lutnick - US Secretary of Commerce

Howard Lutnick is the CEO and Chairman of Cantor Fitzgerald, the financial services firm that holds ~$100 billion worth of treasury securities backing the world’s largest stablecoin, Tether. Shortly after his appointment, Cantor Fitzgerald invested in Tether, securing a 5% stake in the company. This is extremely bullish for several reasons.

1. Senators like Sherrod Brown and Elizabeth Warren have tried for years to kill stablecoins. Now, stablecoins are in the President’s ear.
2. Tether has been a source of FUD for nearly a decade, with rumors about it not being fully backed. I believe these concerns will finally be put to rest.
3. Howard is also extremely pro-Bitcoin, openly admitting in a recent interview that he personally owns hundreds of millions of dollars worth of BTC.

Read that again, and let it sink in.

Out: Senator Sherrod Brown

Senator Sherrod Brown, a three-time incumbent and former chair of the Senate Banking Committee, has long been one of crypto’s fiercest adversaries. He’s worked relentlessly to de-bank the crypto industry, cut off its access to traditional banking rails, and criminalize digital asset activity. Many of his statements can be found here.

During my seven years managing a digital asset fund, I had to switch banks four times, and saw three pro-crypto banks forced out of business under Brown’s rule. The crypto lobby mobilized to take him down, installing a pro-crypto Senator in his place. This was a pivotal race to end banking discrimination, often referred to as Operation Chokepoint 2.0. It also demonstrated the growing strength of the crypto lobby—step on our toes, and you might lose your job.

Speed Round - Crypto Advocates in the President’s Ear

• United States Secretary of Defense – Pete Hegseth
• United States Secretary of Health and Human Services – RFK Jr.
  RFK Jr. has publicly stated that he holds most of his net worth in Bitcoin.
• Department of Governmental Efficiency – Elon Musk
  The world’s greatest entrepreneur is perhaps as much a right-hand man to President Trump as JD Vance. Both Tesla and SpaceX hold approximately $1 billion in Bitcoin each.
• Secretary of the Treasury - Scott Bessent
• “Crypto is about freedom and the crypto economy is here to stay. Crypto is bringing in young people, people who have not participated in markets.”1

The rebels struck back and toppled the empire. The primary anti-crypto foes remaining in DC are Elizabeth Warren and Brad Sherman. Both are in their 70s and are unlikely to sustain their antagonistic rhetoric after this election cycle. Elizabeth Warren, in particular, who once ran her campaign on "building an anti-crypto army," has effectively ostracized herself from a significant portion of Democrats. Following the crushing defeat in November, many of them are likely to shift further toward the center rather than continue their drift to the far-left.

There will come a day when digital assets are likely used as a money-making scheme by some of those in power. It would be naive not to recognize that many of the names involved are driven by self-interest. Just as Pelosi insider-trades her way to billionaire status, I fully expect things to get dirty in DC, with government deals being handed to certain projects. It's inevitable, and will likely lead to new forms of inefficiency and friction—such as a technologically inferior protocol lobbying politicians, who then vote to put state activity on it, instead of adopting the better tech.

Politically, for now, crypto essentially operates under a regulatory Iron Dome. There are numerous bullish catalysts ahead, with few material bearish threats able to breach the ranks of pro-crypto leaders.

The music is playing. So we dance.

Follow the Money: Flows are Coming

The floodgates are open, so where is the flood going to come from? Here are a few key buyers to keep an eye on:

MicroStrategy - The King of Bitcoin

As of today, MicroStrategy has accumulated a staggering 402,100 Bitcoin—nearly 2% of all Bitcoin ever mined. The company, which was the first publicly traded firm to adopt the Bitcoin standard, has recently ramped up its mission to own more Bitcoin than anyone else. A remarkable 37.5% of its Bitcoin holdings were purchased since November. Founder and CEO Michael Saylor has devised a straightforward strategy: issue convertible debt and buy Bitcoin with it. Additionally, the company sells its own shares on the market whenever their premium is deemed too high and uses the proceeds to buy Bitcoin. MicroStrategy’s ongoing capital raises could be a major market-moving factor, as they’ve already raised $21 billion since November and plan to double that in the next three years. At present, MSTR trades at a 2.4x premium to its net asset value (NAV), leaving ample room for further share sales to acquire Bitcoin.

MicroStrategy may one day trigger the next bear market, but first, it could become the largest company in the world. If MSTR were a Shakespearean tragedy, Act I would be the rise (2020-2024), enduring countless storms. Act II will be the Saylor era, where he is put on par with Musk, Zuckerberg, and Huang. Currently worth $70 billion, MicroStrategy is among the largest publicly traded companies. During this act, we’re likely to see MSTR added to the S&P 500, which will further fuel Bitcoin's rise. When Saylor becomes one of the richest people alive and MicroStrategy the biggest company in the world, it will be worth tracking the MSTR premium to NAV to see when he runs out of ammunition, and how high we will have driven his cost basis and debt load by then. I believe an unraveling is inevitable, but for now, he’s sitting on tens of billions in dry powder, likely enough to push Bitcoin past $100k and unlock the next $100 billion in firepower. It’s like the Terra Luna trade in a way—except we’re still phenomenally early, and every short-seller will be punished before the trade unwinds (for context, Terra Luna was the biggest P/L trade of my career).

Part of the reason we’re so early is that at least a dozen publicly traded companies are likely to adopt Saylor’s model in the next 24 months. Momentum begets momentum, and talk of supply shortages will come sooner than expected.

Supply Shortages – Not Enough Bitcoin to Go Around

Back in 2019, I toured various colleges to give seminars on blockchain and Bitcoin. One of the simplest mental models to illustrate Bitcoin’s scarcity was the math of Bitcoin per millionaire. There are approximately 58 million millionaires globally, but only 21 million Bitcoin—likely fewer than 16 million when accounting for lost coins. This means there’s not even half a Bitcoin for each millionaire in the world. When adjusted for companies like MicroStrategy gobbling up 2%, the scarcity becomes even more pronounced.

There are two efficient ways to track supply shortages:

1. Issuance
   Since the halving in May, approximately 400-500 new Bitcoin are mined daily. At $100k per BTC, that’s only $40-50 million in new supply per day. In contrast, the average daily ETF inflow is $137 million according to Farside2. So for every 1 Bitcoin mined, roughly 3 Bitcoins are being snatched up by institutional investors.
2. Where does the extra supply come from? OTC desks and directly from exchanges...

1. Exchange Balances
   Long-term Bitcoin holders tend not to keep their coins on exchanges but rather in custody (self or otherwise). The amount of Bitcoin on exchanges peaked in 2022 and has been on a 5-year decline since. Today, there are fewer Bitcoin on exchanges (despite issuance!) than at any point since 2019. As the tradable supply shrinks, supply squeezes will occur, leading to significant price movements, followed by phases of redistribution by profit-takers and new buyers.

Sovereigns Come Knocking

Donald Trump, RFK Jr., and Senator Cynthia Lummis have all promised something that remains widely under-reported: the birth of a national strategic Bitcoin reserve.

Yes, the United States plans to buy Bitcoin, and according to Lummis, quite a lot of it. In her BITCOIN Act, introduced in the US Senate, she proposes that the US purchase 5% of the Bitcoin supply—roughly 1 million BTC—over a span of several years.

The idea itself is a powerful narrative.

The implementation would trigger flows of historic proportions.

The ripple effects could lead to at least half of the world’s sovereign nations acquiring Bitcoin within a few days to five years of the US formally approving the strategy. I explored the game theory behind sovereigns contemplating Bitcoin adoption four years ago, and it remains a compelling thought experiment.

While sovereigns are lining up to buy Bitcoin, another massive injection of capital is coming from the aftermath of FTX’s collapse.

FTX - A $14BN+ Cash Injection

One of the industry's greatest collapses will soon provide it with renewed life. After years of forced selling by the bankruptcy courts, it’s expected that the FTX estate will return anywhere from $14-16 billion in cash to former users who lost assets due to the fraud committed by Sam Bankman-Fried. While the selling had pushed markets lower, the inverse will soon occur. Billions in cash flowing into the hands of crypto natives amidst a raging bull market will lead to one thing: more buying.

Institutional Buying Beyond Bitcoin

I expect 2025 to be the year when the first wave of Wall Street traders secure compliance approvals, regulatory green-lights, and infrastructure to expand beyond Bitcoin. Currently, traditional funds are predominantly focused on Bitcoin and ETH ETFs, but soon, they will likely begin buying and trading tokens across various themes—ranging from DeFi to DePin, and RWA. While $130 million per day in buying doesn’t move Bitcoin significantly, these buying patterns could materially reprice the broader crypto market. The charts suggest that this shift has already begun.

In bear markets, Bitcoin regains a significant share of market dominance. Typically in bull markets, it loses some of that dominance. As attention shifts again from Bitcoin to the broader ecosystem, we’re likely to see dominance drop to 25-40%, which suggests multi-trillion-dollar appreciation for alternative digital assets. This is the trade we are most focused on.

A Perfect Storm

The current set-up for digital assets could not be better. We’re as close as possible to a regulatory blank check, with interest rates being cut, the M2 money supply expanding after a two-year contraction, and historic amounts of capital flowing into digital assets through ETFs, MicroStrategy, sovereign nations, and more.

For now, the set-up is so simple that I expect the majority of tokens to rise—regardless of how little utility some tokens have (e.g., XRP is now worth a staggering $250 billion). This phase could last anywhere from a few more days to several months. In the latter half of the bull market, when alt season truly kicks in, we’ll likely see greater return dispersion. “Dino coins,” as we call them—tokens from previous cycles with little to no use case—will be more suppressed as teams and investors take profits (see the return profile of EOS, NEO and IOTA for reference). Meanwhile, new token launches will create fresh opportunities and blockchain use cases. Emerging projects, like Virtuals and Hyperliquid, are already showing promise—expect many more breakthroughs as this cycle matures.

Crypto can run on fumes, hope, and excitement for 3-6 months, but to complete a full cycle, the industry will need to rest on major technological breakthroughs that capture the attention of millions. The intersection of crypto and AI appears to be the first such opportunity—injecting new life into digital assets the way DeFi did in 2020.

The next 2020-2021 is on the horizon, but this time, we have reason to believe it will be materially bigger. The industry is likely to hit its first batch of products reaching mass adoption this cycle. There will be sell-offs along the way, but in our view, as long as the underlying assets remain sound, future sell-offs will be frequent but short-lived, representing attractive buying opportunities. In previous cycles, Bitcoin often experienced drawdowns of 30%, sometimes 7-12 times per cycle. If you don’t yet have a digital asset strategy, now is the time to formulate it.

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Disclaimers:

This is not an offering. This is not financial advice. Always do your own research.

Our discussion may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.

Past performance is not necessarily indicative of future results.

1

https://www.forbes.com/sites/danrunkevicius/2024/11/24/most-pro-crypto-treasury-weve-ever-seen-trumps-historic-move-could-spark-bitcoin-and-crypto-price-boom/

2

https://farside.co.uk/btc/

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