Steven McClurg: The Bitcoin Top Was Oct 4th — Prepare For Another 30% Drop?

Key Concepts

• ETF (Exchange Traded Fund): An investment fund traded on stock exchanges, offering diversified exposure to assets like cryptocurrencies.
• Basis Trade: Simultaneously buying a cryptocurrency spot and selling its future, profiting from the price difference.
• Four-Year Cycle: The historically observed cyclical pattern of Bitcoin price movements, linked to halving events.
• DAT (Digital Asset Trust): A type of investment vehicle offering exposure to digital assets, often with different structures than ETFs.
• Spot ETF: An ETF that directly holds the underlying asset (e.g., Bitcoin, XRP) rather than futures contracts.
• Generic Listing Standards: SEC requirements for listing ETFs, often tied to the existence of a futures market for the underlying asset.
• K-Shaped Economy: A situation where economic recovery is uneven, benefiting a small segment of the population while leaving others behind.
• Tokenization: The process of representing real-world assets as digital tokens on a blockchain.

Cryptocurrency Market Outlook & ETF Strategy: A Discussion with Steve McClur (Canary Capital)

This discussion between Chris Perkins (Coin Fund) and Steve McClur (Canary Capital) centers on the current state and future trajectory of the cryptocurrency market, with a particular focus on the role of ETFs and evolving market structures. The conversation delves into Canary Capital’s strategy, the impact of macroeconomic factors, and predictions for the coming year.

Canary Capital’s Approach to Crypto ETFs

Steve McClur details the founding of Canary Capital, initially intended as a hedge fund and active private product manager. The firm pivoted towards ETFs following the potential for a Trump victory in the 2024 election and the possibility of altcoin ETF approvals. Canary strategically filed for ETFs of assets deemed not securities – Litecoin (explicitly excluded by Gensler) and XRP (which had filed as a commodity). They subsequently launched ETFs for XRP and Solana, prioritizing first-mover advantage and identifying tokens with strong ecosystems and longevity. Canary’s approach emphasizes identifying demand (volume, market cap, global trading) and assessing the long-term viability of projects, avoiding those with teams that have abandoned projects.

The Democratization of Crypto via ETFs

Both Perkins and McClur agree on the inherent alignment between ETFs and cryptocurrency. ETFs simplify access to previously inaccessible assets, mirroring the way traditional ETFs democratized access to complex financial products like asset-backed securities. Perkins notes the ease with which his father could now access Ethereum through an ETF, highlighting the accessibility benefit. McClur emphasizes the significant fee reduction ETFs offer compared to direct exchange trading (e.g., $100 per trade on exchanges vs. pennies spread plus a 1% management fee for ETFs).

Canary’s client base is currently a mix of approximately 20-30% retail investors and 70% “fast money” (institutional and active traders), with increasing institutional interest.

Token Selection & Future ETF Development

Canary’s criteria for selecting tokens for ETFs include demand analysis (volume, market cap, global trading) and assessing the project’s long-term sustainability. They are currently focusing on protocols with promise, even if not in the top 10 by market cap, prioritizing strong development teams and active ecosystems.

Looking ahead, Canary plans to launch more sophisticated ETF structures, including actively managed ETFs (currently limited by listing standards) and an index focused on blockchains “made in America.” They filed for an index focused on American-made blockchains.

The Importance of Futures Markets & Basis Trading

A significant portion of the discussion revolves around the necessity of futures markets for unlocking the full potential of crypto ETFs. Current SEC listing standards require a six-month futures market to qualify for a single-token ETF. McClur and Perkins both highlight the importance of “basis trading” (buying spot and selling futures) as a key driver of ETF inflows, particularly for XRP and HAR. The collapse of the basis trade in Bitcoin contributed to recent outflows from Bitcoin spot ETFs. They agree that establishing robust futures markets in the US is crucial for further institutional adoption and unlocking more sophisticated ETF strategies.

Macroeconomic Factors & Market Predictions

McClur presents a somewhat contrarian view, attributing recent market softness to Bitcoin miner capitulation driven by rising energy prices and the shift of miners towards AI data centers. He believes the four-year cycle remains relevant but will become less pronounced. He predicts a peak in the cycle on October 4th, with a potential 30% further decline, followed by a trough in mid-to-late 2026, coinciding with potential Fed rate cuts and the midterm elections.

Perkins counters with a more bullish outlook, citing the dovish shift in Fed policy, the potential for a new Fed chair, and the increasing institutional adoption of crypto. He anticipates a positive impact from the upcoming midterm elections.

The Future of DATs & Market Structure

McClur predicts a consolidation in the DAT (Digital Asset Trust) space, with only the largest and most efficient DATs surviving. He criticizes the high fees and complex structures of many DATs, contrasting them with the simplicity and transparency of ETFs. He believes DATs will primarily appeal to institutional investors and active traders, while ETFs will become the preferred vehicle for financial advisors and retail investors.

Both agree on the need for a more efficient market structure, particularly regarding stablecoins. McClur advocates for a registration framework that allows stablecoins to offer yield without triggering security regulations. They also discuss the emerging trend of exchanges like Coinbase offering equity trading alongside crypto, potentially driving down trading fees and increasing competition.

Final Predictions & Key Takeaways

McClur’s primary prediction is that the peak of this cycle has passed, anticipating another 30% drawdown before a potential recovery in mid-2026. He emphasizes the importance of staying humble and building during the downturn. Perkins, while acknowledging the challenges, remains optimistic about the long-term prospects of crypto, driven by macroeconomic tailwinds and increasing institutional adoption.

This conversation provides a nuanced perspective on the evolving crypto landscape, highlighting the critical role of ETFs in democratizing access, the importance of market structure improvements, and the interplay of macroeconomic factors. The discussion underscores the need for careful analysis and a long-term investment horizon in this dynamic asset class.