Tyler Evans on BMTV: Bitcoin’s Asset Allocation Problem

Well, Bitcoin is ripping this morning, up 5% on the day, cracking over $80,000 per coin for the first time in a couple of weeks. And I think we all know why. It's because our buddy Tyler Evans is in the house, CIO of UTXO Management and Nakamoto. Thanks for coming in today.

Yeah, great to finally be on set with you guys.

I know we've been wanting to have you in here. Glad we can make it happen. Tyler, you've been investing in Bitcoin since 2013, and you were there at the very beginning of BTC Inc. Bitcoin was not at 80K back then. Take us through those early days when you and David came together and started this company and this vision. What was the long-term view originally?

Well, it was really all about education. We were fresh out of college, obsessed with Bitcoin, but with no real-world skills. And so the thing we thought we could do is just tell people what we were passionate about, which was Bitcoin. And so that started with Bitcoin Magazine, and Bitcoin Magazine really, in the early days, before Bitcoin was even a hint of an institutional-grade asset, was there to answer the questions that we were getting from our friends and family and fellow college students about what is Bitcoin?

Why is it secure? Why does it have value? What is mining, et cetera? And that was the spark that lit it all for this decade-plus journey we've been on together, really trying to educate the world about Bitcoin. And that's probably what I'm most proud of: our conferences, our media operations, the millions of people around the world who've learned about Bitcoin through BTC Inc.

So as the CIO of UTXO, you're looking at Bitcoin from a very different perspective. You're looking at public markets, private companies, credit, treasuries, derivatives, capital flows. When you step back and look at the market through that lens, what do you think you're seeing that the average Bitcoiner might miss?

Well, especially with the price move we have today, Bitcoin back over 80K, I think it's important for people to zoom out and realize how impactful this move is for Bitcoin. If I had told you three months ago, middle of the summer, Bitcoin's sitting at 60K, sentiment is at all-time lows, and I just told you that the CLARITY Act had failed, was dead on arrival, and that the Fed just hiked rates again, would you have even dreamed that Bitcoin would be up on the week?

No, sir.

That it would be back over 80K here. And so I'm really a firm believer, from all the time I've spent in Bitcoin, that as much as we like to think that that narrative is what drives price, it's actually the other way around. And now the market needs a new narrative to explain what's going on with Bitcoin and why is it up this week? The CLARITY narrative is dead. The rate hike, rate easing, liquidity narrative is dead. The debasement trade narrative is picking up. And so I think the market is out there searching for a new narrative to make sense of what we're seeing on the spot flows of Bitcoin.

And I think if you don't understand that narrative, or if you're on a desk that's short Bitcoin right now, you're short because of CLARITY, you're short because of rate hikes and you see it going up right now. It's time to take a close look at your position and try to rationalize what's actually happening in the market today.

Well, if you could rewrite that narrative, what would it be?

I think it's a couple of factors. The one I really see picking up the most in the Bitcoin community is just that the bear market's over. And that's what people have been waiting for for a long time. And I think, reflecting on this past week, not just the catalysts this past week, but the past couple of months, in terms of the cybersecurity incidents and all the global chaos happening in the world. There's plenty of narratives for why Bitcoin should have sold off again or should have retraced this move back to the low 60s.

And the fact that it hasn't done that and that spot ETF flows are picking up and that Bitcoin is rising even with the biggest buyers, Phong and Saylor, not in the market today, I think is pretty telling.

Absolutely. It seems like the sellers are thoroughly exhausted. As CIO, you're thinking about allocating capital, you're making capital allocation decisions. There's so many new products. You talk about new narratives, but there's so many new products now for these narratives to form around. You've got digital credit, you have the equities, and you have Bitcoin spot itself. For people listening, whether they're an institution or whether they're an individual trader or a family office, at what times do you want just spot Bitcoin exposure, or what times does something like digital credit make more sense?

And at what time do you want equity exposure?

There are some thoughtful ways you can rotate through all those different products as you express a market view or try to time the market cycles. And that is a lot of what we focus on within our hedge fund at UTXO Management. It's being positioned in the high beta, the low beta, the most amplified Bitcoin, depending on the market regime. But I think what these products really offer is just a bigger door to institutional capital flows. And at this stage in Bitcoin's life, it's really that institutional capital that's moving the needle.

And what I've said for a long time is, especially among the institutional crowd, Bitcoin really has an asset allocation problem. Spot Bitcoin as a commodity doesn't fit cleanly into the mandates of many pension funds, insurance funds, global multi-strat funds. And so who, what portfolio manager is even the one who gets to look at Bitcoin, or how do you put it in credit, equities, long/short, special sits, fundamental strategies? Where does Bitcoin sit in that mix? And so what all these new products, whether it's the publicly traded equities, whether it's amplified Bitcoin, whether it's the digital credit products, whether it's the convertible bonds that are backed by Bitcoin, what those really serve in the market is translating this commodity asset class into those buckets that are familiar to traditional allocators where a BlackRock fixed income has an instrument that fits cleanly in their mandate, that they can buy, that is powered by Bitcoin or is backed by Bitcoin credit exposure or that is fundamental to the Bitcoin ecosystem. And so I think we've seen a huge success with the growth of those, but we're also just scratching the surface here, especially on the credit front where fixed income funds today still don't even have a great way to allocate to this space.

And the macro picture is changing rapidly as well. Are any of these particular buckets, whether it's credit, equity or spot Bitcoin, uniquely positioned over the others to benefit from this debasement trade you're talking about or the macro headwinds hitting other vectors in the marketplace?

Well, I think really spot Bitcoin is going to be a story, but it's especially as this debasement trade narrative has picked up some steam, and you've got both Bitcoin and gold rising. But it's all about, again, how can a particular subset of investors express that view? There's a lot of funds that can only own ETFs, for example, or can't own spot commodities. You don't have many hedge funds that have just spot commodity exposure, but maybe they can buy equities. They could buy a gold miner or they could buy a Bitcoin treasury company to give them a proxy for that exposure.

And as this continues to amplify and more people catch on to this trend, spot gets bid up.

So here, on ARR outlook, does UTXO have an official estimation of what we expect Bitcoin's ARR to be throughout this next epoch, at a certain percentage?

We've got a number of fundamental models we've built internally, looking not only at Bitcoin's history, but at the growth of other monetary assets that have gone through this kind of growth phase, and the numbers are all over the place. I think the number that we landed on, that is our conservative, bet-the-farm estimate for our forward-looking Bitcoin ARR projection, is around 22%. And that's our base conservative case.

So you're also a director at Metaplanet, and they just announced Superplanet, of course, where they're putting 2,100 Bitcoin into a Nasdaq-listed US vehicle. Could you explain the idea behind Superplanet for those who aren't familiar? And what does the structure allow Metaplanet to do that it couldn't really do with a Tokyo-listed company?

Well, I can't really comment on behalf of Metaplanet as a director, but just looking from the outside, this is a very big move. Simon, the CEO, mentioned that this has been in the works for many, many months. And I think if you step back and look at the landscape, Metaplanet has had an incredible success story in Japan and in Asia more broadly. But the US remains the largest, the most liquid capital market, the most flexible capital market, especially in terms of innovating around financial products and issuing digital credit products.

And so I think this move is probably very strategic for Metaplanet to be able to tap the US capital markets and to build a bridge of capital, of liquidity, built around Bitcoin at its center, between the US and Japan. And so I hope they get the transaction closed officially here in Q4 and I look forward to how Metaplanet enters the US capital market now through this subsidiary, Superplanet.

Well, let's bring it back in-house then. So you've got a rare vantage point here, with Nakamoto owning the media side of things, BMTV and Bitcoin Magazine, the Bitcoin Conference. You have stakes across Bitcoin startups and treasury companies, plus with UTXO, you have a front-row seat to how the whole digital credit market is changing. How do you think this helps you see things that maybe other traditional investors aren't?

Well, the front-row seat analogy is very apt and I think that's one of the most fun parts about my role, working at Nakamoto, is getting to see the bits and pieces happening across the entire ecosystem. Maybe it's starting small on the venture side. We're seeing a lot of startups innovating around Bitcoin and AI agents today, abstracting all the complexity of UTXO management and wallets and private keys, and making it as simple as just instructing your agent to do something financial on your behalf. And so seeing those narratives start small with innovators who are on the cutting edge of AI or technology and how that filters up to become a global story and then ultimately becomes one of those drivers or narratives that allocators look to, to explain the price going up. Of course, Bitcoin is going up because it's the preferred money of AI agents. So we'll see what those real trends are that are the catalyst for the next phase of growth for Bitcoin over the next couple of years. But having a 30,000-foot view, where I can drill into not just what's happening in the public markets, but on the developer side, the open-source side, the startup side, is a lot of fun and what I really enjoy.

And looking forward, where do you see the most opportunity for UTXO? Is it on the venture side with some of these agentic startups or whatever else might be in that category? Is it on the equity investments? Maybe you're providing seed capital to explore BTCTCs in additional jurisdictions and markets. Or is it on the digital credit side? I know you just brought in Dan Hillery, who we spoke to yesterday, to build that out. Where do you think the most exciting opportunities lay ahead for UTXO?

Well, our goal at UTXO is really to provide products to help that institutional capital get exposure to the Bitcoin ecosystem for whatever fits their risk profile, fits their mandate, fits their time horizon, fits their liquidity profile. And so across all of those products, the funds we offer and advise, what we're really looking to do is find where the new capital is flowing into the Bitcoin complex as a whole, and being able to offer advice, education, research, and eventually financial products to help grow that sector. And so, like you mentioned, digital credit is one of the things we're incredibly excited about right now. We see the opportunity for a lot of growth there over the next couple years.

And we think that digital credit really has a packaging problem, or a packaging opportunity in the types of investors who are buying it today compared to the total addressable market of digital credit. I'm sure Dan shared more on the specific things we're working on around digital credit, but that's one of our focuses over the next couple years.

And I think we're still clearly very much in the early stages of that digital credit narrative, right? We have these preferred securities and we have structured credit on top of those assets. In terms of building a real Bitcoin capital market, what pieces of that market do you think are still missing?

Again, I think it's really, truly on the credit and the fixed income side. For all the success of the digital credit products, as we call them colloquially, ultimately, from a legal standpoint, these are still preferred perpetual equities. And so the fact that they're equities, that they don't have the same credit ratings as a typical bond, that they don't have duration, and that they're not true fixed income products makes them inaccessible for a lot of traditional fixed income investors as perpetual equities. And so that's one of the opportunities that we're really focused on solving.

And I think that's both for digital credit. And there's also an opportunity for just Bitcoin more broadly, with BitBond-type constructions. How do you fit Bitcoin allocation in a true credit framework that can have a credit rating, that can have a fixed duration, that can have a covered loss ratio, that you can underwrite using traditional fixed income or credit metrics? And when you look at the size of global equities compared to global bonds and fixed income, that's a massive opportunity to increase liquidity for Bitcoin overall.

And you mentioned BitBonds in there. How far away do you think we are from that market maturing and maybe even having sovereign actors come into that space?

I think we've got a ways to go there. It's early, but it's promising. I think honestly the success of the digital credit products today is starting to open a lot of those doors, or open a lot of those conversations, for how you could build a credit structure on Bitcoin specifically, using the same tricks in Wall Street's playbook. So how do you take an asset and tranche it up and have the mezzanine and have different maturities to fit the different buckets of institutional allocators?

And more in the short term, you mentioned agent trading and some of the AI and Bitcoin synergies you're seeing at the VC level. BPI put out a study on how agents, the overwhelming majority of the time, are preferring Bitcoin for payments and as a store of value. So do you think that's a trend that people need to take more seriously? It seems like a lot of times now people think it might be marketing or a fad. Is that something where your thesis is directionally, hey, this is going to last a long time and bring real demand to the Bitcoin market?

I think it's very early and there's a lot of marketing there, but there has to be for any good idea to really latch on. And I think that BPI study was pretty impactful. If you just take a step back and think from first principles about what types of money, what global settlement network makes sense for a truly global, real-time set of autonomous agents who are collaborating and exchanging value for goods and services and data and API access, and building a true agent economy worldwide, Bitcoin has a role to play there. And so that's a huge opportunity, but it's very early stage and I would hesitate to even say that we've seen anything that truly has product market fit there yet today.

Tyler, this has been so fantastic. I can't let you go though without asking about your alma mater. You headed to Bama-FSU this weekend?

Oh, sadly not.

You'll get out there.

Yeah, there you go. 19-point favorite, so it's looking good for them.

I'll take it in a revenge spot. All right. Tyler Evans, CIO of UTXO Management and Nakamoto. Thank you so much.

Thanks.

We'll get you back in here soon.

Thanks, Grace. Thanks, Sean.