Is The Market Bottom In? The DeFi Report's Michael Nadeau on H2 2026 and Where He's Deploying

Michael Nadeau, founder of the DeFi Report, argues that crypto is roughly nine months into a bear market driven by Bitcoin, with two substantial retracement rallies having pulled both bulls and bears offside. He identifies the current prior cycle top zone for Bitcoin as the 56 to 66 thousand dollar range, analogous to the 17 to 21 thousand dollar zone in the 2022 bear market. The largest zone of dip buying early in this bear market was around 84 thousand dollars, after which Bitcoin broke down to 60 thousand and retraced to 82 thousand. The narrative that Strategy's capital raising would suppress bear market severity reversed when Strategy ran into capital structure trouble, removing what traders had treated as a known persistent buyer.

Nadeau holds roughly 25 percent cash, which he frames as reflecting a 25 percent probability that Bitcoin makes a lower low. He went to cash in September or October anticipating a drawdown to around 65 thousand dollars and has been personally buying Bitcoin below approximately that level while also deploying into other coins. He does not have strong conviction that the full rotation of coins from hot money to stronger hands has played out yet. He points out that FTX was likely insolvent for about six months before it became publicly known, and that a large share of coins changed hands in the final 90 days of the 2022 bear market as a result of that credit cycle blowing up. His view is that when the true cycle low arrives, the majority of participants will still expect prices to go lower. The 200-week moving average for Bitcoin was around 62 thousand dollars at the time of recording and has historically been a strong long-term buying opportunity, though Bitcoin has gone below that level and stayed there for multiple weeks or months in prior cycles.

This bear market is more challenging than past ones due to dispersion, where altcoins have risen even while Bitcoin retraced 40 to 50 percent, breaking the historical pattern in which altcoins experienced weakness until Bitcoin built strength. Nadeau attributes this partly to market maturation allowing fundamentally strong tokens to hold up in risk-off conditions, and partly to Bitcoin's scale as a 1.5 trillion dollar asset driving investors toward other projects in search of outperformance. He concludes this cycle is becoming more of a stock picker's market requiring research and good data.

Nadeau argues the four-year Bitcoin cycle is anchored to the underlying mechanics of leverage and credit rather than narrative, and that Bitcoin Treasury companies gave traders a free pass to add leverage because a known buyer was bidding up tokens, creating an imbalance that became visible once that dynamic faded. On portfolio construction, he says infrastructure is largely in place with Ethereum and Solana as the likely major L1s, making this a good time to focus on application tokens. He believes token design in the 2020 to 2021 period was deliberately poor due to regulatory pressure during the Gary Gensler era, and sees buybacks as a mechanism that creates alignment between equity holders and token holders. He cautions that teams start and stop buybacks, so investors need to see a track record of commitment rather than a stated intention.

Pump.fun is generating close to one million dollars of revenue per day despite meme coins being down 80 to 90 percent, and the protocol uses 50 percent of revenues to buy back its token. Nadeau views it as a contrarian bear market position the market misunderstands, noting it functions as a social marketplace and that many of its users appear to be outside the Crypto Twitter audience entirely. Perpetuals are being traded at five times the level of spot. Nadeau missed Hyperliquid after selling at 45 dollars and not acting when it reached approximately 20 dollars in January, and instead bought LIT near the lows as an alternative perps exchange play. He believes both Hype and LIT are currently above fair value, with Hyperliquid revenues, open interest, and volumes all down approximately 50 percent despite strong price action, indicating the rally is narrative-driven rather than fundamentals-driven.

Athena's ENA token is trading down approximately 93 percent from its high. Nadeau compares it to Solana last cycle as an asset with potential for a large comeback, noting Athena built distribution across essentially all of Ethereum DeFi, announced an integration with BlackRock's Aladdin network, has approximately 100 million dollars of demand from a Coinbase partnership, and has not yet turned on its buyback mechanism despite having a cushion between protocol revenues and payouts. On real world assets, he argues it is unclear whether value from RWA growth accrues to Ethereum, an L2, an application, or a company like Robinhood, and he is playing the opportunity through the perps market and crypto financial services companies rather than infrastructure tokens.

Nadeau applies Charlie Munger's inversion principle to crypto investing, identifying the most reliable ways to lose money as chasing assets after missing a move, falling in love with positions, letting ideology override market observation, leaving crypto during bear markets and returning in bull markets, and following narratives without first-principles understanding of where value accrues.