The Bitcoin Signal That Preceded Every Major Rally Is Back w/ David Duong

Hinzugefügt: 2026-05-11

[00:00:00]David, I I I wanted to start with Bitcoin here. Like I said, it's been rejected after tapping its head off of 80K. Bulls are hoping for a break out break out. Bears are hoping for a break down. In your monthly outlook for Coinbase Institutional, you said your official outlook is neutral for Q2 of 2026. What's driving this analysis for you and why can't the markets make up its mind here?

[00:00:21]Yeah, I think that we're in a very headline driven market right now. And I don't think that would surprise anyone.

[00:00:25]It feels like everything is being moved by what's happening geopolitically in Iran.

[00:00:30]And you could get a headline on on, you know, at breakfast that really won't carry over at the dinner time. And we don't know whether there's actually a deal on the table, whether there will be a military escalation. Any of that could happen over the next two to five weeks.

[00:00:45]So it feels like we're kind of like jumping from day to day. But it is interesting that equities is rallying at the moment. The correlation between Bitcoin and US equities, for example, which actually peaked around 65% in February, it's actually been coming down over the last few weeks. And I think that's really showing that Bitcoin and crypto have more broadly kind of carving out its own narrative. Okay. Well, I would like to hear your thoughts about what that narrative is. You said in your monthly report, "We are optimistic that the macro situation could shift in a positive direction in the weeks to come, which would help many crypto assets form a bottom in the near term and then recover." Do you think that we are in the process of putting in a bottom on Bitcoin here or do you think we might go lower from from the lows we've already made?

[00:01:28]So it's interesting cuz we ran a investor survey just a couple weeks ago.

[00:01:32]It was after the start of the the conflict in Iran, but kind of before like some of the capitulation we've already seen. And, you know, there was this kind of like, you know, divergence between people who thought we are deep in a bear market cycle, yet people very much seeing that Bitcoin was undervalued. So how do you kind of square that circle? I think that medium-term, long-term, people still think there's an opportunity here in Bitcoin. Probably looks cheap if you have that view.

[00:01:58]But certainly, I think right now Bitcoin's being driven more by some of those liquidity measures, some of those kind of idiosyncratic things that really affect its market plumbing more than anything else. Whereas equities and other asset classes are being affected by stuff like earnings that are happening this week, for example, or where people believe the AI narrative is going.

[00:02:20]So, it seems it looks kind of similar, but it's it's different. And I think from that point of view, you know, you have things like, you know, strategy putting out its stretch product, the digital asset credit, for example, which is raising a lot of money. That capital is being utilized for buying Bitcoin.

[00:02:37]And that's far outpacing the amount of Bitcoin selling we are seeing. Plus, I think the narrative we had in Q4 and probably early Q1 as well was that we were seeing a lot of long-term holders, the OGs in the space, actually reducing their supply of Bitcoin, which we never really bought into because you weren't seeing that go on to exchanges, which is where, if you were really selling your Bitcoin, you probably like would see that going up. But over the course of Q1, we actually saw that those long-term holders, anything above 155 days, actually increasing the amount of Bitcoin they're holding. If you're not seeing this, you're trading blind right now. There are real moves happening behind the scenes that most people don't see until it's way too late. Inside Milkroad Pro, you can track exactly what our analysts are buying, selling, and what's on their watch list before it moves. You can try it out for just a dollar for 7 days. The link is in the description. Interesting. Okay, so I want to ask you about this this thing you've pointed out about this divergence that's happening. Because as you've pointed out, there's a lot of headlines driving the markets, a lot of macro things that aren't really crypto specific. And yet, the the crypto specific news has all been really constructive. We've seen a lot of institutions like BlackRock, Goldman Sachs, Morgan Stanley, the list is literally too long to read, but they're all launching new products, all launching new things in crypto, moving into this industry with with talent, with resources. Do you think eventually that this institutional like bull run, for lack of a better word, is going to result in higher prices, or are we going to continue to see this languishing sideways action, and like what breaks us out of this?

[00:04:03]I think we will. You know, it's interesting because some of those institutional themes are being played out in tokenization or stablecoins.

[00:04:12]Those are things like the NYSE or NASDAQ kind of announcements that they want to go 24/7 or move into like tokenized equities, settled all of these things with stablecoins, for example. But yeah, you're also right that, you know, Morgan Stanley launched a crypto ETF. Uh their RIAs are starting to recommend it for the first time. We haven't really seen like the magnitude of those flows just yet. It's only been like two, three word Excuse me, two, three weeks. So it's still fairly early uh and in that process. Uh but Goldman, uh you know, they also are launching like a covered call kind of ETF on Bitcoin. So, I mean, these are definitely like massive themes. At the very least, it shows that, you know, crypto is, you know, not going away anytime soon. It's definitely an established asset class at this point. I mean, I thought that two years ago, but even more so now. Um granted, you know, some of that is on the expectation that more regulatory clarity is coming.

[00:05:10]Uh so, I think that that still represents a pretty important theme in the space. But for the most part, yeah, you know, I think that ultimately many of the people we've surveyed and you know, we've run multiple ones with different kind of tweaks on the question. Uh but it shows that more people, I think 65% of the people we polled, uh and this was in January, still want to allocate or increase their allocations into crypto. There's been a series of headlines that haven't been positive for crypto recently. Most of them around hacks. Obviously, the biggest one is the LayerZero, KelpDAO, Avi situation. I'm curious if you've heard any changes in investor sentiment based on that. Because obviously, price, the token of obvious price has been relatively stable still around 100.

[00:05:50]There's this DeFi United movement that's already started to plug that hole and I'm curious if that has moved the needle or or shaken faith in DeFi or if people are seeing this is sort of like, "Oh, this is more battle-tested now. They can handle these sorts of things." What's been sort of the takeaway you've had from that?

[00:06:03]>> I mean, this is a part of a lot of discussions. It's interesting though because it's not making its way into concerns around the price action itself.

[00:06:12]Uh to your point about well, Aave has actually looked okay relative to all of this despite suffering the downstream effects of that KELP DAO hack. I think that to some extent some people are worried when you put it in combination with what's happening with the Mythos moment for example, Mythos being an you know potential AI model that could find a lot more security vulnerabilities. And you know, there's a lot of stuff in DeFi that was built fast, break things kind of mentality. And you know, like this is the concern that you know, even if you had a good audit of the smart contract code, other things. I mean, Mythos's uh potential is that it could also find things on a composability basis. I.E. It might take three or four steps. It might need to combine a few things, but ultimately you could use those things to find a way to you know, potentially exploit a potential protocol or you know, some bridge or something.

[00:07:08]Now, of course KELP DAO was very specific to the Lazarus Group, what happened with potential North Korea. But I think that you know, this is still kind of raising concerns around like, "Well, if I'm an institution that is interested in DeFi." And I think there are institutions who are interested in either you know, using this inside of their own infrastructure or playing with it. You know, like I think many of them are saying, "Well, how do we get another layer in between there?" And I think that technology does exist, you know, somewhere between zero knowledge proofs and fully homomorphic encryption um and decentralized identity. I think there's a path towards having a permissioned DeFi kind of platform, which I get it, some people who believe in the DeFi ethos might be, you know, kind of put off by that prospect. Uh, but I think if, you know, there's a ton of capital that could be unlocked with institutions getting into the space, uh, then I think that's something we really have to consider.

[00:08:03]Got you. Okay, so you're expecting there to be some innovations and and solutions iterated on here to try to protect from some of these risks in the future.

[00:08:09]Interesting perspective there. What about the DeFi United aspect of this?

[00:08:12]Because I think in TradFi, if there's, uh, a bank run or, you know, a theft of some kind, uh, you're kind of on the government to bail you out or the FDIC, but in crypto, that doesn't exist. But this DeFi United thing has shown that the community will come together to support the other investors in the community and in the ecosystem. Has there been any like reaction to that that we've seen this this grassroots movement that's grown?

[00:08:33]I think that we have seen this happen in the crypto space before and people are, you know, I I I think it's always seen as a positive for crypto.

[00:08:42]Um, I don't think that's different here.

[00:08:44]Uh, but certainly you're only you're right. It's, you know, this is like the the the the pros and cons with crypto cuz if you're talking about the TradFi market, you have central banks and others like buyers of last resort. Uh, you know, beyond that, you have marketing departments and all these kinds of things, which we don't have inside of crypto. And like some people like love that, but other people are like, well, this is why like Bitcoin's not getting the traction it has. It doesn't have a marketing department to tell people what we're doing in the space. And that works for better or worse. And I think that in the case of a community coming together to actually bail out, uh, some of these problems that we've seen inside of DeFi, I mean, I think it very much shows that there are, uh, ways to get towards resiliency, uh, but it looks very different for what we're used to in the TradFi world.

[00:09:32]David, before we go on to I have a lot of questions about the institutional investor survey that you guys recently did. But before we go on to that, I want to ask you about something you said the last time you were on the Milk Road Show, which was that ETH is one of the most undervalued assets on the market.

[00:09:45]We've seen ETH finding some footing. The ETH-BTC ratio has seen some strength here recently. What is your outlook on Ethereum here? Do you think that that undervaluation is likely to change? Do you think that Ethereum is faring well in this environment so far in 2026?

[00:09:59]What's your outlook on ETH been here?

[00:10:00]>> I think that Ethereum is coalescing around a different narrative than the one that we saw 2 years ago. You know, like 2 years ago, ETH, I think, suffered from concerns around whether layer twos were going to eat its lunch, for example, whether layer twos were extractive to the activity. And I feel like a lot of those themes have really kind of fallen by the wayside, and it has been reflected in the ETH L1 versus ETH L2 token kind of kind of narrative.

[00:10:29]You've seen that, like, Ethereum's actually doing performing pretty well, in part because, I think, the fees are also cheaper on the L1 now than they were previously. I think, like, once upon a time, you go back 2 years, you're like, "Crap, I just need to send like 50 bucks. It shouldn't cost me this this much to send it." Which is, of course, why the L2s were there, and that ecosystem narrative was really attractive, cuz I could do it for like a penny or less than a penny. Um but now, you know, it's becoming tolerable again, and you could send a fairly decent amount on Ethereum and not feel like you have to pay a ton of capital. So, I think the gas concerns around it have kind of moderated. Uh you're seeing that Ethereum has really kind of jumped to the forefront on the uh you know, quantum discussion, for example, showing that they're actually trying to tackle this, which I think, you know, smartly they they kind of position that in juxtaposition to what's happening on Bitcoin.

[00:11:23]So, I feel like there are those things.

[00:11:25]Plus, I also like that from an activity perspective, Ethereum's also kind of, you you leaning into the AI agent narrative by saying like, you know what, let's enable that AI agentic commerce kind of environment because you have these protocols like X402 and other things.

[00:11:40]Um, but you also need to say have AI agents be able to verify other AI agents. So, Ethereum is enabling that in its EIPs. So, I I think that this is a good trajectory for where Ethereum is going. Prior to this, it was somewhat more kind of, you know, uh, directionless a little bit because, you know, they were trying to re-staking, they were trying like this narrative, composability, and all this kind of stuff. And I think they were good things from an, you know, academic perspective, but not one that I think really resonated with people who were looking for the, you know, the investment opportunity uh, of ETH.

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[00:12:57][music] Got you. Okay. So, the the asset is evolving, the ecosystem's evolving, the narrative is evolving, and all that's generally constructive on Ethereum there. Um, one more question about this.

[00:13:08]Your outlook for Q2 is neutral. Is that across all of crypto, or do you think that there will be pockets of outperformance continuing in the crypto industry, even though the overall outlook for crypto is neutral right now?

[00:13:20]I'm neutral because it's such a hard, uh, you know, it's it's hard to kind of prognosticate in any environment, but especially in this one where we are getting whipsawed by headlines not even on daily basis, but on hourly basis. Like it's you know, it's it's too tough to actually say like hey for the rest of the rest of Q2 I'm optimistic or you know, pessimistic. Honestly, that's kind of why I'm playing it like by year.

[00:13:47]But I am optimistic short-term. I do think that at least over let's say the next few weeks we could see a fairly decent environment evolve. That's because I also the macro environment is kind of amenable to it. But also some of the medium-term risks in terms of where rates are going to be are where like midterm elections are going to put us or how does like AI transform like the labor you know, like all those things I think represent medium-term concerns. I eat not necessarily things that would qualify as downside risks yet or even if they you know, whether they present the prospect of that. But the very least it's not a now kind of moment. Right now I would say you've got the US Treasury General Account balance having been built up to about you know, I think a trillion dollars over the course of the last two weeks because of you know, US tax receipts.

[00:14:42]Now like that spending is probably going to come in in May. So that should unlock more liquidity. If some of that goes to say like digital asset credit or other things, then I would say you know, the financial conditions are going to look very like like like you know, very favorable to risk assets more broadly, but crypto in particular. So that's kind of what I'm looking at when I'm looking at the very short-term. But that also kind of hinges on like I have no idea what's going to happen in Iran. Like you know, all of the Marines have been moved to over from like Guam and Namibia and everything over the last week. Now they're sitting in Iran. Are they going to go in? Are they not? Are we going to get a deal?

[00:15:21]Like I have no idea what's going to happen on that side.

[00:15:24]I appreciate the honesty of the shoulder shrug on this and just be like, I don't know what's going on, man. Uh cuz I think that's where we all are right now and I think there's a lot of value in just being authentic about that. Uh David, Coinbase and EY did a joint survey of institutional investors on digital assets. The report you all published on the survey was called volatility drives discipline, not retreat. And I really liked that title.

[00:15:45]So, I wondered if you could just start with that. Explain why you all settled on that title and who exactly you all surveyed for the survey. Want insights on what's moving crypto markets and how we're [music] trading each event?

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