Digital Asset News host discusses small cap rotation, rate hike expectations, and Bitcoin accumulation strategy
Digital Asset News host covers market rotation from large caps to small caps, incoming rate hikes, and a long-term Bitcoin buying strategy.
Summary
The Digital Asset News host covers several interconnected market themes in this episode. He opens by clarifying that the "small cap rotation" he is discussing refers to the Russell 2000 — not altcoins — and notes that smaller cap stocks, including several AI-adjacent names such as Bloom Energy and IonQ, have been outperforming larger caps. He then walks through rate hike expectations from Bank of America and Deutsche Bank, who are forecasting between 50 and 75 basis points in hikes for 2026, and notes that the CME Group's probability data has shifted from a 95% chance of rates holding in July to roughly a 60/40 split. He argues that rate hikes, while unsettling in the short term, are historically just noise against the backdrop of long-term M2 money supply expansion. As an example, he points out that Japan's Nikkei crossed 72,500 for the first time and posted its biggest weekly gain since August 2024, noting that this counters the narrative that rate hikes inevitably collapse markets. He also touches on an Illinois bill imposing a 0.2% tax on crypto holders, which he views as a troubling precedent. Additionally, he briefly references Leopold Aschenbrenner's investment positions in AI-infrastructure names and a JD Vance comment about the government buying AI companies, deferring full discussion to a second channel.
Key Takeaways
FULL TRANSCRIPT
Introduction: Small Cap Rotation and Today's Market Overview
Host: When we talk about small caps, everybody gets super excited and says, "Oh, it's going to be altcoins." That's not what we're talking about today. We're actually talking about the Russell 2000. We're going to take a look at a little bit of rotation going on right now from larger caps to smaller caps. And also, we're going to take a look at Deutsche Bank, and it looks like there might be some rate hikes coming. But really, what we need to look at is the data behind the data. So let's just jump right into it.
This morning is a little bit of a drop back, especially in the S&P 500. We're down a little bit — not too grandiose, it's just what it is over the last five days or so. One day we're down 0.3%, five days down 0.5%, one month pretty much flat. That's pretty much what it is with the S&P 500. Although we've had some miraculous massive gains in the AI sector, right now the S&P 500 is kind of moving flatly because the markets don't know what's really happening. The markets do not like ambiguity. And of course, because the Iran-US memorandum of understanding fell through for the 77th time, the market doesn't know what to do. Because of that, you'll see little rotations into stores of value. Gold today is up almost a percentage point, even though the S&P 500 is down a little bit. So we see little chinks in the armor and we can see that there is a little bit of rotation going on.
Precious Metals Performance
Now, gold over three days is up 0.87%. One week is still down. One month it's still down. Tell Peter Schiff this isn't a great store of value — I'm just kidding. Three months down 20%. Okay, now you can tell Peter Schiff this isn't a great store of value. But over a year, 24%, and over five years, 120%.
We take a look at silver — the same type of thing. 24 hours we're up a little bit. Three days, not too bad, 2%. One week, hmm. One month — wow — 25% in three months. But over a year, 100%. That's not too bad. Silver is a pretty good one. We'll see. And then of course you've got platinum, and platinum is doing not too bad as well — 26% just for a year.
Bitcoin Accumulation Strategy
But the real story then, of course, is rotation to our favorite asset, which would be Bitcoin. Congratulations also to Saylor and Strategy as they pick up more Bitcoin. You might not know what's going on with Strategy — hopefully that gets resolved. They have $1.5 billion waiting in their treasure chest, so we'll see how it works out.
Today, 24-hour performance is up 6.45%. It actually peaked at 65, which was kind of a bummer for me because I buy Bitcoin every single Monday morning. We can see that the risk levels came in at 0.308 — almost short enough for the risk levels to actually trigger me to buy more. Now, I made a mistake in 2022. What I did was this thing called micro-DCAing. If I had just been buying in the bear markets — which is what I feel we are in right now — I would have been doing a heck of a lot better. So I'm not going to take my foot off the gas. I'm going to keep buying, and as the price keeps going down with Bitcoin, I will keep accumulating. That is the strategy that I have, and we'll see if it works out in the next bull market.
Russell 2000 and Small Cap Rotation
So we have these things going on. We talked about rotations. The small caps I was referring to are the Russell 2000. The S&P 500 — the majority of those are essentially the AI stocks, the big guys: the Teslas, the SpaceXes, the Amazons, Meta, stuff like that. Although Meta's been kind of kicked out of the Mag 7. But we can see the Russell 2000, which are smaller caps, has done a pretty good job over the last 24 hours, the last five days, the last month, the last six months, and the last year. It's up 40% over a year. These are the smaller caps that are out there.
One of the smaller caps that has caught my eye — and this is a Digital Asset News channel, so we're not going to delve too deep into this — is Bloom Energy. As far as portfolio weight, it's listed on the Russell 2000. It'll be graduating to the Russell 1000 in roughly a couple of weeks or so because it's been doing so fantastic. But what do you notice here as far as the top holdings by weight? It's all tech and it's looking like it's an AI play as well: Crito Tech Group, Bloom Energy — we need the picks and shovels — Sterling Infrastructure, Fraet, TTM Technologies, and IonQ. So we can see that it's not all AI, but it's kind of adding up.
If we take a look at some information from Ivan on Tech and look at his bull mania indicator and put in Bloom Energy — not too bad. They actually called it five months ago, and since then it's up 154%. I always like to backtrack it to see if it actually picked it up, and this one did. Now, this isn't perfect, but Bloom Energy is something I'm actually going to go over on the second channel today, which is DNE, because I don't want to convolute things here. This is the same thing that Leopold Aschenbrenner has been putting out — he actually got into Bloom Energy, CoreWeave, Intel, and Lumentum Holdings. We'll get into that over there. And also, I want to talk about what JD Vance talked about as far as the government buying up AI companies. This is from the Diary of a CEO. Mind-blowing.
Rate Hikes: Bank of America and Deutsche Bank Forecasts
Anyhow, to finish this up today — Bank of America and Deutsche Bank on rate hikes. They are coming, but don't worry, it's not like they'll last forever. Here's the report: Bank of America and Deutsche Bank expect the Fed to raise rates in September. Bank of America expects three rate hikes totaling 75 basis points in 2026. Deutsche Bank bets on 50 basis points. My own prediction: somewhere between zero basis points and 150 basis points. I'm pretty much undefeated in that department.
Policy makers' more hawkish outlook is accompanied by strength in the labor market and elevated inflation concerns. We can definitely see that inflation is going up all around us — people in the comments, sound off. But as inflation goes up, we can't keep cutting rates. That was a problem back in the 70s, and if it weren't for Volcker, we'd be in a big, big issue. But here we are, and it looks like we may be raising rates.
The June summary of projections, and Wes — who is the new Fed chair as he takes over from Jerome Powell — his comments indicated the Fed's reaction function is much more hawkish than we thought. That was Bank of America. On the hawkish side, there is the potential for the committee to coalesce around a July rate hike. And I'm like, hold on — July? That's next month. On the dovish side, the recent improvement in energy prices and inflation expectations may more sustainably reduce the urgency to act. That was Deutsche Bank. So they were kind of talking out of both sides of their mouth — that's fine.
But when I took a look at the CME Group — because we just looked at this last week and it was 95% they're going to keep rates the same in July — now look at that split: 61 and 38. Is this right? Yeah, it is. July 29th. Look at that. Isn't that an interesting development? They are saying it's like a 60/40 split. All right, we might keep it, but chances are rising that we're going to raise rates.
Historical Context: Rate Hikes and Market Performance
And we know what happens with rate hikes, right? Everything is the most awful thing of all time and the markets collapse. Eh, not really. Everybody's been talking about this for a couple of years now. It seems like the Bank of Japan raises rates, everything starts to collapse, the yen carry trade unwinds, and it's going to be awful. But as of today, Japan's Nikkei — I think I said that right — just crossed 72,500 for the first time in history. That would be Japan's stock market, after posting its biggest weekly gain since August 2024. It is up 1.8%, adding over 25.7 trillion yen, or $156 billion in market value — and that's after the rate hikes. So the question is, how does that work out? To me, it doesn't matter. Rate hikes are temporary.
Really, all it comes down to is this one metric. This nice blue line here is the effect of interest rates for the Federal Reserve. We can see over time that we like to raise rates as macroeconomics start to deteriorate — we can't just have that much inflation floating around. We raise rates, then we flatten out, then we drop like crazy. From 2009 all the way to 2016 it was essentially zero — well, 0.25, I should say. Then we raised them up, then came down. What does this look like over the markets? Let's take a look at the S&P 500. Does it really care that much about rate hikes? It does like it when rates are flat and everything's stable — look at that, beautiful. But then we start to raise rates like we did in 2016-17 and the market's like, "We don't care." And then of course it gets to a tipping point and we start to drop rates like crazy. Then of course we see the drop and say this is the most brutal bear market of all time — well, that was the coronavirus, so we really can't say that. Then of course it flattens out, we go up like crazy, we hit 2022, and then what happens? Bear markets, everybody loses their mind as we raise rates, and we flatten out, and so on and so forth. It's the same thing happening over and over again. Midterm election years, inflation rates, we've got to start raising rates, this is the most awful thing of all time. But it really all comes down to this: that red line is the M2 money supply. And as long as the government keeps printing money and debasing the currency, you're just going to keep having valuations go up. So yes, it might be awful in the short term. Long term, it's just noise.
Q&A: Illinois Crypto Tax
Host: Chicago's here. Hey — there's that new bill that was passed which essentially is a 0.2% tax on everybody who holds crypto. It was pointed out to me that this tax in Illinois only corresponds to the exchanges. Unfortunately, the exchanges are probably going to pass that on to their customers. So everybody in Illinois — doesn't matter if you spend it, if you have capital gains, if you move it — you're going to get taxed 0.2% just for holding an asset. How awful is that?
I had Andrew Gordon on — he's been on the show a couple of times, and his law firm is in Chicago. We're going to talk about that today, but we mixed up the times, and maybe I can have him on tomorrow. He's rallying against it very hard because he says, "This is just the first step." And if other states adopt that, that's going to be not a game over, but a very detrimental effect to Bitcoin and crypto. And I have to agree. It seems very dystopian. I don't like that. We'll see how it goes.
Chicago is a mess. Even the Bears are moving out. What the hell happened? You know, this is the thing about government — they say, "We just don't get enough money and these damn billionaires are just taking everything." And some of that may be true, that's for sure. But it seems like the mismanagement of taxes that go into the government never stops. It's like giving crack to crackheads. You can't keep doing that. They don't know what they're doing with it, and they just waste it, and there's fraud and abuse. Sorry for Illinois for that happening. But hey, if the Bears want to come to Texas, we've got a couple of cities that could use an NFL team so they can beat up on the Cowboys.
Q&A: SpaceX, Tesla, and Elon's Companies
Host: Rob, are you buying SpaceX? I am buying a little SpaceX and I'm hoping it goes way, way down. I don't know though if SpaceX will be integrated and start to go under the umbrella of Tesla. Seems like that's where things seem to be headed. So you'll have Tesla, SpaceX, xAI, the Boring Company, Starlink, whatever other company Elon's got going on — all under one big massive umbrella that is Tesla. So maybe you can just buy Tesla. Maybe there's another stock split coming up. Who knows?
The Boring Company — they actually have that going on in Las Vegas right now. They have an actual completed tunnel from the airport to the Strip. I was like, that's pretty good. I lived there for two years and that wasn't around when I was there, and it was a hellacious drive. So congratulations to the Boring Company for getting that done. Wasn't there supposed to be some kind of rail system in California and they spent billions and billions of dollars and got like five feet out of it or something like that? That's called fraud and abuse. Just saying.
Q&A: Roth IRA and Tax-Advantaged Crypto Investing
Host: If you want to minimize your taxes, especially right now, it would be very important for you to probably get into a Roth IRA retirement account. Mojo is retiring — or he put in his resignation. I bet if Mojo doesn't have a Roth IRA, I'm sure as heck guaranteeing he wished he would have started that back when he got into crypto. If I would have started a Roth IRA in — well, I invested in 2017, and if I could have in 2018 — oh my god, because that was when Bitcoin was around $3,000 to $5,000 in 2018. Because of the allocation that you can actually put in your Roth IRA, I could have had over one Bitcoin in my Roth IRA easily. I could have done two Bitcoin back then. I would have had two Bitcoin in my Roth IRA, which I wouldn't have had to pay a dime of taxes on.
Q&A: UK Politics and Sphere of Control
Host: Starmer and all involved in the government should be prosecuted — I know what you're talking about and it is disgustingly awful and I agree with you 100%.
Is our politics in the UK more broken than Humpty Dumpty? That's what it is. Well, just remember that we have our sphere of control — the things that we can actually take control of and change — and there's just some things that we just can't. So just make sure we make that distinction. And one of those, of course, is the investments that we're into and that we adhere to the rules of whatever those rules are. Mine are essentially buying the bear market. That's where I make all my money. Just stick around — just like in the military, if you show up in the right suit, the right BDUs, you get promoted. That's all I've got to do.