Why This Crypto Cycle is Over | Michael Nadeau's DeFi Report #7
🎯 Summary
Podcast Summary: Why This Crypto Cycle is Over | Michael Nadeau’s DeFi Report #7
This 79-minute episode features Michael Nadeau of the DeFi Report discussing his conviction that the current crypto bull cycle is effectively over, leading him to adopt a highly risk-off stance. The conversation centers on analyzing on-chain data and historical cycle patterns to justify this significant shift in portfolio allocation.
1. Focus Area: The primary focus is Crypto Market Cycles and DeFi Investment Strategy, specifically analyzing whether the current market phase represents the end of the bull run or a temporary dip before a melt-up. The discussion heavily relies on on-chain fundamentals, leverage metrics, and historical cycle symmetry.
2. Key Technical Insights:
- Extreme Leverage Unwinding: ETH futures estimated leverage ratios reached near all-time highs (approaching 1:1 collateral to leverage), indicating the market was “over its skis” and highly susceptible to the massive liquidations observed during the recent flash crash.
- Cycle Phase Identification: Nadeau frames the cycle in four stages: Early Bull, Wealth Creation, Wealth Distribution, and Wealth Destruction. He argues the market has largely completed the Wealth Creation phase (Oct ‘23 - Jan ‘25, marked by ETF inflows) and is now deep into a prolonged Wealth Distribution phase, where early long-term holders are selling into high prices ($100K+ for BTC).
- Diminishing Catalysts: The primary buying catalyst (spot Bitcoin ETFs) has largely been absorbed, leading to a lack of clear fundamental drivers to push prices significantly higher from current levels to projected targets ($150K BTC).
3. Market/Investment Angle:
- Shift to Risk-Off: Nadeau has moved his portfolio from 75-80% deployed to approximately 70% cash, marking the first time he has been this risk-off since 2022.
- Late Cycle Confirmation: The current market duration (over 1,065 days since the Nov 2022 trough) aligns closely with the length of previous cycles, suggesting the market is structurally late, despite the lack of a clear “blow-off top.”
- Contrarian Timing: Nadeau executed the significant shift to risk-off before the major flash crash in mid-October, based on weakening underlying fundamentals (low volume, slowing ETF flows) despite high leverage.
4. Notable Companies/People:
- Michael Nadeau (DeFi Report): The central figure, known for a disciplined, fundamental, Buffett-esque approach to crypto cycles, focusing on deploying capital during fear and exiting into greed.
- Bit Digital: Mentioned as a sponsor and an example of an institutional player that has pivoted its treasury entirely into staked Ethereum (ETH).
- BlackRock/Fidelity: Referenced as the price-agnostic ETF buyers whose initial massive inflows provided confidence for leveraged traders to pile into the market.
5. Regulatory/Policy Discussion: While not a primary focus, the discussion touches on the impact of ETF flows as a major structural change this cycle, effectively acting as a massive, consistent buyer that influenced trader behavior and leverage accumulation. Geopolitics and tariffs were mentioned as external macro risks being monitored.
6. Future Implications: Nadeau suggests the industry may be entering a Wealth Destruction phase, which typically follows prolonged distribution. If the market fails to hold key structural levels (like the 50-day moving average around $102K for BTC), a significant breakdown is likely. The cycle, if over, will have played out differently due to the ETF structure, potentially setting a higher base for the next bear market.
7. Target Audience: Crypto Portfolio Managers, Institutional Investors, and Sophisticated DeFi/On-Chain Analysts who utilize cycle analysis and fundamental data to time market entry and exit points. It is less relevant for passive DCA investors.
Comprehensive Summary
Michael Nadeau joins the podcast to present his strong conviction that the current crypto bull cycle is concluding, prompting his first major risk-off move since 2022, increasing his cash position to 70%. Nadeau’s investment philosophy emphasizes disciplined cycle trading: being greedy when others are fearful by accumulating assets during bear markets and rotating into cash during late-cycle euphoria.
The core of his bearish thesis rests on on-chain cycle analysis and market structure weakness. He notes that the current expansion phase is historically long. He identifies the period following the ETF launch (Q4 2023 into Q1 2024) as the “Wealth Creation” phase, where the majority of new money and speculative activity occurred, culminating in early holders selling into prices near $100K Bitcoin. Since then, the market has been in a prolonged “Wealth Distribution” phase, characterized by long-term holders de-risking.
Nadeau’s decision to shift aggressively to risk-off was made before the recent flash crash, based on observing a dangerous divergence: extremely high leverage (especially in ETH) coupled with weakening underlying fundamentals (slowing ETF flows, low spot volume). This lopsided structure suggested the market was vulnerable to a sudden unwind, which materialized.
He challenges the notion of an imminent melt-up, questioning who the marginal buyer is now that the initial ETF demand surge has subsided. While acknowledging that the absolute bull market structure for Bitcoin hasn’t been definitively broken, the probability favors weakness, leading him to exit ahead of potential “Wealth Destruction.” The conversation serves as a critical warning for investors still fully deployed, emphasizing the need to
🏢 Companies Mentioned
💬 Key Insights
"Should I have bought Bitcoin or should I buy Coinbase? And they always came back to it was right to just buy Bitcoin. That has changed."
"a lot of the gains in some of the bull market actually happened outside of our crypto-native assets and in assets like Coinbase or Robinhood or Circle or even Galaxy more recently."
"In order to capture the bull market this cycle, you actually had to own some stocks. And that's totally different because in the past... they always came back to it was right to just buy Bitcoin. That has changed."
"I'm stuck between these two theories: either we're early and the real alt season starts in Q4—that's the hope—or this was it. It was a silent top designed to trap everyone. He said both are scary because one punishes early sellers, the other punishes believers."
"This was the shittiest bull market ever. For this one, there was no hype, no euphoric blow-off, no 'this is the top' moment. It was just rotating L1s dying, memes failing, perps chains, every pump a sell into every break. Retail never really entered in size."
"The Fed—this was not a crypto cycle. I think most of us have the belief that the Fed had to be cutting rates for Bitcoin to do well, and that wasn't really what happened in this cycle. We've had high rates for most of this cycle with Bitcoin doing quite well. And I think what's been revealed is that the fiscal spending is the other side of this, and that's been propping up not just the crypto markets but also the TradFi markets."