Cyber Hornet’s Mike Willis on Navigating Market Volatility with a 75/25 Stocks-and-Crypto Strategy

While the major US stock averages have opened higher on this Thursday morning, but the past few days we've seen weakness across the AI trade as well as crypto.

And when it comes to crypto bulls like Michael Sailor and Tom saying the AI bout has sacked massive capital away from digital assets.

Now along those lines about Bitcoin funds in billions in outflows since mid May.

And speculative capital is being freed up in anticipation of massive IPOs, most notably the highly anticipated SpaceX IPO tomorrow.

Well joining us on this Thursday morning to weigh in is Mike Willis, co-founder of Cyber Hornet ETFs.

Mike, good morning.

Thank you so much for joining us.

So a lot of competing headlines.

So first and foremost, take us through your 7525 hybrid model of investing in stocks as well as crypto.

So you're seeing the reason why we believe you should have a foundation at S&P 500.

We like to look at the Trad FDI spread, um, actually on an ongoing basis.

Right now, it's running about 60%.

Tradfi being the S&P 500 over the last year is up about 30%, and crypto is down about 30%.

So you have a 60% spread between the two. people, investors have been looking for non-correlation between the two asset classes.

Well, now they have it.

So we take the base, 75% S&P 500 to kind of build the foundation of the portfolio.

Right now, the S&P has been hitting new highs, as you've been talking about.

Crypto, on the other hand, going through a crash.

So 25% kicker added on top of the pyramid, if you look at that way, uh, into the crypto space, and then we rebalance it in monthly.

So we're buying into this crash right now.

Yes, and of course speaking of crypto, we're paying attention to price action when it comes to the crypto majors of Bitcoin as well as E.

Last week we saw Bitcoin fall below that 200 week moving average below 600.

So when it comes to crypto exposure, what does that actually look like?

Yeah, I think, um, Bitcoin could go a little bit further here.

I think you could see it press through.

We're down 50% off the top, uh, highs of October.

I think you could see it go down through 50,000 on the Bitcoin side.

In terms of exposure, uh, we really like the 25% exposure, and what we looked at is that investors historically They can handle about a 30% drop, but once you start losing 40% plus, and it's certainly 50%, most investors bail at that point.

So what happens is if you have a long-term positive view of the crypto space, and we believe the digital asset space, we're still early, um, and this is an asset class investors are going to want to own.

So we're trying to figure out How to give them a path to owning the long-term returns of the market.

And we think if they just go in 100% in crypto, they're going to get sold out at the bottoms and bought in at the highs, and they're not going to actually experience the full run.

So, for us, that sweet spot when we did the back modeling was about 25% of the portfolio.

You could handle those big down periods.

And that's really borne true.

Our, our ticker symbol BBB, which is 75%, S&P 500, 25%.

Uh, Bitcoin, really in 2024, when Bitcoin was raging, you got an extra 14% over the S&P 500.

Instead of 25%, it was up 39%.

Last year when Bitcoin was down, you were down 7%.

If you just held Bitcoin outright, we were up 10%, uh BBB was up 10%.

And then year to date, what's been happening is crypto's been getting toasted, and the S&P 500's hitting all-time highs.

So we've been running at Uh, up 5% to down 5%, depending on when you look at it, but certainly a holdable range for investors who don't want to get shaken out here.

But this is where you need to be buying into crypto as it legs down.

Yes, and you mentioned this intersection of Dei as well as TRAD 5, but of course all of us are awaiting that SpaceX IPO coming tomorrow.

So when it comes to the AI trade, a lot of the volatility we're seeing, what do you make of liquidity being drawn away from crypto as well as what we're seeing in AI and what all of this means when it comes to the mega IPOs?

What's really happening beneath the surface here?

Yeah, I think it's a huge deal.

I think there's a big, the, the initial people who, the, the first wave into Bitcoin, they came in for the Bitcoin, for Bitcoin's core principles, a set monetary policy, separation of government and money, 21 million coins.

So you have a, um, a monetary policy by code.

And that's when, that so wave number one that came into Bitcoin came in for those core reasons.

The 2nd and 3rd wave into Bitcoin really has been um price and return chasing, and um basically what that means is that they're treating it like a tech stock, a new.

A new tech space that they want to own in their portfolio.

So, when you have anthropic and SpaceX coming out with IPOs, you have the chip sector going vertical.

Well, all of the people that are in Bitcoin and crypto chasing price and return, they're of course going to shift.

You've got the crypto space down 50% plus, um, and you've got these other spaces raging.

So the liquidity shifts over, and it, it's certainly a huge factor here.

And finally, before I let you go, there have been a lot of headlines about what Michael Sailor has been doing when it comes to his selling of Bitcoin as well as his recent purchases.

So what do you make of this tug of war that we're seeing between the Bulls versus the Bears, but also some of the whales?

Yeah, I think, uh, when he first sold his 32 coins, I didn't make much of it, but, um, there was a big deal made of it, uh, you know, in the market, and now it's actually borne true.

So, I think, um, because you see Tether doing some, uh, some sales for the first time and, and some other indications that, um, the whales are selling.

So, I think you have to pay attention to that and, and certainly, Uh, sailor's strategy, everyone, it's well known, uh, and when you dance with leverage, I think there's always a, a risk there of having to unwind it.

So I think that's partly what's priced into this crash, uh, is the Michael Saylor factor.

So I do think you have to pay attention to that.

Well, Mike, we will have to leave it there for today, but thank you as always for joining us and thank you so much for sharing your insights.

Great to be here.

Thanks for.