Key Takeaways

• Long-term Bitcoin holders are starting to sell after years of holding, impacting market dynamics.
• The crypto market is in a “twilight zone”, a transitional phase with contradictions in sentiment.
• Divergence in crypto sentiment is influenced by the 2021 bubble’s impact on different market participants.
• The industry is shifting from a speculative economy to a more productive one.
• Expectations for the crypto market in 2026 are low, contrasting with the high expectations of 2025.
• Structural issues in tokens have led to a disconnect between price and fundamental value.
• Current low expectations in crypto create high potential for positive surprises.
• Regulatory and institutional changes are fostering innovation in crypto.
• Broader integrations of crypto into social media and financial services are anticipated.
• The crypto economy will increasingly benefit a smaller number of leading players and incumbents.
• Large financial institutions and web two companies are launching competing products in the crypto space.
• Dollar debasement has been a significant narrative influencing Bitcoin’s price action.

Guest intro

Ryan Watkins is the co-founder of Syncracy Capital, a thesis-driven hedge fund making high-conviction investments in the secular winners of the crypto economy. Prior to founding Syncracy, he served as a Senior Research Analyst at Messari, where he was one of the first analysts to explore and explain emerging on-chain data. His data-driven research, including theses on Solana and Hyperliquid, informs Syncracy’s long-term bets in crypto.

The behavior of long-term Bitcoin holders

• Long-term Bitcoin holders are finally selling after years of holding through drawdowns.
• “There’s been an enormous amount of selling from kind of the OG bitcoiners throughout this period” – Ryan Watkins
• Many wallets that didn’t touch their Bitcoin for ten to twelve years are now selling.
• This selling behavior is impacting Bitcoin’s price stability.
• “When you have a high single-digit percentage of supply turning over, it can cap the price of Bitcoin for a long time” – Ryan Watkins
• The selling pressure from these holders is linked to Bitcoin’s underperformance.
• “Are we past this idiosyncratic selling for Bitcoin?” – Ryan Watkins
• This behavior highlights a significant market trend affecting future price movements.

The current state of the crypto market

• The crypto market is described as a “twilight zone”, a transition between night and morning.
• “It’s a good metaphor for this transition between either sunrise and night” – Ryan Watkins
• Divergence in sentiment is influenced by the experiences of different market participants.
• The 2021 bubble pulled forward expectations about the industry’s direction.
• “Reality is different for different sets of people that have been in this asset class for a long time” – Ryan Watkins
• The industry is transitioning from a speculative economy to a more productive one.
• “We’re going from an older, more speculative crypto economy to one that’s more productive” – Ryan Watkins
• This transition suggests changes in investment strategies and market focus.

Market expectations and structural issues

• Expectations for the crypto market in 2026 are extremely low.
• “Contrast 2026 is in many ways like the polar opposite where the expectations are extremely low” – Ryan Watkins
• Structural issues in tokens have led to a disconnect between price and fundamental value.
• “Tokens have had structural issues for a long time where you couldn’t actually accrue value to any tokens” – Ryan Watkins
• There’s too much information asymmetry between core teams and the public.
• This disconnect affects investor confidence and value accrual in crypto.
• The low expectations create a high potential for positive surprises.
• “Usually when people least expect good things to happen, they have an outsized impact” – Ryan Watkins

Innovation and integration in crypto

• The reset in valuations and regulatory changes create a conducive environment for innovation.
• “A combination of valuation expectation being reset and regulatory and institutional tailwinds” – Ryan Watkins
• Broader integrations of crypto into social media platforms and financial services are expected.
• “You might be able to enter a trade through Twitter to buy an asset on Solana” – Ryan Watkins
• Large financial institutions and web two companies are launching their own competing products.
• “There’s gonna be a lot of large financial institutions and web two companies that just spin up their own competing products” – Ryan Watkins
• This shift could reshape competition and innovation in the crypto space.
• Legislation clarity can significantly impact the speed of crypto adoption and innovation.

Bitcoin’s performance and market dynamics

• Dollar debasement has been a strong narrative influencing Bitcoin’s price action.
• “Dollar debasement has been a much stronger narrative over the past year” – Ryan Watkins
• Bitcoin’s price stability is affected by selling pressure from long-term holders.
• The belief in a four-year cycle for Bitcoin price movements is more psychological than fundamental.
• “I don’t think it’s like a fundamental law in nature that every four years we have to go up and then down” – Ryan Watkins
• Bitcoin may soon catch up to gold and silver, but volatility and selling pressure could delay this.
• “It’s a matter of time before we do actually catch up to gold and silver” – Ryan Watkins
• The underperformance of Bitcoin is linked to idiosyncratic selling.

The future of finance on blockchains

• The trend of finance moving onto blockchains will continue to grow.
• “All of finance moving up to blockchains” – Ryan Watkins
• The growth of tokenization has been slow due to logistical challenges.
• “There’s just more logistical challenges to getting these assets onto the blockchains” – Ryan Watkins
• Trading equities and commodities on blockchains with leverage will become more popular.
• “We can do it with a ton of leverage and we can do it from anywhere in the world” – Ryan Watkins
• Perpetuals are a compelling way for traders to engage with leveraged assets.
• “It really does have product market fit” – Ryan Watkins

Value attribution and market maturity

• Tokens derive value from on-chain cash flows, while equity can derive value from off-chain cash flows.
• “Tokens derive value from cash flows from a contract on chain” – Ryan Watkins
• There is a trend towards clearer value attribution for token holders.
• “What matters is that it’s clear what token holders own” – Ryan Watkins
• The crypto economy is a collection of products and businesses moving along different adoption curves.
• “The crypto economy is not a single market maturing in unison” – Ryan Watkins
• Different segments of the crypto economy will reach their growth stages at varying times.
• “They will start to hit their growth stage at different times” – Ryan Watkins

Broader potential of blockchain technology

• It could take another three to five years for sectors like NFTs and crypto gaming to reach Bitcoin’s adoption level.
• “It could actually be another three to five years before those sectors get to where Bitcoin is today” – Ryan Watkins
• The perception that blockchains are only useful for finance is overly simplistic.
• “If you actually understand what this technology enables, you realize that all these things will probably materialize” – Ryan Watkins
• This opinion challenges a common narrative and emphasizes the broader potential of blockchain technology.
• The traditional model of incentivizing hardware suppliers with tokens is becoming obsolete.
• “The old model of giving hardware suppliers a ton of tokens is just not going to work anymore” – Ryan Watkins
• This shift indicates a need for innovation in financing mechanisms.