 People should check their risk tolerance because we are seeing a lot of froth throughout the industry. The crypto bull run may have reached an inflection point. While Bitcoin has been ranging sideways for the last few months, a number of altcoins have been registering outstanding gains. The decline of Bitcoin's market dominance has sparked concerns around the sustainability of this bull cycle. We have some meme coins, for example, doing exceptionally well, and those are kind of warning signs for the cycle. Tesla stopping Bitcoin payments due to environmental concerns has put more pressure on the market. How much upside potential is left in this Bitcoin bull run? Are competitors threatening Bitcoin's network effect? Facing uncertainty, what should investors do in order to protect their portfolio? To answer these questions, we reached out to strategic investor Lin Alden. So, the last time you talked to us back in November, you predicted Bitcoin's growing network effect would propel it to a $1 trillion market cap. I think the market cap could easily go to over a trillion because that's still a small fraction of gold's market cap. That target has been reached. So, congrats for the successful prediction. The question now is, how much steam is left in the Bitcoin bull cycle? And is there still upside potential or we reached already the top? Yeah, I think that's a really good question. And admittedly, it's hard to answer. So, if we look at a couple different indicators, you're telling us somewhat conflicting things. And so, we've had a two and a half month consolidation. We've built up a lot of support here, but also a decent amount of resistance. And if you look at a bunch of indicators like the hoddle wave, like, for example, the cycle of longer-term holders selling into some of the new bullishness, that's not been as extensive as previous cycles so far, which generally indicates that there's probably still more to go. If you look at different momentum indicators, like the how far above the market capitalization is compared to the realized capitalization, which is kind of a measure of cost basis, and other sort of, say, deviations from moving averages, it never really had quite the blow off top that it had in previous post-having cycles. And so, by a lot of those metrics, there's probably still upside to go. On the other hand, there are some indicators like the pie-top indicator that have signaled atop. And so, there are kind of some mixed signals out there to be on the lookout for. And so, my base case continues to be higher, but it's certainly a much, it's a more mixed kind of a less asymmetric outcome than it was when I made the call back in 2020 throughout that period. And so, it's still in that inflection point where it could go either way, but my base case would be that there's probably still more to go in the cycle. And also, I heard that you were also analyzing the flows that are coming from cryptocurrency exchanges that are bigger than the flows coming into cryptocurrency exchanges. That should be also the sign that investors are still piling up bitcoins, right? Yeah, that's been actually one of the things that's different from every other cycle, because in previous cycles, there was like small periods of time where coins left exchanges, whereas this was by far the longest period of time where coins left exchanges. And so, the most bullish version there is that you basically have this big influx of corporate buyers and other institutional buyers locking up coins in cold storage that are probably not going to move for a while. The more kind of a neutral interpretation of that is that because of the rise of things like stablecoins, especially in this cycle, bitcoins less used as a unit of account for trading different crypto pairs. And so, it's more of an asset in its own right, and therefore there needs to be fewer of it on exchanges because stablecoins have somewhat taken that role in the industry. And so, bulls and bears can kind of interpret that in different ways, but overall, that's certainly an interesting sign because we're not seeing coins go to exchanges like we'd often see towards the end of a bull cycle. In a recent interview, you said that at this point, bitcoin investors, at least some of them, should think of their risk in their bitcoin investment by taking some money off the table and putting it into other assets. So, can you explain what is the rationale behind this recommendation of yours? Yeah, it's not a recommendation more so as just people should check their risk tolerance because we are seeing a lot of froth throughout the industry. We have some meme coins, for example, doing exceptionally well, and those are kind of warning signs for the cycle. For me, I had the ironic problem where I invested in bitcoin earlier last year as kind of a moderate position, but when that goes up like 8x, that's suddenly a very large position. And so then you're basically managing that large position relative to the other positions in the account and eventually there could come a time where rebalancing would make sense. Now, because I've done a lot of work on the protocol, I have a pretty high conviction on it. And so, I'm fine with maintaining a pretty large position, but different investors have different risk tolerances. And so, some investors are not fine with that large percentage of their gain still being in a single asset. And so, for people who would have trouble with drawdowns or periods of volatility, it can make sense to rebalance. And so, it really comes down to investors kind of analyzing their own behavior related to volatility and making a call based on their own conviction on the asset class. Kraken's then held theorized the idea of a super cycle. According to this theory, bitcoin won't have the retracement typical of previous bear markets, and it will go straight to a million in a massive asymmetric move. So, what do you think about this theory? Does it sound realistic to you? I think there's a realistic case for it. I mean, certainly as a bitcoin long, I'd like to see it happen. I try not to have aggressive scenarios as my base case. And so, my base case basically is that as bitcoin goes from near zero and as it becomes a larger and larger asset class, that each post-having bull run will be a smaller percent gain than the one before it. And that's not necessarily going to be the case, but that's kind of my base case assumption because as the law of large numbers kicks in, it takes a lot more capital to move the price of the asset. And so, my base case is that this will be a cycle similar to 2017, a little bit less perhaps. And that's kind of how I'm looking out for my own position sizing and things like that. Now, the case for a larger cycle is that this is the first cycle where we have a meaningful amount of institutions on board. Some of them probably intend to hold permanently. You'll have pools of capital that are interested in rebalancing. So, if bitcoin does really well, they might trim it. We've already seen that in a couple of portfolios. On the other hand, if bitcoin were to dip, they could rebalance back into it. And so, basically, bitcoin has been through enough cycles now that I think a lot of investors, especially some of these large investors, are confident in it. And so, they're willing to buy the dip faster, you could say. And so, my base case would be that in addition to maybe not having the same percent gains as previous cycles that bitcoin's draw down, I think would also be less extreme than some of the previous cycles. And so, I don't know if I'm full on board with a super cycle theory, but I certainly think that it makes sense for that idea to be out there and for investors to weigh the probability of that happening. If you had to think about a time frame, when do you think we'll see the end of the current cycle in terms of time frame, end 2021, mid 2022? Do you have any ideas about that? I think there's a big variance there. So, if you look at previous bitcoin cycles, I mean, they generally got a little longer each time. And so, they've been less explosive but longer. And so, if that trend were to continue, it could leak into 2022 this time around. If not, if you look at some of the macro headwinds, for example, some of the employment benefits are expiring in the United States in September. And so, basically, it's a little bit less fiscal support that's going to be here. We're starting to see some Fed members get concerned about market euphoria or potential for inflation. And so, some of them have talked about tapering asset purchases. And so, some of these less liquid financial conditions could put downward pressure on some of these assets that have gone somewhat parabolic, which in some ways, fortunately, is fine for bitcoin because already been in this consolidation, whereas I'd be more concerned about lesser tokens that have gone absolutely vertical in recent months. But basically, as we look out into quarter three and then into quarter four, some of the macro risks grow a little bit. Okay. So, overall, an optimistic view but still with some caveats to look at. Yes. Moving on. So, in one of your latest articles, you said that determining whether bitcoin is a good place to allocate capital to or not ultimately depends on an investor's assessment of its network effect. So, what are the main factors that we should look at to understand how healthy these bitcoins network effect looks? So, different ones. One is the number of users coming in, both on-chain users and estimates from exchanges. I've also, in this cycle, because we've had institutional adoption, mainly only in bitcoin. There's some funds that also buy Ethereum. But then, as you go down into the smaller coins, there's not really enough institutional interest there. So, if you look at ways that bitcoin and some of the other top protocols have been adopted into institutions have been interesting. So, you have things like PayPal integration. You have Cash App integration for bitcoin. We just got news, for example, that NIDIG is partnering with banks so that people will be able to buy bitcoin through their existing banking relationships in many cases. So, I also keep looking for new corporations that add bitcoin to their balance sheet. And so, these are companies that they're not exchanges, they're not bitcoin-native companies, but that decide to have a non-zero bitcoin allocation. I think not that many will go all in like MicroStrategy has, because he's like a Super Bowl, but I think you'll have more companies do what, say, Square did, where they put a smaller allocation of their cash into bitcoin as kind of a longer-term hedge for the rest of their cash position. And so, I look for different signs of progress there. I'm also watching things like some of the apps that are being developed making use of the Lightning Network and the underlying technology that Lightning Labs is providing. We have Strike Global and some of these other places that are starting to use Lightning, because that's not been around as long as bitcoin. And so, that layer is earlier in its growth phase, but we're starting to see some potential use cases out of that for even, for example, fiat to fiat transfer using bitcoin as an intermediary. And so, there's a lot of signs like that that I look for engaging bitcoin's network health. One of the signals pointing at the strength of bitcoin's network effect is its market dominance. So, back in 2017, you decided not to invest in bitcoin, among other things, because its market dominance was declining. And in the recent months, we are seeing a similar scenario. Bitcoin's market dominance has been going down. It currently sits at around 48% down from 70% in January. So, if this trend continues, couldn't it undermine bitcoin's network effect? I think we have to look at that question over multiple business cycles. And so, back in 2017, in addition to bitcoin's dominance falling, we also had the bitcoin and bitcoin cash split, which added extra uncertainty for bitcoin and that ecosystem. Besides bitcoin and Ethereum, a lot of the major coins that were around in the last cycle that chipped into bitcoin's market dominance are not the same ones that are around in this cycle, chipping into bitcoin. So, for example, in the last cycle, dogecoin was not a meaningful percentage of bitcoin's market cap. For this time, we have the dogecoin meme spike going on that's been pretty persistent. We also are seeing a rise of a bunch of these DeFi tokens. We've seen Binance come on the scene. And so, I'd be more concerned if I saw protocols that say chipped into bitcoin's market dominance in one cycle and then chipped even more into it in the next market cycle. I think that's where it gets kind of concerning. And so far, we haven't seen that. I mean, the one that you can say comes close is Ethereum, but that's still not reached, say, all-time highs in terms of the ETH-BTC ratio. So, if you were to see that gaining market share on bitcoin in multiple cycles, that's another kind of never affecting the industry to watch. But outside of those top two protocols, we see that the wave of challengers keeps being a different wave of challengers. And so, that's basically showing that in those bull markets, a lot of those tokens don't have longevity to get around to the next cycle. And so, we'll see how bitcoin's dominance does at, say, the other end of this bull market. We'll see after the bear market kind of where the chips fall in that cycle and then where it starts rising from there to see which ones are persistent. So, focusing on Ethereum. So, Ethereum has been outperforming bitcoin in 2021 so far, and its market dominance is increasing. So, there is a lot of talk about this flippening, a scenario in which either replaces bitcoin as the leading crypto. So, how realistic is such a scenario according to you? I think in a bull cycle, it's a low probability but a non-zero probability. Because, for example, if the cow explosive that Ethereum was in 2017 towards the end of that had a giant blow-off top and really kind of took a meaningful percentage of the market capitalization back then. And for example, that ETH-BTC ratio still hasn't reached that cycle high. And so, if you were to have another blow-off top, it's certainly possible. I try not to prove a negative or rule out improbable outcomes. But, overall, that would still have a long way to go to kind of catch up with bitcoin's market capitalization as it currently stands. And so, overall, I think one of the risks of any coin that's not trying to be a store of value, like bitcoin, if it's kind of trying to do multiple things, it's easy for another competitor to come and be cheaper and take some of that share. And so, my concern would be that you have shifting kind of leaders in the utility space. Now, so far, Ethereum has been the main one, but we have to see how some of these rising competitors either fail to take market share from it or continue to take market share from it. We are still talking about the importance of bitcoin's network effect. So, a downside of the growing network effect of bitcoin is the environmental impact. So, the bitcoin network currently consumes as much energy as a small country. And as the network grows bigger, so will the energy needed to maintain it and arguably the carbon footprint. So, how should investors look at this problem? So, one is that bitcoin uses less than 1% of global energy. And so, then the second part is energy usage is fine as long as the work that it's doing is productive and is valuable to people. And so, for example, we don't question the electricity usage of washing machines and clothes washers and dishwashers because they provide us something that is valuable to us and makes our lives simpler. And so, when we look at bitcoin, the thing is that it scales pretty well. And so, it has a pretty big energy requirement, but then as it grows, that doesn't scale at the same rate. And so, if you look at, say, bitcoin's energy usage as a percentage of market capitalization, that's been going down every year since inception. And that's because the block subsidy gets cut in half every four years. And if you look at the percentage of bitcoin's market cap spent on security, so that's the combination of the subsidies and the transaction fees, that keeps going down. And so, let's say bitcoin does continue to grow from here. It becomes a $2 trillion, a $5 trillion asset class, whatever the numbers it reaches. That doesn't necessarily mean that energy component is going to go up two to five times because the block subsidy in a few years will be cut in half again. And so, I don't view the too much energy usage as a problem because of that exponential reduction in block subsidies. And I'm more focused on making sure that bitcoin continues to use an adequate amount of energy relative to its market cap. Gotcha. Okay. Now, to conclude, I would like to ask you one last question. We don't have a crystal ball, but I was pretty excited to see that you actually got right the latest prediction in our latest interview about Bitcoin reaching $1 trillion market cap. So, what is the next milestone in terms of market cap that you are looking at for the end of this bull cycle? So, I guess I'm looking at Bitcoin over $100,000. And so, you know, you can call that maybe a $2 trillion market cap. And it's one of those things that I was very, very high conviction on that $1 trillion market cap. Whereas now, we have to see how this plays out. And so, I think it certainly could consolidate and disappoint as a reasonable probability. But I also think this is a pretty good probability that it continues to search from here. And I'm certainly remaining long as part of my portfolio. Awesome. Okay. Thanks a lot, Lin. That was great to have you with us today. Yep. Thanks for having me.