The Onchain Data That Explains What's Happening

Mike Nato of The DeFi Report believes the current crypto bull market cycle is likely over, having shifted his portfolio to a significant cash position based on onchain data indicating late-cycle conditions, high leverage, and a lack of new buying catalysts.

• Crypto cycle indicators, high leverage, and significant profit-taking by long-term Bitcoin holders point to a late-stage bull market.

• The market lacks new buying catalysts, and ETH's muted performance suggests a 'stock-picker's market' rather than a broad altcoin season.

• A sustained drop in Bitcoin prices or a clear shift in global liquidity and fiscal policy would be necessary for a return to a risk-on investment strategy.

Mike Nato has moved to a predominantly cash-heavy, risk-off position in crypto, believing the current bull cycle is ending, a sentiment he called before a recent flash crash. His decision is driven by onchain data showing increased leverage without underlying strength, a prolonged 'wealth distribution' phase, and historically high realized profits by early Bitcoin holders. While acknowledging counterarguments for an extended cycle, Nato prioritizes capital preservation for the next bear market to deploy at lower prices.

Investor Philosophy

• 00:03:34 Mike Nato’s investment strategy focuses on a small set of high-quality assets, driven by onchain fundamentals, with a long-term bullish outlook on crypto. He actively plays the 3-5 year liquidity cycles, rotating into cash during late-cycle periods to deploy capital during bear markets, aiming to be 'greedy when others are fearful' as famously quoted by Warren Buffett.

Late Cycle Indicators

• 00:06:46 By late September/early October, the current crypto expansion phase had reached over 1,044 days from Bitcoin’s November 2022 price trough, making it distinctly late cycle compared to previous 163-165 day expansions. Despite a base case for a Q4 2025 top and a potential melt-up scenario, a significant increase in ETH futures estimated leverage ratio, reaching an all-time high close to 1, indicated excessive risk in the market without corresponding spot buying strength.

Wealth Distribution Phase

• 00:21:51 The market has been in a 'wealth distribution' phase for approximately ten months, where long-term Bitcoin holders have been selling into prices above $100K. This cycle has seen early holders realize over $900 billion in profits, nearly double the $500 billion from the previous cycle, suggesting a significant exit of established capital and a muted overall bull market, particularly for Ethereum, which has only seen $26 billion in realized profits this cycle compared to $220 billion previously.

Lack of New Catalysts

• 00:36:32 Onchain data reveals momentum slowing and a reliance on leverage rather than new buyers, indicating the market is 'running on fumes.' There's a lack of clear catalysts to drive Bitcoin from its current levels to $150K or Ethereum from $4K to $8-10K, making the market structure wobbly and suggesting a higher probability of weakness rather than further upside.

Global Liquidity & AI

• 00:44:53 While some argue for an extended cycle based on global liquidity and the AI bubble, Mike notes that global liquidity continued to expand past the cycle peak in the last cycle, making it an imperfect predictor. Moreover, even with potential liquidity increases, a strong crypto-asset-specific thesis for new buyers is required. Concerns also arise from a 'liquidity crunch' within the banking sector, as evidenced by the SOFR rate exceeding the Fed funds rate, which tends to increase market volatility.

Conditions for Re-entry

• 01:08:48 Nato would reconsider his risk-off stance if Bitcoin were to drop significantly, ideally below $80K or even $60K, signaling a clear bear market for re-entry. Alternatively, if Bitcoin continues to hold strong above its 50-day moving average (around $102K) despite ongoing whale selling and widespread risk-off sentiment, coupled with potential policy-maker interventions like a 'Trump money cannon' that injects fiscal stimulus, it could change his calculus for upside potential.