What Comes After $100K Bitcoin? Lyn Alden Breaks Down the Macro Picture

With Bitcoin stuck at around the $100,000 mark for weeks, you might be asking yourself, have we already reached the top of this bull market or is there still room to go? And more importantly, has the classic four year boom and bust cycle lost its relevance?

None of the metrics so far show anything of extreme sentiment like we see at prior cycle peaks, including 2021.

And beyond the charts, there is a bigger question. Where should we be putting our capital given the unpredictability of today's macroeconomic environment? To unpack all this, we with Lynn Alden, one of the most respected macro thinkers in the space.

You want to own scarce assets. If you're in kind of a slow motion, runaway physical spiral, this is an.

Interview you don't want to miss. Before we get started, remember, this video is not financial advice, just educational content. I'm Giovanni. Let's dive in. I wanted to start first about the macro. So a lot of people are saying that the four year cycle for Bitcoin is not relevant anymore. Other people say that the cycle has changed. What's your position on this? Is this cycle still in place and where are we in this cycle at the moment?

So my base case is that the cycle's still in place, but that the cycles are changing over time. Even before this cycle, I published research kind of arguing that Bitcoin has correlated more closely with liquidity than anything else. And going back several years, liquidity cycles on average are about three years. And Bitcoin's bull markets, even though there's been like one bull market per four year having cycle, the length of those bull markets vary. Sometimes it goes from lows to highs very quickly, other times it takes longer. And that length of time is actually kind of correlated with what's going on with liquidity for the most part. And you know, as Bitcoin becomes a larger market, so it's a larger, more liquid, we're talking a $2 trillion market now. It's more integrated with the traditional finance system rather than almost entirely disconnected from it as it used to be. I do think that some of the extremes are being removed from it. It's easier for a tiny illiquid asset to have extreme price moves than a larger and more liquid and widely held asset. And so I'm not surprised to see that this cycle is more prolonged. But so far I think it's on track. I mean, it continues to follow global liquidity measures as we'd expect. I do think that the four year halving cycle is increasingly less relevant because mining rewards are now a much smaller share of available coins. And instead it's mostly about what price will unlock older coins. And so kind of the metrics that I track are one, the market value to on chain cost basis to kind of see, you know, how much euphoria is in the market at a given time. And then I also track like the HODL waves. So generally speaking, when you have bull markets, the percentage of coins that haven't moved in more than a year or two starts to fall because some of those older coin holders that are, that are deeply in the money now, they tend to start trimming into that strength. And we've been seeing it this cycle just like past cycles. So I think the cycles, those cycles continue to matter even as maybe the having cycle matters a lot less than it used to.

Do you think we already reached the peak of this cycle or you think there is still room to go?

So my personal opinion is we've not peaked yet. And going back to the prior kind of metric that I mentioned, market value compared to on chain cost basis, the reason that's useful is you can picture say a house like a street with like 50 houses on it, and let's say none of those houses changed hands in a while. And then someone buys one of those houses at a much higher price than it sold for last time. Generally what'll happen is all prices on all houses on the street will go up in perceived price because one of their comparable sales changed. And yet a very small percentage of the houses changed hands at that new price. And so that's kind of an illiquid price. It's unclear what would happen if multiple people on that house, on that street, I mean, wanted to sell their house. And so not until you kind of are at that new price level for a while and, and there are multiple house sales, would you kind of consider that the new true price of houses on that street and bitcoin is obviously much more liquid than that, but it does a similar dynamic where if it jumps very quickly with a pretty small number of coins that are that kind of changed hands and now we kind of reset the price of the entire market cap, that's not necessarily the real price if more coins want to move. And so that's why I look at the market value compared to on chain cost basis, because when that gets really far ahead of itself, you're more likely to get a correction. And in the prior major cycle tops, including 2021, that ratio reached extreme levels. So basically the market value increased way faster than the on chain cost basis and then it took a lot of time for that to be digested. When we look at this cycle, we've not reached anywhere near those prior peaks of metrics like that. We've kind of reached say mid levels of that metric. And none of the metrics so far show anything of extreme sentiment like we see at prior cycle peaks including 2021.

Now we have the very first pro bitcoin president in the United States. So a lot of people might think that this is a sort of political premium that Bitcoin is enjoying at the moment. Do you believe that this premium exists? And if so, don't you think that it is not necessarily a sustainable premium?

Other food is the opposite. It de risked it slightly, so it took away a discount. And so basically when people and institutions invest in Bitcoin, they're pricing in some non zero tail risk that the government's really going to crack down on it at some point. Even in recent years under the Biden administration, it's kind of been at the periphery of the market. In order to get the spot ETFs in place, literally the SEC had to be sued. Um, and banks have been very restricted in what they can do with it. And I think the market correctly saw that in this current administration that's less likely to happen. So they priced out a discount that was in. Now obviously in, in you know, three and a half years, some of that could be reversed based on election outcomes. That's, you know, that's a pretty far time away. And also the bigger and more liquid the asset gets, the less, the less relevant the governments are for managing it. Because at that point, I mean, the donors own it, the banks own it. The, you know, it's, it's tied in the financial system. So every kind of four years you give it to keep growing makes it so the next four years kind of matters less from a political standpoint. So I'm not really worried about there being a political premium in it, even though obviously the election outcomes do matter for the asset class.

Yeah, yeah, that makes sense. Now I just want to touch upon something that you said in your latest speech at Bitcoin 2025. So you open it by introducing the concept of nothing stops this train. You were referring to the growth of the US debt. Can you explain what are the concrete metrics that you are looking at when you say that this debt is sort of unstoppable and why you think that already nothing can stop this trend and why bitcoiners should pay attention to it.

But basically it's the idea that US Fiscal deficits are pretty intractable. And so regardless of election outcomes, because I've seen this before and after the election, there's very few ways to meaningfully reduce the deficit in any sort of investable time horizon. So call it five to 10 years. And therefore, I had the view that this is going to be very persistent. And therefore the market impacts from those deficits are likely to continue. So the main metrics I look at, one of them is demographics. So as the baby boomers started entering retirement years in the late 2010s at scale, there started to be a drawdown of Social Security, for example, and we started to see a disconnect where normally fiscal deficits are higher during periods of high unemployment, and they're lower during periods of low unemployment. And we got a disconnect from that. So we started to see large deficits even during periods of low unemployment. And so they're, they're, they're, they're disconnected from the economic cycle because they're more tied to demographics. More seniors collecting Social Security and Medicare and paying less into the system. And so that's, that's a fundamental change. Another really big fundamental change is the interest rate. Uh, and so for, for about 40 years, there was rising debt to GDP, but there was falling interest rates. And so the interest on that debt, especially as a share of gdp, was very manageable. Um, but then once we hit, you know, zero kind of throughout the 2010s, and then we started to, you know, have more inflationary pressures, and now even if we only go sideways in interest rates, so I'm not even necessarily calling for higher interest rates, but if we just kind of bounce around between, you know, two and six for the foreseeable future, instead of going structurally downward, there's no longer an offset to the rising debt to gdp. And so we, for the first time in decades, we got a breakout in interest expense as a share of gdp. And so that's a very meaningful and intractable issue to deal with. There's multiple other factors. A really big one is that the US Is more financialized than many other developed countries, meaning that our tax receipts are heavily correlated with our stock prices. So if we get like a bad or even a mediocre year in the stock market with a lag like the next year, generally speaking, tax receipts are not very good. And that's for a couple reasons. One, we have more wealth concentration than most other developed countries. There's more global capital stuffed into our stock market. We have, you know, a lot of Compensation is tied to stock prices, especially among high income, which pays the majority of taxes, and of course capital gains. So all this factors together makes that pretty strong correlation. So that means even when they do try austerity in some way, like they try to trim spending or try to increase taxes, it's likely not to. It's likely to translate to kind of worse stock performance which then ricochets back and hurts your tax receipts. So basically where they are, this whole debt cycle, where they are demographics and then the highly polar, polarized Congress that kind of makes major tax increases hard, it makes major spending cuts hard. A lot of this is just locked in almost regardless of election outcomes. And so for the next five, 10 years, I think this is going to be a background issue that both in terms of the economy and in terms of capital markets will be relevant. And of course bitcoin, the reason bitcoiner should pay attention to it is because the main competition of bitcoin is the dollar. And so, you know, if the dollar is very strong, then it makes the keys to own it. But if the dollar, you know, if total credit in the system and total dollars in the system are going to keep increasing over the next three, five, seven, ten years, that's one of the macro factors that makes bitcoin useful to own. You want to own scarce assets if you're in kind of a slow motion, runaway fiscal spiral. Bitcoin, gold, high quality equities priced at reasonable valuations. High quality real estate price at reasonable valuations. Generally speaking, I like the global assets the best. So that's bitcoin and gold. And between the two, Bitcoin is a faster horse by far.

So you often claim that the devaluation of fiat currency is inevitable given this unstoppable trend of that growth. But what if are we underestimating the resilience of the fiat system? Of what if, for example, technology could come into play with technological deflation? So when technology improves, things get cheaper, Wouldn't that invert the trend you're talking about?

It's not going to slow down the deficits. Technology does have other impacts on, for example, where inflation shows up from those deficits. If you don't get a lot of technology offsets, then those deficits are likely to show up in consumer price inflation. So for example, if we're not better at making more energy, if we're not better at making more productive things related to AI and things like that, then those deficits are likely to show up in price increases because our supply is not keeping up on the other hand, if AI suppresses white collar wages, allows way more white collar output for things, and if we keep the energy flowing and things like that, then those fiscal deficits are more likely to show up in asset price inflation. And so either way, if the number of dollars is increasing substantially, you want to own the highest quality, scarce assets. So if, if, for example, we have no bottlenecks in energy, it doesn't necessarily follow that oil is going to go up in dollar terms, even though there's a lot more dollars, say five years from now than there are now. On the other hand, if that's happening, we're not making more bitcoin other than the marginal amount that's still being mined. And so the highest quality assets, whether it's bitcoin gold, the best equities, best real estate, the best irreplaceable art, water from property, those types of things, they're still likely going to appreciate relative to dollars. In that system where total credit keeps growing, that whole structure is almost disconnected from technology. And so technology just kind of shows up where that price increases are likely to happen.

Now, I want to touch upon one of the hottest trends in crypto at the moment, which, which is the Bitcoin treasury companies. So companies that are accumulating Bitcoin on their balance sheets, people are concerned that these companies are taking on leverage and that essentially in a market downturn, some of these companies could blow up and essentially trigger domino effect similar to the ones we saw in previous bear markets. What do you think? Do you see those concerns as justified?

Well, leverage is always a risk. And this is, you know, this type of thing has been going on in currency markets for a long time. You know, a carry trade where people will borrow in one currency that they perceive as weak and they'll use it to get another currency that is either higher yielding or likely to appreciate relative to the currency that they're borrowing. And it tends to be a rather leveraged trade. Bitcoin is similar. I mean, it doesn't pay any native yield, but it's scarce and has a lot of price appreciation potential. And so much like you would borrow an emerging market currency and try to buy dollars, there are entities that are arbitraging this by borrowing dollars and using it to buy a much harder asset in Bitcoin. So I think bitcoin treasury companies make a lot of sense. And there's trillions of dollars of managed capital that is kind of like in walled gardens. These are like asset managers, 401ks, you know, insurance companies. There's all these kind of these big pools of capital that can't really leave their ecosystem too much. They can't go on chain to Bitcoin. And so giving them various securities, whether it's an ETF or whether it's a corporation or whether it's a debt instrument from a corporation, that allows all those different types of managers, whether it's a stock manager, bond manager, discretionary macro manager, to be able to express a bullish view on Bitcoin. So I think it's totally normal. And yet I do think that by the end of the cycle, I mean, I'd be surprised if we don't see at least one of these blow up. It comes down to some of these are going to buy in late when there's more signs of euphoria in the market. Some of them might not term out their debt appropriately. So we saw before MicroStrategy got through the prior bear market because they appropriately termed out their debt. And they continue to term out their debt. There could be newer entrants that don't manage this as well. They get overeager, they're less savvy. The way they construct things, that's certainly possible. So I do think that like any decent trend, it'll be taken to excess. Usually trends don't just kind of stop midway. They make sense initially and then they get taken to excess or kind of too much happens too quickly. So I do fully expect that, you know, when we're kind of looking back and saying why is there a bear market? Why did this cycle end? It will probably be tied to these treasury companies in some way. Which is not to say that the treasury companies shouldn't be doing what they're doing. It's just that there's going to be some later or less savvy entities that do improperly and the leverage come backs to hit them.

And now, final question. I want to know your price outlook for the next few months. Do you have some price targets that you're looking at in terms of how higher we can go from here in terms of Bitcoin price?

I think it'd be disappointing if we don't see at least 150k. You know, I'm hesitant to give a much higher price targets because you could certainly reach there. But I try to take, you know, one step at a time. And so I think that by most metrics I'd be surprised if we don't see another 30 plus percent move or more that would get us up to that kind of, that higher level. There are certainly higher numbers that are. I wouldn't be surprised at all. I'll reassess if we reach those numbers to see if there's still more to go. But basically, I think we're in a longer cycle, maybe less extreme, but still summers and winters, um, still bull markets and bear markets. And I tie them less to the four year having cycle and more toward pockets of euphoria, pockets of depression, as well as the supply demand cycle. So what kind of higher prices unlock older coins and what kind of consolidations stop those older coins from getting to the market? So, you know, I'd say most metrics suggest higher from here, moderate, at least moderately. Cool.

Thanks a lot, Lynn, for being on our show. It's a pleasure as always, and see you soon, hopefully.

Thank you for having me.