How To Trade Crypto Cycles with Flood

Summary

• Flood is still long-term bullish Bitcoin and adding down here: the debt-and-deficit setup makes debasement “an inevitability,” and “I don’t think that changes just because it’s sold off 50%.” Drawdowns are for re-underwriting — “if your thesis is unchanged, well, guess what? You’re getting much better average entries” — with the long arc a transition from “hypervolatile 3x levered NASDAQ” to a gold-like safe haven. The only structural worry he names is quantum risk.
• The honest miss: nation-state hoarding hasn’t happened — governments like Germany instantly sell seized assets while central banks stockpile gold in a straight line. “That just clearly hasn’t taken place. I think we’ve been very wrong on that” — but there’s no expiry on the thesis, and Avi’s bottom signal is exactly the current disinterest: when people move on, that’s “the most bullish time period to start buying, at least on a 6 to 12 month horizon.”
• Value coalesces to three things only: monetary store of value (BTC, “arguably Ethereum”), permissionless trading (Hyperliquid, Solana), and stablecoins. Everything else: “all we’ve figured out is how to make gambling slightly better,” and most tokens of the last five years were “not even innovative ways to try and scam retail.”
• “Perps will dominate options volume over the next decade — I will die on this hill.” The evidence: of Binance’s 400M+ KYC accounts, over 92% of derivatives users traded perps vs 8% options — “one of the largest consumer preference studies in history.” Retail wants leverage, not convexity; options fragment liquidity by strike and duration, which is where Jane Street’s edge lives. The CFTC clearing a path for US perps plus Robinhood’s 7.5% of US equity options volume frames the trade.
• The operating playbook: have capital when other people don’t, and hold multiple levers per position (spot + short future + options). Specimens: the 10/10 depeg, where Marinade and other LSTs traded at 60 cents from Binance liquidations — “10% in maybe a day”; shorting UST at 95 cents for ~20-to-1 instead of being scared to short Luna; and the Hyperliquid airdrop, where the market implied 8% odds of $60 against their 20–25%, on a modeled $1 of buyback ≈ $20 of market cap.
• Apps accrue the value, not chains: US retail says “I trade through Robinhood,” never “on NASDAQ,” and crypto’s forced venue choice will be aggregated away by super-apps. “Solana will not own the customer relationship.” Avi’s dark corollary: most crypto-specific apps — $500B+ of altcoin market cap — go to zero.
• The 2026–27 book: long spot BTC (no long-dated options paying theta) into a “violent snapback” correcting the QQQ and gold ratios; own both HYPE and HOOD for the perp adoption wave (he owns HOOD and has been adding into the nuke); don’t fade AI — “you are still going to continue to get paid to be delusionally bullish”; and don’t short alts down here — zombies drift and never pay you. “You really have to pick your spots shorting alts” (Celestia at dollars, not cents, was the spot).

Deep dive

1. Down 50% changes the entry, not the thesis

• Avi opens with the mood: twelve months of disillusionment, Bitcoin lagging gold, indices, and the AI flood, altcoin shorts feeling like “free money.” Flood’s answer is procedural — drawdowns are the best time to re-underwrite, because “if your thesis is unchanged, well, guess what? You’re getting much better average entries.”
• The thesis itself: 2022 killed the idea that “rates don’t matter” — “you just see that that’s completely untrue” — but the current structure of debt and deficits makes more printing and dollar debasement “an inevitability,” and that doesn’t change because the asset sold off 50%. His family office’s default: when there’s nothing good to buy, keep adding to Bitcoin.
• The long arc is a transition from “hypervolatile 3x levered NASDAQ” to a safe-haven, countercyclical allocation like gold — “it may take some time before we get there.” The only reason he cites not to be bullish is quantum risk, and he concedes recency bias: early Bitcoin gains make it “feel like a very safe asset to us.”

2. The nation-state puzzle is the real re-underwriting question

• What he actually interrogates: why do nation-states sell Bitcoin instead of hoarding it? A government discovering a gold deposit wouldn’t instantly dump it, yet Germany and others liquidate seized assets immediately. “Is it an educational problem? Do they see risk? Is it politically unfavorable?”
• The long-tail upside case — nation-state hoarding game theory, reserve replacement — “just clearly hasn’t taken place. I think we’ve been very wrong on that.” But there’s no deadline: “I don’t think there’s a set time period where, oh, if it doesn’t happen in the next year, it’ll never happen.”
• Avi’s counter is the gold comparison: central banks are stockpiling gold as a geopolitical move to shore up reserves — that’s the straight-line bid Bitcoin lacks. His bottom tell is disinterest: people raising their hands and moving on, which he calls “probably the most bullish time period to start buying, at least on a 6 to 12 month horizon.”

3. This bear versus the old ones — and what a bottom looks like

• 2014–16 was different, not worse: notional volumes “probably 1/100th of what they are now,” attention on theorycrafting into the block size wars. The uglier analogue is 2018–19’s “total volatility death” — a famous 2019 print where Bitcoin traded in a $3 range. Avi remembers it viscerally: “Sucked so hard.” What Flood watches for: vol coming down, open interest bleeding out, exchange inflows stopping.
• Crypto has also become “a bit less socially acceptable” than AI, and capital has rewarded the wrong people: momentum chasers piling into AI names got paid, while loyal crypto holders got punished — crypto equities hammered, “the average altcoin one-year, two-year, five-year return is horrendous.”
• His indictment, verbatim: “All we’ve figured out is like how to make gambling slightly better” — and most tokens of the last five years were “slightly innovative or not even innovative ways to try and scam retail. And it makes me sad.”

4. Value coalesces to three things — and Avi’s “what do I even buy?” problem

• The mature market rewards only what makes sense: monetary store of value (Bitcoin, “arguably Ethereum”); permissionless trading — Hyperliquid, its DEX copycats, and Solana, where “for the first time ever decentralized applications have a comparable experience to their centralized counterparts”; and stablecoins, which “feel inevitable” — his early Signet account turned out to be “just USDC under the hood, which was crazy.”
• Avi’s tension: believing the theses doesn’t tell you what to own — “you can’t buy USDT and hope it goes to $2.” Most of crypto’s historical utility was the trading itself: buy low, sell high on narratives and VC flows.

5. The playbook: capital when others don’t, and levers to pull

• Three house tenets: perps are the optimal way to transact value; have capital when other people don’t; and give every position multiple levers. The HYPE template — long spot, short some futures against it (you’re paid to put it on), options layered when mispriced — means when the market dumps “you actually have a button to click” instead of a frozen 80/10/10 portfolio.
• His CIO Kyle Saska’s quip, which Avi loved: “Markets are like a pop quiz — if you didn’t study you’re going to fail, and if you studied they’re actually really easy and there’s free money on the floor.”
• Best specimen of studying paying off: the 10/10 depeg, where liquid LSTs like Marinade on Solana traded at 60 cents on the dollar, presumably due to Binance portfolio-margin liquidations — buy tens of millions, short the future, “10% in maybe a day just because you have capital when other people don’t.”
• Trader hygiene for anyone solo: bifurcate capital into active trading, long-term hold, and living expenses — “that way you’re not commingling the three” and trading under duress.

6. Luna and Hyperliquid — betting on the right thing, sized by defined risk

• The Luna miss became doctrine. They’d done the math on the death spiral but were “just scared to short it” — hard to fade Jump. The obvious trade was shorting UST at 95 cents: just over 5% risk if it repegged, “you were getting like 20-to-1,” on something they intimately understood could go to zero. Lesson: edge comes from knowing one to three protocols really well.
• Hyperliquid was the asymmetric-information sequel: peers guessed global perp fees at $1–3B a year when it was “more like 10 to 20, sometimes 30.” If Hyperliquid could take high single digits of that market, airdrop sellers implicitly pricing $100–200M of revenue would dump at a $1–2B cap — so his firm was “a significant amount of the hour-one, day-one volume.”
• The follow-on: 40/60 call spreads, likely via Flowdesk, priced at an 8% chance of $60 against their 20–25%, justified by a buyback model where “$1 of buybacks could be like $20 of market cap” (versus ~$7–8 on Bitcoin) — with motivated airdrop supply being retired outright. “These dynamics made Hyperliquid a very misunderstood asset from like $2 to $60.”

7. “I will die on this hill”: perps eat options

• With the CFTC clearing a path for US perps, Flood’s case starts patriotic: America’s two great exports are culture and “liquid standardized financial markets,” and not owning crypto derivatives “is a travesty.”
• The data he leans on: Binance has 400M+ KYC accounts, roughly 20–25% opened derivatives accounts, and of those “over 92% have traded perps, only 8% traded options — it’s one of the largest consumer preference studies in history.” Retail “is looking for sufficient leverage to make their trading interesting. They’re not really looking for convexity.” Supporting tells: 0DTE at over 56% of options volume, Robinhood at 7.5% of US equity options volume, prediction markets being “just a perp that settles at zero or one,” and HIP3 already doing hundreds of millions to single-digit billions daily.
• The structural argument: options fragment liquidity by strike, duration, and contract — “this is where the majority of the money for Jane Street comes from, trading option spreads against retail” — while perp liquidity is uniform, linear, and can’t lose you more than your account. “I really fundamentally believe perps will dominate options volume over the next decade.”
• Avi’s precedent — worth keeping: the MSTR premium collapsed once IBIT options launched, because leverage products cannibalize each other. Flood sees no obvious short in response — options won’t go to zero; the bet is trading itself growing as “discretionary entertainment spend.” His self-aware rationalization: better retail loses money on Nvidia than blackjack, since a stock loss can teach — “Also, that would be better for me, because I can trade against them.”

8. Apps accrue the value, not chains

• Riffing off Vitalik’s L1 value-accrual thesis, Flood’s answer is unambiguous: the applications make the money. US retail says “I’m trading through Robinhood, Schwab, or Interactive Brokers” — never “I trade on the NASDAQ” — and payment for order flow already made trading P2P with market makers. Crypto’s forced venue-determinism (Hyperliquid not Lighter, Solana not Ethereum, Polymarket not Kalshi) gets aggregated away by super-apps.
• His forcing question: would you rather own NASDAQ, or Robinhood — which “fundamentally owns the customer relationship” and can bolt on perps, sports betting, banking, payments? “It’s clear to us that Solana will not own the customer relationship.” This is why he’s building Full Stack: one deposit, every product, chain- and venue-agnostic.
• Avi’s fear, stated plainly: if the thesis is right, most crypto-specific applications go to zero — and there’s “more than $500 billion of market cap value across a lot of these altcoins” not making the pivot to real businesses.

9. Don’t short alts down here — pick your spots

• Counterintuitively, Flood wouldn’t press the great alt short at these levels: a lot of alts are “zeros, or zombie companies… grifting the treasury,” but zombies don’t need to trade to zero — they drift with beta to the majors while funding may chip away at you. “Shorting alts primarily is a waste of time unless it’s offset with a very sharp long.”
• Timing was everything on his 2025 “kingmaker trade” — long HYPE, long BTC, short alts — put on “when Celestia was trading at dollars, not cents. That’s the time to do it.” Now? If ‘Bear Chain’ squeezes 150%, “I could not give a shit at all, honestly. It’s destined to go to zero… and you shouldn’t waste any time thinking about it.”
• Avi’s reiteration from his own flamed memes-short call: shorting crypto is really about timing — you short after the squeeze, and something like WorldCoin up 50–70% having blown out the shorts “is still a phenomenal short.”

10. Edge honesty and the 2026–27 book

• On day-trading: “I’m notoriously terrible at short-term calls, actually” — mid-to-long-term is where he’s above average. The market got harder in 2025 once systematic firms (likely SIG, plus Jump, Tower, HRT) “got the green light from the admin” — so retail edge shrank. The durable skill is duration-matching: “You can say I think DEX trading is going to grow and then you’re stuck long Ethereum instead of Solana. You were right, but you were also wrong” — or long Lighter at $1.5B like Founders Fund instead of just buying Hyperliquid.
• The FTX scar underwrites the whole philosophy: his cash was on FTX, so even knowing Bitcoin was “unbelievably cheap at 18K or wherever it traded down to,” he couldn’t buy. Avi’s echo: his best returns ever came post-FTX, going “super deep” into Solana, Bitcoin, and GBTC bought from the FTX estate — “you’re not fighting with anybody because nobody has the capital.”
• The convictions for 2026–27: outright long spot or levered-spot BTC — no long-dated options paying theta — into a “violent snapback” correcting the QQQ and gold ratios, possibly catalyzed by quantum-resistance optimism; perps gaining share via both HYPE (onchain, sharper capital) and HOOD (everyday American retail — he owns it and has been adding into the recent nuke, flexing exposure between the two); the Full Stack aggregation thesis; remaining bullish on AI, where “the potential upside is infinite… I wouldn’t fade AI this year, candidly” — “No, I’m not a doomer by any means”; and being long political and societal volatility, which Avi notes “is probably the gold trade.”
• His closing frame for bear-market survivors: crypto is isolating and apathy is easy, but “this is where the returns are generated — the most asymmetric opportunities occur because there are just less eyeballs and less dollars looking at them” — a framework for allocating time and career, not just capital. And a parting ask: tell creators you appreciate them, because “haters are always like 10 to one for the positive people.”