Guest: Matthew Sigel, Portfolio Manager of VanEck Onchain Economy ETF ($NODE)
Host: Anthony Pompliano
Podcast Source: Anthony Pompliano
Key Takeaways
Matthew Sigel is the portfolio manager of the VanEck Onchain Economy ETF ($NODE), which is considered one of the most forward-thinking institutional products in the crypto ecosystem. In this interview, we explore how institutions evaluate Bitcoin, from market structure and investor sentiment to the drivers of recent price movements. Matthew introduces three key indicators he uses to assess the future trajectory of Bitcoin, shares his buying strategy during periods of market volatility, and discusses his focus on stocks of crypto-related public companies. Additionally, this podcast delves into the broader digital asset ecosystem, including smart contract platforms, stablecoins, and areas he considers to hold the greatest long-term potential.
There is also a TL;DR version of the podcast notes in infographic form to help you quickly grasp the main ideas.
Summary of Key Insights
Bitcoin mining companies are transitioning into AI enterprises.
Volatility remains one of the biggest challenges in the crypto space.
Matthew Sigel typically evaluates Bitcoin’s market performance from three perspectives. The first is global liquidity, with Bitcoin showing a sustained negative correlation with the US Dollar Index (DXY); the second perspective is the level of leverage within the crypto ecosystem, where leverage has decreased significantly and funding rates have dropped substantially; the third perspective is on-chain activity, which currently appears relatively weak and does not present an optimistic outlook.
Support levels near $78,000 and $70,000 present a good entry opportunity.
I typically opt for dollar-cost averaging, such as investing a fixed amount at a specific price level or making periodic investments every two days.
My investment style involves small positions, high diversification, and leveraging the 'buy low, sell high' strategy within the market. So far, this approach has proven effective.
Once the decision to buy is made, there is no need to commit the entire investment at once; instead, a phased allocation approach allows for a more rational response to market volatility.
The market is overly saturated, and the inflation rate of altcoins remains high. Beyond their speculative nature, they have yet to truly find product-market fit.
Solana has performed exceptionally well in building a cross-industry ecosystem.
Trump's deregulation policies have actually had a negative impact on altcoins, as the feature of decentralization has been undermined under the new regulatory environment.
How institutions currently view Bitcoin
Anthony Pompliano: Today, we are joined by Matthew Sigel, the portfolio manager of Van Eck's On-Chain Economy ETF ($NODE).
I think we can start with an important question: How do institutions currently perceive Bitcoin? The market signals are mixed, with both positive and negative data, poor price performance, and subdued investor sentiment. How does Van Eck, along with other institutions, generally view Bitcoin and its asset allocation?
Matthew Sigel: From the perspective of investor interest, I believe that institutional attention to Bitcoin remains high. We continue to receive significant demand for educational content, portfolio construction advice, and requests for small-scale allocations. However, given that Bitcoin prices have experienced a retracement of over 30%, trading volumes in some of our listed products have also declined. This indicates that while research interest in Bitcoin is robust, there is hesitation when it comes to actual trading activities.
Anthony Pompliano: So, if we analyze these data points, how would you differentiate between positive and negative data?
Matthew Sigel: We typically evaluate Bitcoin's market performance from three perspectives.
The first is global liquidity. Bitcoin has maintained a persistent inverse correlation with the US Dollar Index (DXY), meaning that global risk appetite, leverage, and deleveraging significantly impact Bitcoin—especially since the onset of the COVID-19 pandemic. This macro trend has had a far greater influence on Bitcoin compared to previous phases. Unfortunately, Bitcoin miners are at the core of this process. Recently, due to tightening credit conditions and large-scale companies like Oracle raising substantial debt to develop their AI capabilities, Bitcoin miners have had to adjust operations to adapt to market opportunities. This requires considerable capital expenditure, which often relies on debt financing, equity financing, or selling Bitcoin to raise funds. Until October, Bitcoin miners were actively selling Bitcoin to support these developments. This situation has created a vicious cycle: the tightening of credit conditions not only affected miners' ability to secure financing but further depressed Bitcoin prices. Therefore, I consider the evidence from the perspective of global liquidity to be mixed—there is funding support, but the market outlook has become more uncertain.
The second perspective is the level of leverage within the crypto ecosystem. I view this as a positive signal. In mid-October, we witnessed a market liquidation event that reduced leverage levels in the crypto market, causing funding rates to drop significantly. Over the past 12 hours, the scale of market liquidations reached approximately USD 1.7 billion. This indicates that the sentiment around leverage in the crypto market has weakened considerably, which I interpret as a bullish signal.
The third perspective is on-chain activity. We typically focus on metrics such as transaction fees, the number of active addresses, and transaction frequency. Based on these metrics, current on-chain activity appears relatively weak, reflecting an unfavorable state of activity.
How to assess indicators in real time and key Bitcoin price levels
Anthony Pompliano: So, how do you evaluate the Bitcoin market? We've discussed that global liquidity is a 'yellow light,' leverage within the crypto ecosystem is a 'green light,' and on-chain activity is a 'red light.' Clearly, these signals are mixed. How do you weigh these factors? Among these three, which one do you tend to focus on more? When these signals appear simultaneously, how do you adjust your strategy?
Matthew Sigel: I believe this largely depends on one's investment style. As I mentioned earlier, current trading volumes have decreased, indicating hesitancy among investors in executing trades. For instance, in the blockchain-focused ETF that I manage, about two to three weeks ago, I sold 15% of our Bitcoin mining positions. This decision was driven by our observation that market optimism began to wane, coupled with increasingly tight credit conditions. Bitcoin miners contribute significantly to our returns, so it was prudent to moderately de-risk heading into year-end. Currently, we haven't redeployed these funds, but I am monitoring several key Bitcoin price levels.
One critical level is USD 78,000, which represents a 40% decline from the peak. During the previous market cycle, Bitcoin experienced an 80% decline. Since then, Bitcoin's price volatility has decreased by approximately half. If volatility has halved, I believe the magnitude of price adjustments could also halve, making a 40% decline a reasonable risk-reward opportunity. Additionally, the USD 78,000 level can break through the USD 69,000 support formed post-election. We saw fluctuations near USD 70,000 on Election Day and tested this level again in April this year. Thus, a strong technical support has been established here.
If there is a further decline, another level worth watching is $55,000, which is the position of the 200-week moving average. In an extreme scenario, such as an 80% drop again, Bitcoin might return to around $27,000, which is exactly the price level when Blackrock applied for its Bitcoin ETF. Such a situation would erase all gains from the ETFs, but I consider this possibility to be relatively low. Overall, a 40% decline and support near $70,000 presents a good entry opportunity.
Anthony Pompliano: I understand your perspective. As individual investors, we can be more flexible in judging price levels, such as $77,000 or $80,000, where these differences might not matter much to individuals, but institutional investors face more constraints when deploying capital, such as risk management, rebalancing issues, while also having access to data tools and experience unavailable to individual investors.
How do you view the difference between investing at $77,500 and $80,000? Should one act decisively when nearing the target instead of waiting for even lower prices? Given the current high market sentiment volatility, how would you specifically execute your investment strategy? For example, when the market is full of extreme greed or fear, stock market volatility might be low, but the VIX index reaches 28. In such a case, would you enter the market directly and decisively, or maintain discipline by setting price targets and executing through limit orders?
Matthew Sigel: My personal style leans toward a gradual approach. I typically choose dollar-cost averaging, such as investing a fixed amount at a certain price level or making regular investments every two days. As professional investors, we have a dedicated trading team that helps find liquidity and execute trades. This is one of the advantages of institutional investment, allowing us to adopt a more disciplined investment approach.
However, I believe there is no absolute right or wrong way. The key lies in making informed and reasonable decisions based on one’s logic and client needs. For me, slowly building positions aligns better with my style.
Why $NODE Performs Well
Anthony Pompliano: Let’s talk about publicly listed stocks related to Bitcoin and the crypto industry. Your ETF product $VanEck Onchain Economy ETF (NODE.US)$ has performed exceptionally well since its inception, with gains reportedly between 28% to 32%, surpassing the performance of Bitcoin itself.
Generally speaking, many believe that Bitcoin or crypto assets themselves should outperform related stocks, but over the past year, we have seen some different trends. Could you discuss the public stock strategy for $NODE and your asset allocation thinking among these companies?
Matthew Sigel: Indeed, from an investor's perspective, whether institutional or retail, many prefer to gain indirect exposure to the crypto industry through equities. This is because financial disclosures for stocks are more standardized and can be directly integrated into their brokerage accounts. A significant shift since the election, from my observation, is that investment banks have started showing willingness to underwrite crypto-related assets. This explains why we've seen numerous IPOs, SPACs, and secondary offerings over the past year. At Van Eck, we were fortunate to adjust our strategy post-election to focus on investing in crypto-related equities. This approach has proven correct. Since the launch of $NODE, Bitcoin's price has dropped by 16%, while related stocks have risen significantly. We identified AI’s profound impact on Bitcoin miners and constructed a relatively low-volatility portfolio.
Of course, our portfolio experienced some drawdowns, but compared to other competitive products in the market, we successfully mitigated some downside risks by strictly controlling position sizes. In this early-stage industry, many small-cap and highly leveraged companies face execution and operational risks. I believe there is no need to take excessive risks, such as allocating 10% to a single position. Instead, I prefer concentrating risk within a range of 1% to 4% and leveraging market volatility to find advantages.
Moreover, our definition of crypto-related stocks is relatively broad. We not only focus on companies whose primary business is closely tied to the crypto industry but also include those entering Bitcoin's value chain through tokenization or sales. These companies can achieve cost savings and generate revenue through related operations, which also significantly impacts their price-to-earnings ratios. Therefore, my investment style involves small-sized positions, high diversification, and applying a 'buy low, sell high' strategy within the market. So far, this approach has yielded positive results.
Anthony Pompliano: The companies you mentioned do not necessarily derive most of their business from the crypto industry. Could you provide an example of companies that sell products to the crypto sector or utilize relevant technologies but are not traditionally considered crypto companies?
Matthew Sigel: Let me give you an example—Hynex, a South Korean memory manufacturer primarily serving the semiconductor industry. Competing with Micron and SanDisk, it operates in an oligopolistic market. When Bitcoin mining equipment sales perform well, Hynex’s DRAM business accounts for single-digit to mid-single-digit percentages in Bitcoin mining applications. Marginally, this does have a certain impact on its overall business, though not a dominant one. However, when considering the influence of artificial intelligence on supply chains, supply and demand dynamics change significantly. Companies like Hynex currently trade at a price-to-earnings ratio of around 5x, making them highly attractive from a valuation standpoint. Our allocation to Hynex is approximately 1%. The company benefits not only from its association with digital assets but also from other structural growth opportunities. This serves as an excellent example.
What could reverse the downturn for Bitcoin miners?
Anthony Pompliano: Bitcoin miners have faced significant setbacks in recent years, especially after Bitcoin's price peaked. What factors do you believe could reverse the downturn for miners?
We recently discussed an interesting perspective from Howard Marks during a 2018 Wharton interview. He referenced a common metaphor in investing—'catching falling knives.' His strategy wasn’t about trying to precisely time the bottom but gradually accumulating positions as prices approached the bottom, even if they might continue to fall, while continuing to add positions as the market recovers. So, what do you think could trigger a turnaround in trends for Bitcoin miners?
Matthew Sigel: I strongly agree with Howard Marks’ perspective, which aligns with the investment strategy I previously mentioned. Once the decision to buy is made, there’s no need to commit all capital at once; instead, adopt a gradual approach to rationally respond to market fluctuations.
From my analysis, two main factors could help miners emerge from their difficulties. The first is revenue performance in the artificial intelligence space. There is considerable debate in the market about whether investments in AI will yield tangible returns. I believe AI’s benefits are more evident in cost optimization rather than direct revenue increases. By cutting operational costs, businesses can more significantly boost earnings per share, sending a positive signal to the market. For instance, OpenAI recently struck a partnership agreement with Target to integrate its technology into retail applications and checkout processes. This deal may reach nine figures, and although limited information has been disclosed so far, as similar transactions emerge, market confidence in AI could gradually strengthen.
The second factor is the monetary policy of the Federal Reserve. If the Fed chooses to cut interest rates, it will significantly improve market liquidity, which is crucial for Bitcoin miners. The market currently remains divided on whether the Fed will cut rates in December, but once liquidity improves, the financing pressure on miners will be somewhat alleviated.
Overall, these two factors—the revenue performance of artificial intelligence and the Fed's monetary policy—could become key drivers in reversing the downturn faced by Bitcoin miners.
Anthony Pompliano: When we talk about publicly listed companies related to cryptocurrencies, Bitcoin miners are a significant area. In addition, there are stablecoin providers, such as $Circle (CRCL.US)$ 、 $Gemini Space Station (GEMI.US)$ and $Coinbase (COIN.US)$ , as well as some infrastructure companies and other related sectors. How do you view these companies?
Matthew Sigel: Circle is a typical example, once overvalued due to market enthusiasm, and now going through a period of valuation adjustment. However, at the same time, their market share is actually gradually increasing, so in the future, we may increase our allocation to such companies in our portfolio. Returning to Bitcoin miners, we have learned one thing from recent market dynamics: the critical role of capital costs. Over the past three months, almost all mining companies have been raising funds to support their AI infrastructure construction. This is a capital-intensive process, and we are beginning to see a divergence in capital costs within the industry. For instance, $Cipher Mining (CIFR.US)$ A recent agreement with Fluid Stack (backed by Google) to build infrastructure through debt financing has been announced. Meanwhile, companies like $Bitdeer Technologies (BTDR.US)$ have had to rely on convertible debt, while $CleanSpark (CLSK.US)$ has similarly adopted dilutive financing methods. This disparity in access to capital will exacerbate the 'winner-takes-all' phenomenon within the industry, making it more imperative for investors to favor large mining firms with a capital advantage.
Anthony Pompliano: Economies of scale seem to be becoming an important topic of discussion. In the past, it may not have been a critical issue due to the smaller size of the industry. But as the industry matures, scale is becoming increasingly important, whether in private markets, liquid crypto assets, or some early public companies. For instance, Coinbase has grown into a truly large company, and there are also a few mining companies that have broken through scale limitations. In traditional industries, economies of scale are often crucial. This now holds true for the crypto industry as well—either achieve scale, or risk being marginalized.
Matthew Sigel: I completely agree. In the early days, the primary strategy for Bitcoin mining was to find the cheapest electricity and achieve profitability through regional resource advantages. However, due to limited funding from Wall Street for these operations, mining companies struggled to achieve economies of scale. This situation is changing now, especially at the intersection of artificial intelligence and the mining industry. Like $TeraWulf (WULF.US)$ and $Cipher Mining (CIFR.US)$ Such companies have already been able to expand their business scale through debt financing. Although these financings are rated lower, their impact on minority shareholders represents a significant turning point.
However, I believe Bitcoin mining still exhibits strong regional characteristics. For example, Cipher operates in Texas, TeraWulf in New York, and Bitfarms concentrates in the PJM region (the PJM region refers to the PJM Interconnection, the largest Regional Transmission Organization (RTO) in the U.S., responsible for managing the electricity system covering 13 states in the eastern U.S. and Washington, D.C.). Direct competition among these companies is not yet intense, but there are signs that they are beginning to expand into more regions. For instance, TeraWulf recently indicated plans to enter Texas to serve more customers. As the industry evolves, the advantages of economies of scale will gradually emerge, but similar to the utility sector, regional factors will continue to play an important role.
Assessing the balance sheets of companies holding Bitcoin
Anthony Pompliano: $Strategy (MSTR.US)$ Companies incorporating Bitcoin into their balance sheets have already demonstrated significant scale effects. There are now many companies in the market starting to include Bitcoin or other crypto assets on their balance sheets; some are traditionally listed companies, while others have gone public through reverse takeovers or SPACs. What is your view on the entire digital asset market, and how might these assets accumulate value in the future?
Matthew Sigel: Our perspective on this field is relatively cautious. We believe that many small-cap digital asset companies in the current market may struggle to sustain high valuations over the long term. Of course, this does not mean that no such companies exist, but there is no reason to assume that so many small companies can maintain a premium. In my early career, I studied the Asian markets, where there were many Net Asset Value (NAV)-type companies, typically trading at a 50% discount, especially when there was no clear path to a change in control or minority shareholders could not realize the value of assets. Therefore, our strategy is to avoid such companies, although there may be exceptions in certain cases. As valuations decline, we also see some small companies beginning to sell Bitcoin and repurchase shares, and activist investor interventions may create opportunities for these companies.
I am closely monitoring $Strive (ASST.US)$ Whether the transaction can be successfully completed remains to be seen. If the transaction is completed, I believe Strive's risk-return profile may become more attractive because their preferred stock structure is relatively straightforward, enabling fixed-income investors to more easily assess risks and returns. For instance, Strive’s preferred stock repurchase price is set at $110, with an issuance price of $75 and a par value of $100. Moreover, they manage interest rates to keep the target price between $95 and $105. This design allows investors to better gauge both upside and downside risks.
In contrast, Strategy’s preferred stock structure is more complex. Although they maintain close ties with convertible bond arbitrageurs and can trade at a premium throughout the cycle, creditors still face significant uncertainty as the company retains the option to redeem the debt. This design increases the difficulty for creditors to assess risks and may not be as favorable to fixed-income investors.
A similar situation can also be observed in $METAPLANET INC (MTPLF.US)$ . They recently announced a new preferred stock structure that resembles Strive's model, but this may not be optimistic for them. The reason is that this structure enhances the power of bondholders, giving them priority over cash flows while diminishing potential gains from the equity portion. While this could be a more sustainable option for bond investors, it might negatively impact shareholders, especially for companies relying on equity returns, as this design could become a burden.
Anthony Pompliano: There are also some market doubts regarding these companies’ ability to repay their preferred stock debt. For example, Saylor mentioned that if Bitcoin grows by only 2% annually, they can still sustain operations in the long term. If there is no growth at all, they can fund operations through stock sales for up to 70 years. What is your view on these companies’ debt repayment capabilities?
Matthew Sigel: This depends on the specific structure of each company’s balance sheet. For example, companies like Strategy rely heavily on Bitcoin price appreciation and unrealized gains to support their debt repayment capacity. They can borrow further against these unrealized gains to sustain operations. Meanwhile, smaller companies tend to sell Bitcoin directly to repay debts. While this approach may boost investor confidence, it raises a question: If these companies begin selling Bitcoin en masse during a bear market, what impact will it have on the market? Such a scenario could exacerbate downward pressure on Bitcoin prices, especially when market sentiment is weak.
Anthony Pompliano: If these companies start dumping Bitcoin collectively, what do you think will happen in the market? Do you believe forced liquidations might occur? For instance, could Michael Saylor be compelled to liquidate assets?
Matthew Sigel: This situation is likely to amplify downside risks for Bitcoin prices, particularly under weak market sentiment. I believe Saylor’s case is unique; even if Bitcoin falls 50% from its peak, he would not need to sell assets. He can negotiate with creditors to refinance. However, for smaller companies, the situation could be more complicated. If these companies’ stocks trade at a 50% discount to their net asset value, activist investors may seek board seats and push for corporate governance changes or even liquidation through legal means, returning assets to shareholders. This process is typically lengthy and could take one to two years.
Anthony Pompliano: So, for companies holding Bitcoin but not classified as Bitcoin companies—such as Tesla or Block—do you think this trend will continue to grow, or will the market differentiate?
Matthew Sigel: This is a noteworthy issue. We observed a similar phenomenon while managing the Node ETF. For instance, companies like Tesla and Allied Resources (ARLP), despite holding Bitcoin, have not been rewarded by the market with significant valuations for these modest Bitcoin holdings. However, this situation could reverse as the market evolves. Recently, MSCI considered removing Strategy from certain indices, which may prompt many companies to adjust their strategies, capping their Bitcoin holdings below 49% of total assets to avoid exclusion from the indices. Such a strategy allows companies to benefit from Bitcoin’s appreciation while retaining eligibility within the indices. The market is always evolving, and I believe that as rules are adjusted, the market may assign higher valuations to companies holding small amounts of Bitcoin.
Matthew's Outlook on Altcoins and Bitcoin Dominance
Anthony Pompliano: Your team has spent considerable time researching crypto-assets and publicly traded companies associated with these assets. What is your current view on crypto-assets other than Bitcoin?
Matthew Sigel: Objectively speaking, we have not been as aggressive as some ETF competitors in launching single-token solutions. We have filed applications for a BNB ETF and an Avalanche (AVAX) ETF. Frankly, the market is oversaturated, and the inflation rates of altcoins remain high. Beyond their speculative nature, they have yet to truly find product-market fit.
Therefore, our stance in this area is not particularly optimistic. Clearly, the market has significantly retraced. Yesterday, I attended the MultiCoin Summit and found that Solana has excelled in building cross-industry ecosystems. Many sectors are leveraging its blockchain architecture. However, compared to some company chains (such as Tempo or Circle), decentralized blockchains lack support from sales teams. Company chains typically attract merchants through sales teams and incentivize employees with stock options to expand the market, whereas decentralized blockchains can only rely on community efforts and monetization potential to seize opportunities. This conversion mechanism is not direct enough to drive merchant adoption of their payment systems like Visa, Mastercard, Square, or Solana.
Anthony Pompliano: What about performance relative to Bitcoin? Historically, during bull markets, altcoins tend to outperform Bitcoin. But this time, it seems Bitcoin has outperformed most altcoins, surprising many. Why is this happening?
Matthew Sigel: From a fiat-currency-denominated perspective, Bitcoin has indeed outperformed other assets. I believe Trump’s deregulation policies have negatively impacted altcoins because decentralization, as a feature, has been undermined in the new regulatory environment. In the previous regulatory context, Ethereum had a clear advantage among decentralized alternatives. Now, that edge has been leveled, placing every project on a relatively even competitive footing. This is also part of the reason why company chains are gaining prominence. These companies are not entirely decentralized, nor do their roadmaps explicitly aim for decentralization, but they can leverage tokens to engage in businesses that were once deemed illegal. This has eroded some of the differentiation advantages of genuinely decentralized projects such as Ethereum and Solana.
$NODE Inside: Structure, Allocation, and Strategy
Anthony Pompliano: Could you briefly introduce NODE to everyone and explain your investment strategy?
Matthew Sigel: NODE is an actively managed ETF, where we can allocate up to 25% of our assets in cryptocurrencies through ETF investments. Currently, we hold 11% in Bitcoin ETFs, approximately 1% each in Ethereum and Solana.
The remaining portion consists of stocks related to this field. Our objective is any company that has articulated a strategy for making or saving money by adopting Bitcoin, blockchain, or digital assets. I personally believe that Bitcoin mining companies are transitioning into AI companies. Mining enterprises represent the largest exposure in the fund, accounting for approximately one-third. The rest of the capital is allocated across fintech, e-commerce, energy infrastructure, and others. This diversification aims to smooth out portfolio volatility.
If we were to invest solely in pure-play companies within the crypto sector, such as Strategy and Coinbase, the volatility of these highly leveraged companies could be extremely high, even reaching up to 10%. Based on feedback from institutional investors, volatility is one of the biggest challenges in the crypto space. Therefore, our strategy is to reduce overall volatility through diversification while still allowing investors to benefit from the growth dividends brought about by the widespread adoption of digital assets.
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