Bitcoin Bear Market vs. Blockchain Bull Market with Beimnet Abebe & James Seyffart

0:00Welcome to Galaxy Brains.

0:25Welcome back to Galaxy Brains. As always, I'm your host, Alex Thorne, head of firm-wide research at Galaxy. Bitcoin not zero. We have a great episode for you this week. Bitcoin's down. It's trading down. Our friend, BimNet, we're going to get to in a minute with a very fulsome discussion on where Bitcoin is in this bear market drawdown, what gets them excited about Bitcoin and when. That's coming up. But we have a great interview also after BimNet with James Safeheart from Bloomberg Intelligence. Our friend, we've had James on the show quite a number of times. I talked to him on the sidelines of Consensus 2026 in Miami a few weeks ago about Morgan Stanley launching one of their only ETFs of any type, a Bitcoin ETF, about institutional adoption, the incredible institutional presence at Consensus and how they're all, the big banks and brokerages are all building Bitcoin, crypto, blockchain products.

1:16And we'll also talk about the rise of niche sector ETFs, inverse ETFs, people trying to launch prediction market ETFs. James is an ETF expert. Before we get to that, I need to remind you, please refer to the link to the disclaimer in the podcast notes and note that none of the information in this podcast constitutes investment advice or an offer, recommendation, or solicitation by Galaxy or any of its affiliates to buy or sell any securities. Let's hop right into it with Bimnet Abibi. Let's go now to our friend Bimnet Abibi from Galaxy Trading. As always, Bimnet, welcome back to Galaxy Brains.

1:47Thank you for having me. It's an exciting time to have you on because everyone's been asking me what Bimnet is thinking right now because chart looks pretty bearish, Bitcoin 65K. Obviously, long-time listeners know that you've been saying this was going to be a prolonged bear market, not just a little blip, for many months now, and that there would be bear market rallies. We now know that the rip from 60 back to 82.5 looks like a bear market rally. Well, it's almost entirely wiped now. Yeah. Are we heading lower than 60? Yes. And my basis for saying that is, one, the marginal buy pressure isn't there from Saylor.

2:30In fact, he actually sold. He did. Right. And you've got this weird setup where he's not able to basically issue to buy anymore. Right. And he's got to increase his cash. Not the MSTR ATM, right? Correct. He needs a certain MNAV and by his own admission or his own dashboard, it looks like it's below it. And the ETF flows have also stopped. And so it's one of those things that isn't performing in one of the craziest like brisk on rallies that we've had in markets. And so flows are dying down and the story has gotten worse. And, you know, when you think about it in the context of prior Bitcoin cycles, which we've repeatedly highlighted on the call, in prior cycles, you were actually lower in Bitcoin price space than you are here.

3:18Even, yes, this far from the prior all-time high. Correct. We measured it through Sunday, which was May 31st, but I think you'd still be above it even these prices. And so you're just having like a catch-up trade to like where it has historically moved. And right now, you know, it just seems like there's no real good reason to buy it like on a short-term basis. And so if you think about the market as like an attention marketplace, it's getting like no attention or like the wrong type of attention. And so my thesis is bear market is still in effect. We will most likely test levels between 50 and 40K at some point this year.

4:04In terms of like a one - to two-week outlook, it's tough to gauge because you just moved really far incredibly quickly. Last week you said 60K in 60 days. So that was seven days ago. And we're really not very far from it. It was reminiscent when I was saying 60K within months or within weeks back in February. And then we got there in six days, five days. I don't know. But yes, this could happen at any moment at this point. We're very close to 60. Yeah. Yeah. But in terms of the things I look for, in terms of max panic in a market that typically signifies a low, you haven't really had it yet, right?

4:44You haven't had like, you know, down 5 % in a straight line, like, you know, instant liquidation type of move. You haven't had like an insane move higher in implied vols. Like they have moved higher, but it's not been like too like, holy shit, this is insane. You're saying if you compare to like prior bottomings, it doesn't have those characteristics yet. Correct. Yeah. And, you know, there's still signs that, you know, There's still a ton of selling going on in the market, but it doesn't feel like panic, capitulation, bottom type of selling. It would feel more like an October 10th type of event where you're like, oh my God, everybody.

5:23I mean, honestly, even February 5th was pretty bloody. I think that – remember when I was – I've said this before that like if that was the bottom, February 5th and 6th, like in a year or two or 10 years, we look back and that had been the bottom. it had enough of the characteristics to match. You know, like we dropped$10 ,000 in two days. Yeah. But yes. Right now, though. It feels orderly. Yes. And it doesn't usually when it's bottomed. Correct. And so what this, you know, move from 60 to 82K and rejection tells you is that the trend is still in place. And my simple, you know, motto in trading is just the trend is your friend.

6:05Yeah. Right? And if you're in this structural downtrend, the way to trade it is sell rallies, right? And you buy on the dips to cover your position. But in terms of genuinely thinking about when you have a true bottom, you'll kind of feel it because it'll be like a panic capitulation, like what is going on. And you'll get to levels that prior cycles have kind of bottomed out at. Yeah, and on an index basis, you were saying like if we look at all the drawdowns from prior all-time highs, you said our line on an index basis, meaning like normalized for the different prices, is still above all of the other ones.

6:44Correct. But they all bottom between like 20 and 40 indexed, and that corresponds to what you said, 37.5 to 50? Yeah, somewhere around there. So like 40 to 50. 40 to 50. Yeah. But – And one of the things underlying this, by the way, and I've got some research coming out soon that will show more about this. The cycles, it did repeat almost to the day. I mean really close. Like basically every bull market is having to like what 400 to 500 days or sorry, it's like the October of the having year. I don't know why it's always in October to 400 days or so until the all-time high. And then, you know, like four to 500 days of bottoming until the sort of new cycle starts.

7:33And if you actually line them up, like, they look pretty similar. Yeah. The only difference that I've found is some compression, which makes sense with more institutional adoption. So didn't go as high, haven't gone as low. You think we still will go as low on an index basis. That remains to be seen. If we don't go as low, then the cyclicality will have remained, but maybe it's dampened a little bit. It's totally possible, I think, in terms of— Well, you said 50. It could be 40, 50. It could be. 50 would be on the upper end of the index drawdown. No, absolutely. And I think it's also worth noting, just highlighting the impact that the Bitcoin price action is having on a bunch of other crypto assets.

8:19um you know mainly eth is is breaking down you're back to like the 60k low levels effectively um and in theory every time it goes down that the dat buying pressure on on the east side is is also you know declining um and solana is basically at you know those same low levels it's even lower on a relative basis yeah so you know there is pressure like bleeding into the the rest of crypto So, but long story short, you know, DATs aren't buying. Folks in ETFs are selling. And if you put that in the context of a macro tape that's been incredibly positive for risk assets, like, you know, it's a very worrying picture.

9:03And you line it up with the Bitcoin cycles and it tells you, you know, there's probably more room to go lower. Yeah, I think that makes sense. So if we look at the cycle and we assume that it, again, continues to play out on a similar timescale, which is, of course, not guaranteed, when do we start getting excited about stepping back into Bitcoin, do you think? When should investors be making sure that they're paying attention to see if they like the level? I mean, if you're thinking about it cyclically, like about 365 days from the prior all-time high puts you into like October. So like essentially in Q4 of this year is probably the time to just start accumulating.

9:46Like about one year after the prior all-time high has historically been a great buy zone. Time. Of course, that's purely time. Time. Yeah. And I think you can be that way because realistically why that bottom happens partially and why I think it repeats is you have the same people that sold at elevated levels that believe in the cyclicality that are like, oh my god. Well, I liked the thing but I was taking profits. Now it looks cheap again. It looks cheap. They know about it. Yeah, I think that's true. Drew, I know this anecdotally. A lot of the OG whale sellers will be OG buyers at some level.

10:25We're just hunting that level. How much of the – you talked about cyclicality. You talked about the macro tape being very risk-gone bullish. How much of that competition from other bull market narratives outside of Bitcoin and crypto is weighing on crypto also? For example, big IPOs coming, like AI trade. You've got levered ETFs. You've got, you know, PERP, TradFi stuff taking off on, you know, Hyperliquid, et cetera. And maybe coming to the U.S., it looks like, with CFTC. And I think really, like, what folks care about is, like, leverage and volatility, right? They want to see number go up really quickly and, you know, post$10 ,000 but have, like, you know,$50 ,000 of exposure.

11:09Yeah. And all of a sudden— A lot of people want that. Yeah. You can't get that with Bitcoin right now. Yeah. Yeah. And so it's a thing that's just been grinding lower and it hasn't really had these like explosive moves higher. The wall has been generally lower than prior times in Bitcoin history. Yeah. I think also like, you know, if you look, even if we bottom at the bottom of your, you know, your range that you've said 40K area, that's meaningfully more than double where the last cycle bottomed. And I think of that as these are the people that long term believe in holding the asset. Uh, and that's growing.

11:45And so much of the, I sort of think about as a mental model that like the price above the prior all time, wherever the low ends up being, um, is the froth. and it's the fraud because Bitcoiners have been preaching loudly for years that the asset is meant to be a non-inflating hard money store of value that you hold with a low time preference that you're meant to work hard in life and you're supposed to be able to save in money that doesn't get devalued by the central bank. Right? It's not the narrative has never been promoted by Bitcoiners that it is a good risk asset. Yeah. It's not it has performed in the past, but that was due to risk investors, is my point.

12:29So it's right now, it is not a, you know, sexy risk asset. That is a fact. Yeah. Because risk is rallying and is not. I wonder if this is part of the road to becoming a store of value asset. Did people think it was going to transition, go like up, up, up on a risk basis, and then everyone immediately changed to using it as a store of value? Like, I think that road is rocky to that place. Maybe this is part of that story. I will tell you that eventually you will get a significant amount of money printing. And right now the setup in macro is very interesting where you've got all these central banks expected to hike even in the US.

13:09But realistically, like I don't think they can hike. And there's a ton of debt outstanding in the world. And it's not like deficit spending is going down. And so you have this world where there's just more and more debt. And eventually, you know, you're probably going to have a breakdown in the back end somewhere globally. It might be domestic or it might be somewhere in G10. But eventually all roads lead to the central banks expanding their balance sheet and printing more money. And so in that world, this store of value narrative will gain tremendous prominence. And I think things like gold and other hard assets will perform.

13:53But it's just a matter of time. And so if you're thinking about it as a long-term investment, Q4 is a great time. Yeah, I hear you. And I'm thinking that in that scenario, let's say the risk investors, they go to gold maybe, they've become disillusioned. buy Bitcoin as a risk asset, but they never quite learned about it as a store of value asset. But in the meantime, the global Bitcoiner population that is using it as a long-term asset will have continued to be growing. And when that great devaluation occurs in fiat money, there'll be more such Bitcoiners and maybe a lot more of them will decide to buy more.

14:34And if it happens, like the genuine transition to a hard money store of value for Bitcoin, that's kind of how I envision it, that the global population of people who believe it should trade like that outweighs the risk people. And I also think another thing - And we're clearly not there yet, though. We're not. But the other thing that folks probably miss is the amount of financial institutions domestically and abroad that are working to integrate blockchains and general crypto into their organizations. And so by the time the thesis makes a lot of sense, it'll be part of the web of connections and like in financial services.

15:15They'll be ready. They'll be right there waiting. Like, yeah, you will be able to, you know, go to XYZ Bank and, you know, have physical Bitcoin there. Yeah, I think that's right. Right. And it's also, they'll probably end up giving you leverage versus it. They'll probably let you do other stuff. It'll be useful collateral. Yeah, that's right. I wonder as an aside, we were talking about this before, but, you know, you get these giant IPOs coming. I know. SpaceX, Anthropic. is somewhere in the future, and whatever else, you know, I mean. Open AI, yeah. Yeah, I kind of wonder, like, especially when I look at the ETF flows, which, of course, financial advisors can do, and traditional investors can easily access on their brokerage platforms.

15:57How many RIAs are getting calls saying, hey, you know, I was huddling this thing because I liked it, but, you know, let's cut our losses to raise some capital for the SpaceX IPO? I think a fair amount. Or other AI trades. Yeah, I'm going to buy Micron or I'm going to buy Korea. Well, I think just the ETF flows in particular, like a lot of that is advisory. A lot of it is – I think of it as traditional flows. They're not necessarily institutional. Plenty of retail investors buy those as well. But they're TradFi investors that buy it. And there's right next to – there's probably banners on some brokerages right now about how to get a slice of the initial – When XYZ new issue is going to start trading.

16:41Like, there's a lot of advertising about other right there next to their Bitcoin ETF position. Well, you also can't blame these guys because if you miss the AI trade this year, like, you're sitting there being like, what did I just do? Like, did I just miss, like, a generational, like, opportunity? Right. And if you're a good fiduciary, like, what are you going to say? Like, don't buy, like, the NVIDIA? like at this like you know let's say three months ago like they're gonna sell every chip in the world there was a giant like there's a huge dip in this stuff yeah when everyone thought briefly remember there was the uh the ai anxiety about the capex are they still spending now like companies you know giant mega cap corps are doing at the money offerings to raise money to buy more ai capex i know it's crazy i think that's a really notable switch though but you just went from a market that, you know, tech companies used to buy back shares aggressively.

17:38And now we're talking about at the money offerings. Issuing to raise cash to spend on CapEx. That's the funny thing too with like, um, the buybacks were all funded by these giant balance sheets that they were all holding. You're like, why aren't you supposed to be allocating that capital to growing the business? Like the criticism of buybacks has always been, by the way, same in crypto buybacks has been a criticism. Aren't you meant to instead of buying your stock? Yeah. Being like, why should basically You should pay it back as a dividend, the criticism goes, to your shareholders rather than just, which I guess this is the debate that crypto is speedrunning itself.

18:10Well, should it be paid as a dividend or is it buyback accretive to the token, in this case the stock? But they finally found a huge use for this money, which is buying multi-year or even decade-plus data center deals and stuff for their AI stuff. What a crazy story. Yeah, interesting times for sure. but eventually Bitcoin will find its way back. And I think we're probably, we've never been closer to the bottom because every day that passes is another day closer to when it's time to buy. Well, there you go. My friend, our friend, Bim Netabibi from Galaxy Trading. Thank you so much. Thanks for having me.

18:51James Safeheart from Bloomberg Intelligence, my friend, welcome back to Galaxy Brands. Thanks for having me, Alex. I do want to say real quick though, because we'll have heard the intro. Your intro is like my favorite intro to any of the crypto podcasts. Shout out to Phineas and the team. I love the Satoshi quote from Jamie Dimon. It's just every, you're like - Satoshi's going to come back. What? Delete all your coins. Delete all your coins. Bitcoin's going to go to zero. Yeah, it's up there for - Is Jamie Dimon coming around to crypto though? It seems like JPM is fully working on it finally. Dude, we are at consensus and JP Morgan has a huge booth, like a massive, that didn't cost, that's cost a pretty penny.

19:32It's crazy, right? Like, because the institutions, they're not coming. Like, they're literally in the room with us right now. Yeah, I mean, this is the, so I've, granted, I only started coming to ConsenSys starting in 2022 down in Austin. That was very retail. Abby Johnson was there in 22. Yeah, she was. Yeah, Franklin was there. Yeah, but they were early movers. And the booths were very much not institutional at all. It's like a million shit coins. Yes, exactly. I was like, what is this conference? It's like Quark coin. Yeah. Fork coin. And you're like, how can they have the same name? Yes. But now it's very different, right?

20:07Yes. Like it's very institutionalized. I guess there's some people that probably don't like that. But as somebody who comes from TradFi, it seems like things are growing up. There's obviously going to be growing pains, pros and cons with that. But this feels way more institutional based. And like the industry is growing up a little bit. But this, I was just in Vegas last week for the Bitcoin conference, which is an interesting other juxtaposition and comparison to make. Much heavier retail, much bigger, by the way. People here at ConsenSys were like, oh, I heard Bitcoin wasn't well attended. I was like, my brother, like Bitcoin Vegas was five times as big as this.

20:42But this conference, especially now, but this year, this is an industry trade show. There's probably not a retail person here. It's all pros. And there's a lot of them. That's what I'm saying. Yes. giant professional industry now. Yeah. Like I was weird. Like when I went, used to go to these things, it was weird for me to wear a blazer. Like I wasn't wearing a full suit yesterday. I was on stage with pump and we were both in full suit and tie. So like, like, and there's a lot of people walking around in suits. It's very, it's becoming very institutionalized. Pump probably came out of the womb in a suit, but that's a different story.

21:13Let's stick with this topic though. Institutions and the crypto natives. I was, I just interviewed somebody who has a national bank charter. And I said, would Satoshi think that was cool? Aren't you like, isn't the crypto anarchist libertarian roots clashing with the TradFi? The Bitcoin ETFs might be the best example of this. It's the most libertarian, self-sovereign crypto anarchist asset in the history of the world. And you should have 1 % or 2 % in your portfolio. How do you think about the tension, the clash between Insto and Tradfire? So part of it is like, that's the way I've always viewed it.

21:55Like I thought this thing had true power. Like I didn't come on board really until 2017. So I wasn't definitely not an OG, but like I've always viewed it and there's value in being that, you know, decentralized asset. But you got to, you got to face the facts here. There are plenty of, my parents are never going to take care of their own coins and deal with a multi-sig wallet or a hardware wallet. Like it's just not going to happen. Let alone my grandparents. some of my friends aren't going to do it and like all this is doing the etfs these institutions that are blackrock you know they're behemoth of wall street they're launching this thing they're coming on board they have been on board and it just it's just it's abstracting away and be people will pay for convenience like people are happy to abstract this away and give somebody else the responsibility so if something goes wrong it's their fault but it's not changing we've talked about this before it's not changing bitcoin itself like you're you could still do self-custody you can still do multi-sig on your own.

22:45You can do all these things without abstracting it away by giving your money to BlackRock. Or I mentioned, I mean, Morgan Stanley now, which I know we're going to talk about. I mean, that is a, what better symbolism of the opposite? I mean, this is what the biggest army of investment advisors in the world, I guess, or like top two or something. They never issue ETFs. They've got like 20 total. Like MS is a distribution platform, much less than an issuer, they're issuing a Bitcoin ETF and they've also added it to model portfolios at this army of invest. Is this what we've been talking about? The whole purpose for the ETF?

23:22You and I can buy Bitcoin on Coinbase or like, you know, River or whatever. We have not had a problem. But like the RIAs have had a problem. Is this like peak RIA adoption? Yeah. I mean, I remember when we were talking about the ETF launches right before it was happening. You and I were on a podcast. Yeah, we were. We were at PubKey. Yeah, PubKey with Peter McCormick. And I was, this was the argument he was making. And because some people are like, what is the demand going to be? Like, why are you even going to do this? But there's a multitude of reasons why MS did this, right? One, as you mentioned, they have an army of, I think, I don't know what the number, it's over 15 ,000 advisors or brokers.

23:57Yeah, I thought it was like 10 to 15 ,000 or something. Seven-ish trillion dollars in assets in their wealth platform. A trillion. Yes, yes. You put one, they're recommending two to 4 % in a portfolio, depending on your risk, ability to take risk, all these things, whatever. That's a lot of portfolios and a lot of money. Well, exactly. And if, so one, if you think there's, there's multiple reasons they do this. One, I get, bet you a lot of those advisors have a lot of clients that already own Bitcoin on places like you mentioned, Coinbase, Gemini, Kraken, and they want to bring that under their umbrella where they can charge a fee.

24:26It looks good for them. Why would they want to launch, go and put this, they want to eventually put this in client portfolios. They are now. So why pay somebody else to do it. So we have this saying BYOA is better than PTOA. Bring your own assets. PTOG. Bring your own assets. It's better than pay the other guy. So they undercut everybody in fees. So Grayscale's product was 15 bps. This is 14 bps. Are we going to get down to like two bps, you think? I don't think so. We're probably near the low end of what you mean. I mean, right now, Van X HODL is zero fee because they have a fee waiver. But that ends, I think, at the end of this year, but like it costs more money to store Bitcoin.

25:03There's a lot more risk with all the hacks we know we're talking about. So you're never going to get to like, I don't think we're going to get anywhere near two bips anytime soon. Um, but I think we're at the lower end and maybe, yeah, I mean, you got to get to a point where like some of these other issuers have to start competing and like, do you want to compete on being the lowest cost provider or do you want to compete on your own brand? Right? Like there, there's, there's, there's different ways to go about this. So, but MS, they are, uh, adding it to their portfolio recommendations for certain types of investors, and they have a lot of those investors.

25:34Did they say, you said, bring your own assets? Were they just like, well, I mean, if we're going to be telling people to buy Bitcoin, they should buy it from us? Is that what they did? You get into this quandary of fiduciary duty, right? So if you launch a Bitcoin ETF and it's not the lowest cost in the market, then you have to justify, okay, I'm going to buy Bitcoin in an ETF. And then you have to justify why you want the Morgan Stanley one that charges, I don't know, we'll call it the same as IBIT, 25 bps or even if they went higher 30 bps right you have to justify why you did that now there is no reason to justify it one you're putting in your own your own fund it is the lowest cost option in the market there's no qualms about doing that right and i think the other problem is like they probably see one this is a way to like build their brand with younger investors they also just started trading on e-trade which morgan stanley also owns i love that and so like this is a way for them to be like look you maybe they're trying to bring people in-house to be be under their wealth uh advisory service.

26:28So there's all these things and benefits I think that they saw for potentially doing this. And again, you charge 14 bps. Let's assume they're not making any money on that just because it's costing them somewhere around that to operate this. And it's also, if you bring that in-house, you charge on the fees, you charge on the assets as well. So it's 1 % AOM fee, 0.80 bps. In the portfolio. And after the vehicle fees, you also charge your clients. Yes, exactly. For managing their assets, giving you a financial plan, all these things. And then remember, they also filed for Solana and Ethereum. So those are also probably going to come in the near future.