The case for Ethereum in the current bull run

Transcript

GM, good morning. Welcome to the Milk Road Show, the daily crypto show for a market so bullish even your Uber drivers giving you alpha. I'm your host Cloud Reedhead covering for Jay while he's off doing I don't know whatever podcast hosts do when they're on vacation. Uh but today I'm joined with Michael Natu, an investor, writer, educator, and founder of the DeFi Report. I actually got to catch up with him was it two weeks ago now in New York City at Permissionless and we had a couple beers and chatted crypto for hours. So we're going to continue that conversation uh here today. Uh we're going to discuss a bit about the macro world and what it means for crypto markets because there's kind of an inflection point happening.

Uh we're going to talk about the ETH BTC ratio. Uh it hasn't been relevant, I think, for years because it's just only been down. I think maybe it's the time. We'll ask them if it's finally bottomed. Uh and we'll talk about how to value L1 assets like ETH or Soul. And if we have some time, we'll dive into some stuff around Coinbase and Robin Hood, too. So, lots to lots to discuss today. Um but before we do that, a couple things I got to note. Uh, if you want to build a crypto portfolio that actually works here in 2025, we put together a free guide that shows you exactly how to do that. You'll get the strategy, the cycle cheat code, and a portfolio setup you can copy right now. The link is in the show notes, so go check that out. And by the way, today's episode is brought to

you by Definitive, the leading multi-chain trading terminal trusted by Funds, Dows, and Protraders, as well as Letin get cash without selling your Bitcoin. All right, without further ado, let's bring Michael up to the stage. Michael, how you doing, my man? Doing great. Great to see you, Kyle. Yeah, you as well. Uh, check out the new hat that Michael's wearing, by the way. The DeFi Report hat looks pretty sweet. We love it. Uh, and by the way, if you guys haven't read the DeFi Report, go check it out. It is um some of the best content out there. We absolutely love it. Um, so there's your your shill. You don't have to worry about doing that at the end of the episode. I got it for you. But Michael, let's get started. Uh, talking about um talk about the macro world. Uh, obviously things have changed

a lot in 2025. um early days I think we had you on maybe it was January or February and you were a bit bearish which turned out to be actually the right thing because we ended up getting the liberation day which sent markets in a in a tail spin. I think we had you on maybe in May or something uh and things had changed a bit by then and I think the macro world changed a bunch by now as well uh here in July. So walk us through your sort of framework of what you're thinking in the macro and how that pertains to to crypto in markets. Yeah. Um it's been a it's definitely been a busy year and my thinking is definitely evolved a little bit. I think you know earlier in the year we're I was seeing a lot of signs of like definitely

a local top possibly like a you know pico cycle cycle top based on just a lot of behavior a lot of stuff we're seeing in data and then you had Trump come in and you know it looked like he was prepared to basically take a wrecking ball to the economy with tariffs um also with Doge and really fiscal austerity and and balancing the budget. Uh at the time I thought that seemed that felt to me like similar to late 21 cycle when the Fed started cutting when when the markets were very frothy and the Fed started cutting rate uh started raising rates and people were sort of late to to acknowledge that and it was in hindsight it was like an obvious time to to get out and and so all of that stuff was lining up and it looked like Trump was

going to be the guy to sort of actually try to cleanse the system. But what we've learned is like this basically this taco thing where Trump always chickens out has actually been what plays out and it's sort of like this I forget what the the saying is but basically nothing stops this train uh I think is the saying and I think that has essentially uh played out and what I'm now looking at and it's it's very clear and sort of it's being told directly to us now from Scott Bassant and others in the Trump admin that um you know what we're going to see now is basically the total opposite of what what was being what what you know Lutnik was coming out on CNBC saying we're going to balance the budget. Now it's we're going to run

the economy hot. We're going to run inflation hot. We're going to try to get uh yields uh the Fed funds rate down. And it just looks like to me that that's like an MMT playbook. Uh that looks like fiscal dominance. It looks like, you know, higher than normal inflation. And it looks like we're just going to try to grow our way out of this which is we've done this in the past. This happened in the 40s where we basically had to run inflation hot and basically uh you know create growth through inflation increase taxes and you keep your debt pinned where it is and you basically inflate away the debt. So to me that is the setup and and you know it was kind of a similar setup this time last year when we were looking at MMT. We were sort of

saying the Fed is less important. Um and MMT is sort of driving the markets and I just think we're kind of in the same the same setup again here. Uh we've kind of done a full a full circle over the last year. Um but that's a setup to me and that looks you know very bullish I think for uh crypto. You know monetary conditions look pretty loose right now. we're seeing capital go into risk assets and so I think it's a it's going to be an interesting setup for the rest of the year I think. Yeah, I I couldn't agree more. Um when that sort of tune changed it was like oh this is fully on. I guess this is not what we originally thought or at least what Trump uh Trump first said he was going to do. Um and now it's it's literally game on. And I think for those

that, you know, are not deeper into the macroeds in a world where they're going to inflate their way out of debt, that means that you want to hold hard assets, right? And hard assets means, sure, it means gold if you're a boomer. It means Bitcoin if you're a little bit more, you know, on the front lines. Uh it also means tech stocks, right? Uh and it means crypto assets. Like it means a lot of these things that will hold its value as we print away these fiat, you know, fiat currencies. So, it is a it is a tough time for those that don't hold assets to be completely honest. It doesn't necessarily mean good things for the economy, per se, depending on how they do this, of course. Um, but it is a is a good time for those that do hold assets. So, uh, when you hear them

saying they want to grow their way out and run the economy hot, you don't want to be holding any fiat currency in that world. You just want to be holding hard assets or bonds. Don't hold bonds either, right? Yeah. Yeah. Right. Don't hold bonds either. Absolutely. So, I don't know if you if you on the macro side, do you think that that's starting today? Is that going to be a thing that they've kind of worked through first? Is there some some hiccups along the way? Like, what's your sort of timing on this like them actually running hot? Like, I don't think they can just like say they're going to do it and then, you know, flip a switch and boom, it's gone. Maybe you think they can. What's your sort of timeline on on this sort of like thing playing out? And does this change the

cycle? Like obviously everyone thought the four-year cycle was this year. Uh, and if we're just saying we're about to run it hot, what do you what do you think about that for for markets? give me sort of timelines here. Yeah, I think you know markets sort of go through these processes where they they get bearish and then they there's sort of a wall of worry that needs to be climbed again. And so I think we're in the process of doing that. I was looking at the polyarket recession odds are down to like 19% or so now after getting up I think as high as like 60% around the tariffs. And so you're seeing like this the wall of worry starting to to sort of sort of recside a little bit. Um I do think like what's something that's very

interesting that's going on in the market is you have like a political bias that is like playing out in financial markets where you have like the the anti-Trump crowd who still believes that like these tariff policies are going to somehow you know come back and cause a lot of problems cause inflation. And I think that this is impacting in investor psychology a little bit. And we're in the early stages, I think, of like a lot of these people chasing the market. Uh is kind of how how I see this. Um in terms of like the the timelines of all this, I think the the big beautiful bill passing is is sort of a sort of a landmark there in terms of some of these these policies in terms deregulation.

um we are close to getting the the stablecoin bill uh through and and signed into law as well. Um and so I just think the big beautiful bill, the spending bill, all of this is going to start to come into the markets. You're seeing the long end uh yields starting to rise again because they're they're looking at inflation. They're looking at growth. You're not seeing any indication that uh the bond market is pricing in like slowing growth and potential for recession. So to me it looks like every all systems go like we're we're we're we're pushing towards that that final outcome where inflation is actually higher than than than the nominal yields and and you you are actually inflating the debt. We're not quite there just yet, right?

So yeah. Okay. So I have to ask obviously this world is a good world for Bitcoin. I think anyone who has some idea of markets at this point is like oh okay we're going to run the economy hot. I should probably buy Bitcoin here. But I'm going to ask the question. And I think many people have asked this, you know, a lot over the last 3 years. Is there some is it time to move out of Bitcoin into kind of like the alts, right, into the riskier assets, whether that be Ethereum, Solano, or even farther down the risk curve? Have we finally gotten to this point where like this makes sense? And I'm going to bring up the ETHBTC chart. I think I drew these blue lines on here back in like early 2024, and that proved to be break to the downside real bad. And so I mean

a lot of people have tried to call this ETHBTC bottom uh for the last couple years and it has not worked. Uh I thought maybe it was up here. This was back in what March 2024. Uh and we went way lower. So I'm curious. Um you know, it looks like maybe there's a bit of a bottom here, but we've been faked out many times. What's your thinking uh on this chart? Yeah, I've definitely been super early on this as well. So I mean eventually we're going to be right on this I I think. But um yeah, I think Bitcoin is still at 65% dominance. So this this rotation obviously has has not happened just yet. And to me, this is this is just a matter of of time. And I think it's a personal question in terms of, you know, how much risk people are

willing to take. I think if you are somebody who's just, you know, wants a dollar cost average, doesn't want to pay attention to the markets that much, like maybe you stay mostly in Bitcoin. But if you're more crypto native and you're in these markets like like I am, I'm definitely rotating some of the capital capital out, I still have uh you know the majority of my portfolio in Bitcoin and usually have most of uh the portfolio usually up to 80% in the majors. Uh but I have been been buying ETH. We started buying ETH around you know 2200 or so and buying it through through 2500. Uh we've got some charts that we can share later to sort of show like why we think that we're sort of at like a reasonable valuation to to get in there. Um but that's kind of how I think

of it. It's really a personal question, but to me we're at like five-year lows still on ETH BTC and ETH tends to outperform during like periods where rates are dropping, liquidity conditions are improving, capital's moving out to the risk curve. So that setup just is telling me that yes, it it's appropriate to rotate some capital to ETH and then potentially even out to stuff that might have some beta to ETH as well, which we can talk about later. So yeah, I think typically what comes with your kind of typical altcoin season or the riskier assets doing better is like the economy running hot, right? like things are people are consuming things, the economy is really running, things

are working generally means inflation is going higher, financial conditions are are loose. Uh, and that's kind of like the world we're moving into, I would say, like right now. Uh, and so it seems like we're, you know, you might not want to try to frontr run it as you said, but it feels like, at least that's what Trump is telling us, though. He's lied, you know, many times previous or or maybe he hasn't lied, but he's had to change he's had to change what he's doing uh multiple times, but it does feel like, okay, this world is finally happening. Um, let let's let's chat about ETH because I know you've got a lot of work that you've been doing on ETH and you've got a bit of a thesis there. Uh, you said you're kind of bullish on ETH. You've been buying it since 2,200, I believe you said. uh walk

me through your your bullcase for ETH right now and I'll bring up some of the slides here uh because I believe you've got a few charts you want to you want to walk us through. Uh we'll go to the next one here. Yeah, you know, we've done we've been publishing all kinds of research on on Ethereum and Salana and just trying to go deep on these networks and and have like a thesis moving forward. A lot of it's from the token holder perspective in terms of like how value accrs to token holders through staking. A lot of that data does not look good for ETH. it actually looks better for Salana because there's more me on Salana. Um, so I'm sort of like separating that analysis from just like basically how I'm playing playing the markets. And to me like the reason I think ETH is going to

outperform here is you just have like a combination of sentiment got so so bad that like it just just human nature, right? It has to start to turn to the upside and we've sort of went through that over the last few months, I think. Um, so that's that's one thing you can see that you know the Ethereum community and the Ethereum foundation and you know business leaders that are involved with the ecosystem have all like sort of taken feedback I think over the last few years and like Etherealize is an example of this. Etherealiz was basically born out of this need for um, you know, an institution to be able to talk to other investors and tell the Ethereum story in the market. Bitcoin has done a better

job of this. I think and I think Ethereum has sort of learned over the last few years that they need to step up and I'm seeing that. So I think you have you have that you have sentiment you have like you can see sort of organization coming. Um and of course we know that Ethereum tends to outperform during like the riskon environments which I think we're going into. Um we do have some like other sort of fundamental data that that looks good for for ETH. Um but I think that's that's really it. And then of course there's these other things going on with treasury companies. You know, this is one of the like Joe Luben was on CNBC basically saying like, you know, Ethereum's in this period where we've had to like sort of ease Ethereum's monetary policy in in a way

because you're you're sort trying to grow the L2s and costs are dropping as you do that. And so ETH is issuing it ETH issuance is going up, right? So, so that's kind of like it's kind of interesting to think about it in terms of the monetary policy is working as expected, but he's sort of saying like, hey, as we go through that trans transition, we need somebody in the market bidding the token. Uh because it's just act it's just that important that the price of the token does well. And so that is kind of why these treasury companies are popping up. It's like you just need somebody in the market buying the token. Um and they're willing to just set up these vehicles uh to do that. And so you have that. You have Tom Lee, I think is just an absolutely just absolutely huge to have

somebody like that who is very well respected uh in the in the financial community. He's on CNBC all the time. Now he's telling the story. He's got a treasury company. So I think it's a combination of all of this that just has me sort of thinking that this is kind of the obvious bet uh you know moving forward here. So yeah, I couldn't agree more and we'll go through your charts uh right after this, but I think um we just did a whole episode on ETH treasury companies yesterday. Uh and so listeners, you can go check that out. But I I think that that is one of the biggest unlocks for ETH and Ethereum DeFi that that we've seen in in years.

Like you said, someone's got to be out there, not just bidding ETH, but like teaching and educating. And Ethereum Foundation was not doing that. The Ethereum companies were not really doing that. Whereas like Salana had their BDS just been on fire for the last few years. And I think um you know having Tom Lee, having Joe Lub and all these guys out there on on the news, on podcast whatever shilling this. That's it's not just like on podcast on news. They're actually going out and teaching and and teaching investors and like going onetoone on Wall Street shaking hands going listen this is the next play. This is where you capitalize on stable coins on this and that like however they're they're they're teaching it. Um, and I I think that that's why Bitcoin has done so well over the last five years because literally that's what

Michael Sailor has been doing, right? He's got a massive team that they hold webinars, they hold conferences, they're at Wall Street every day just screaming about Bitcoin. And we haven't had that for any other asset. And I think that's um it is a a massive unlock. And they've already bought I don't know what the number is, but you know, I think over a million at least on treasuries anyway. Uh there's like over a million so far in ETH. So um and they're not stopping. like this is I think only going to get bigger and bigger and I think that to me is is what excites me and kind of brings back the it's what makes me think okay Ethereum this can be different this time in terms of the ETHBTC ratio etc. So let's walk through some of your um some of your numbers here. I'm just going to pull it

back up on screen. Uh so the Fed funds rate I don't know if you want to go over this one. This is the macro we just sort of talked about but feel free to share this here. Pretty straightforward. We just mentioned this, but you know, you can see when that purple line drops, like ETH tends to respond very well to that. And even, you know, last year when the Fed cut in September, cut, you know, a full base full full percentage point. Ethereum did well during that period and then when they paused, you know, it started selling off. Obviously, we had tariffs and other other things that that were involved there. But I just think, you know, you've got the the the way that the White House is talking about just cutting Fed funds and, you know, this sort of war between Trump and Powell, like they're talking about it in

terms of like this is necessary to refinance the debt. And I've never I've never really heard like monetary policy being discussed like that. And that that to me is like somewhat of a signpost that like these rates are going to come down. Like I do think Trump is going to get his way. Is this absolutely necessary for ETH to outperform? I probably not honestly. Um, if the Treasury and and through this big beautiful bill and all the spending that's coming, if that's going to happen anyways, I don't even know if it's totally necessary. But we can see that this chart tells you pretty clearly that when when conditions loosen, uh, ETH tends to outperform. And that's that's when it outperforms Bitcoin as well. So, yeah, I think an even better one to look at would be instead of Fed fund rates,

look at the Dixie. uh because every time the Dixie goes down, that's when you have these sort of like bigger altcoin seasons or the banana zone as as some call it. Um and you'll see that probably even correlate better and that's what we're seeing right now as the dollar has just been down and down since I don't know what it was, January, February, whatever, whenever we top there. And I think that doesn't stop. So I think um that's your other kind of sign that that this is is going to happen. What do you got here? ETH uh e Yeah, ETFs have been pumping lately. So ETFs doing very well. Um, so Fidelity's ETF added 20% in Q2 um to the AUM. So just super bullish. This, you know, this hasn't been talked about uh a lot, but I think the ETFs have been a pretty good

success for Ethereum. I know Bitcoin got most of the attention, but you've got almost just barely uh just underneath three and a half% of the ETH circulating supply in these ETFs now. So, you know, that to me is more long-term uh c store of value type type play there. So, I think this is this is bullish uh to me. Yeah, absolutely. And you know, we're probably going to get Estaking at some point, I've heard in the next like month, two months. Yeah. Uh and so does that add a little bit more of a catalyst? I would assume so. And also maybe just people want to hold it for longer, right? Because like obviously you can you can buy and sell ETFs easily. Um but if it has some yield, you might want to you might want to keep that for a little bit longer.

So, I think that's going to drive a little bit more demand for ETH. Uh, and then speaking of that, we've got ETH supply in smart contracts. What are you seeing here? Yeah, another bullish chart. Uh, just showing we're just underneath like all-time highs here. So, about 43% of ETH supply is in is in smart contracts, right? That's that's telling you that people have confidence in the protocol itself to move capital into staking contracts into DeFi. About 29% of that is actually the the that's being staked. Uh and then the rest of it is, you know, value that's that's within DeFi, you know, within within L2s. It's it's it's in the ecosystem, uh being used, you know, as collateral and and creating

capital efficiency. So to me, this is another another bullish chart for for for Why is it down for the last about year, let's call it looks like summer of 2024. Do you have a hypothesis there? I've got not not totally sure to be honest. I know. So there was a big movement of uh of ETH off of L2s uh over the last like you know last few months or so and most of that was I believe Binance creating I it might have been an incentive program for staking but they're removing a lot of base a lot of ETH from base down to L1. So we're seeing it come off L2s. I don't know if that's necessarily part of it or not because because the stake rate has been up. So it's definitely not stake rate. It's got to be coming from uh DeFi. Uh,

my other thinking is the ETFs launched in the summer, I think May of last year, and they're accumulating a lot as you just said, and they're not staking yet because they're not allowed. So, would that be pulling it down a little bit? And what's great is as soon as that gets turned on, let's say in one, two months from now, I imagine all that ETH is just going to get staked out of nowhere. Uh, and that should really pick this number back up. That's that's my assumption because it just the timing is is almost exact. Makes sense. Yeah, it does make sense. There are some people that I think are moving their coins from like cold storage and they just want the ease of just putting it in the ETF and so it's like a bit of a swap and that that could be, you know, the explanation for that.

Yeah. Yeah. Um anyway, uh let's continue on here. Balance on centralized exchanges. Balance on centralized exchange. This is another bullish chart. It's just it's so the balance of ETH on centralized exchanges is at its lowest level since July of 2016 right now. So that's just telling you people are moving their ETH off of off of centralized exchanges into DeFi like we just talked about into staking contracts. It's less, you know, it's less of the asset that's available, you know, to to purchase. And so if that's going down and and demand to buy the assets going up, that's pretty good recipe.

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Yeah, I so this metric I I always question because I again the ETFs. So obviously there's going to be a lot of ETH coming off exchanges because it's going into ETFs or it's going into these treasury companies. And so I I always wonder if this metric is a signal at all or if it's just a result of like, you know, new market structure because we're getting, you know, new things in the public markets. Um, so I I don't know. I I haven't really looked fully into it. Just my like first thinking as I as I think about this because you see both both Bitcoin and ETH uh is just hitting like lows for for um assets on on centralized exchanges.

So just it is always evolving for sure. Yeah, 100%. Probably one of the bullish sign most bullish signals. I think the savior of crypto this year uh is is stable coins and um yeah walk me through this chart. Yeah, I've got like almost $140 billion of stable coins now. It has sort of leveled off a little bit over the last last quarter. So looking to see that that come up again. But this is like the big narrative I think you know on like Wall Street and stuff. I think everyone sort of gets stable coins uh now and it's understood that most of the stable coins are on Ethereum. So this is just sort of like adds to the narrative I think for Ethereum uh moving forward.

Yeah. And I I think this is just going to completely take off. Uh I think this chart's going to be up and to the right. Um and uh and of course most of it or or bulk of it is happening on Ethereum. I know some is happening on Tron too. It's one of the biggest as well. There's really no one even close after you get past those two. Um there is growth in some of the L2s. Salana has some growth as well. Um but for the most part uh a lot of the stable coin supply is happening uh on Ethereum. So um obviously another another bullish signal. Now um let's do this chart and then we'll get into more more of a conversation on ETH uh but then we'll get into valu valuing them. But what's this chart first?

This is showing we've been just trying to figure out like you know we've done a lot of analysis on real yields you know value acrruel to token holders. Obviously, we don't think that's like driving valuation for these things just yet. Um, and so we've been looking at a lot of different data points to try to figure out what what is actually doing that. This was interesting. I mean, Fidelity put out a report the other day that looks at sort of GDP and, you know, valuing these things as, you know, more through the lens of countries, you know, using that using the native currency. Um, this just shows the L1 GDP plus the combined GDP for base uh, optimism and arbitrum. And that's the uh that's the the purple line there. And it's just

kind of interesting that it's it's pretty well correlated to the ETH price, which is the the pink line. So, just an interesting chart to maybe explain some of the the price action um that that we've been seeing. And if this is you know if this is going to hold then we would expect to see like more uh applications just bring on more users that activity that onchain activity leads to you know demand for ETH itself and that correlates to to the price of ETH um and and so I'll be monitoring this we look at a number of there's another one I think on with TVL you know we're trying to find ways to to understand when ETH is sort of underbought versus undersold and using

some of these metrics to to kind of get get there. So GDP for those that don't know is like the the fee revenue from applications and protocols uh on top of the the different chains that you you mentioned. So Ethereum, Optimism, Arbit and Bass I believe is what you said. Um so that's an interesting one that's that's fairly correlated. There was one um I'll bring up where did I have it here. This this is actually from uh the consensus team was sharing this um and this is basically again another way to try to value this stuff. I think the the key thing for for listeners is we don't know how to value these L1 assets yet.

Um there's a lot of speculation. You hear REV a lot. Um I don't really subscribe to that much. I don't think that that matters so much. I think REV is basically like the revenue of the chain. Let's call it the fees that that that the chain creates. Um and so that's been one that's been been pushed around. This one here uh is a little bit more difficult probably to to wrap your head around, but basically what it is is on the left side here you have the the market cap of Ethereum on the right side. So going down at the bottom here, you have um the value the total value of DeFi TVL on the L1. So Ethereum plus all the L2s plus all the stable coin value on the L1 plus all the L2s plus the restaking assets. And so it's like the economic security of all those assets um

tends to correlate on 85% to the market cap of of Ethereum. And so one thing what this means is like you want to look at is DeFi TVL going to go up? Is stable coins going to go up? Is restaking going to go up? And if any of those are going up, that means that there's more room for the market cap of Ethereum to go much higher. Uh and so that's about 85% correlation, which is pretty darn good. Um so that one's quite impressive. And and as you said, there's a ton of them right now. Um, so I think what I really enjoy about this is I think now that you have these ETH treasury companies going out and educating and speaking with Wall Street about Ethereum. Originally it was just Bitcoin. Now it's Ethereum. We're going to get a lot more of these, right?

Like Wall Street's going to go and try to figure out how do I understand if Ethereum's overbought or not, right? And they're going to go and run a bunch of models similar to these or different to these. And it's going to just help us all get a little bit smarter and and try to understand how to value these things more because, you know, we don't have a lot of options today. Uh, and so we still need to figure out what are what are the best ways to value them. So, I think um I think that's that's pretty exciting. Uh, let me just pull up the strategic uh what is it called? The ETH. I want to see how much uh ETH is in the strategic reserves right now. Um, we're sitting at Yeah. 1.3 uh million ETH worth. What is that? 3.7 billion. Uh, so that's a a massive

number. Uh, and I think that this only picks up. Like if you look at Sharp Link Gaming here at Espet, they're at 205,000 ETH. They started buying ETH like what, a month and a half ago. Uh, there's Bit Digital. Whoops. They have 100,000 ETH and they started buying like two weeks ago, three weeks ago maybe. Um, there's BTCS. They've already got 15. And then you've got um, as you mentioned, Tom Lee, it's not on here yet because they haven't made their purchase, but they're about to. And I think they raised $250,000 or $250 million. So, um, and there's two or three more that have launched just this week. So, I think, um, this isn't going to stop. And what's what's great about this versus the ETFs is basically 100% of this ETH that any of these companies are buying is either

being staked, rest, or put in DeFi, right? And so, if you look at the measurement I just said here, we need either stablecoin growth to go, which we both said is going to happen. I mean, you have the the US government that's pushing that right now. And then you have these ETH treasury companies which are about to blow up ETH DeFi, right? And and the amount of ETH that's locked in stable coins. And so, uh, and then and then heck, maybe the ETFs get turned on and they can do staking, uh, pretty soon. And so, I think you're going to see ETH DeFi, uh, and TVL, uh, and Ethereum DeFi just go through the roof. Uh, and so, yeah, I agree with you. I couldn't be more bullish on on ETH right now. And I've been I mean, I've always been a bull on Ethereum. I haven't

necessarily been a bull on ETH for a little while here, but um the excitement is definitely back. I don't know if you have anything else you want to add to that. I mean, I I feel the same. It's just like it's just a breath of fresh air, I think. Um and like that the the ETH treasuries that you just pulled up, I think that chart started in March, which is like three or four months ago. And like how many treasury companies were on there? There's like 25 30 of them already. So, uh very good sign. That's sticky. That's a that's a bid in the market. That's holding the asset. That's a sticky holder. Yeah. Um, so yeah, it's there's there's there's a lot of catalysts here all sort of lining up lining up together.

Well, what's nice is these are all long only. They're they're buying spot and they're staking it and they're not doing anything with they're not selling. It's not like an ETF. ETFs are great. We love those flows and they've been picking up like crazy. But those can be the basis trade. They can be anyone buying and then selling tomorrow. The the the ETH that's being bought by these ETH treasury companies, it's going nowhere, right? It's well, it's going into ETH DeFi, which is uh which is pretty sweet, right? Uh so that's what we love to see. Before we get into we'll get into more valuation stuff. I'm just curious your thoughts. Um so this chart I've been looking at today. This is the soul ETH chart. Uh which is re reaching quite a critical point. Um I've always said soul is going to outperform ETH the cycle.

Obviously there's a big setup here with ETH at least in the short term. So like I don't know if this stays forever but this is so ETH. Another way to look at it is um is ETH soul. And I don't know that looks pretty this chart looks very bullish to me. If it breaks through which it looks like it could do any moment now. Uh, I don't know, maybe we get a run on ETH versus Soul. Curious if you have a have a take on that. Is this just like a a pullback and and you know, we're kind of hitting resistance here or sorry, support if you look at the ETH soul line or so ETH line or what do you think is going to happen here? I I do think ETH is going to I've been in your camp so like kind of more on the

side of Salana for most of the cycle, but to me like the the narrative like the whole all the catalysts have have shifted here and so that doesn't mean soul's not going to do well versus the US dollar. Like I think it still will do well, but I I tend to think ETH is probably going to outperform Soul uh going forward. Very interesting. Love it. Love to see it. Uh love to see people adapt and change as the market changes. Yeah, you got to be flexible. Absolutely. I mean, if you haven't, then you've probably gotten wrecked this year. So, uh or the last few years. So, it's it's definitely a key thing. Let's bring a couple more of your charts here.

This one's quite interesting as well. This is just another way to look at is ETH overvalued today? Is it a good time to be buying? Um and uh yeah, what are we looking at here? Yeah, this is just the MVRV Zcore. It it's looking at the market value and comparing that to the realized value, which is an approximation of the sort of cost basis for the the coins uh on the network. It's not it does not factor in the ETFs or the coins on exchanges. So there's there's nuance to some of this data, but historically has done a pretty good job of telling you when it's a good time to buy and also when the the market's getting a little overheated.

This is the zcore, so it's giving you the um standard deviation in terms of like where that realized value is compared to historical norms. Uh it's it's at about like a 37 right now and it's the the historical norm over the last five years is about one. So, it still sort of looks like kind of fair value. Typically, the best time to buy is when it drops below uh drops drops below zero there. Yeah, but we're close. We're close. So, right, you're not far off. So, it looks like it's still good. MVRV is is a popular one used in Bitcoin as well, and it's worked really good for for a long time here. This one's a 200WE moving average. Um, how do you use this one?

Another long This is a long-term moving average. Uh, also works well for Bitcoin. And what what this tends to the price tends to collapse towards this longer this is like a 4-year uh moving average. And we can see we dipped like significantly below it like the largest drop below it just uh this past April. So that looks like it was one of those like really really good buying opportunities. Um but we're still sort of just right at that that 200 week moving average which historically has been a good a good time to buy as well, right?

Uh and then market cap versus TVL very similar to the one I showed actually um previously that consensus was looking at but walk us through through yeah just just another attempt to try to understand like this is almost this one we're trying to like figure out like what is like book value and I think that's similar to what you were showing with what consensus is doing there like you know can you get to some sort of it's obviously not book value but like a similar sort of metric for crypto networks And I think this this sort of is another way to look at it. It looks like you know ETH price has bottomed uh when it has collapsed right to the to the uh TVL of the network or or sorry that's the market cap uh the market cap

has dropped when it's sort of bottomed when it when it when it hits the TVL. This is like also there's lots of nuance here. TVL is extremely reflexive to the price of these assets. Obviously a lot of ETH is in is in um in DeFi. So, you know, the TVL rises and falls as market prices rise and falls fall as well. So, something to keep in mind. I I think though if there's if there's two like knowns like forures that are about to happen over the next year, it's stable coins are going to increase and Ethereum TVL is going to increase because of the fact that ETFs are going to be able to stake. ETH treasury companies are not just staking but also reststaking and using a etc. So I think like it is it is almost unknown that the DeFi TVL is going to go up on Ethereum

and so is the stable coin supply which bodess well for kind of what you're showcasing here and what I think others like Fidelity and that are showing as well. So there's um yeah there's a lot to be excited about on ETH. Let me flip the script here. I want to I want to just throw my a big thesis that I've been playing out. I just want to throw it on you and just see what you think and this will bring us into our discussion around um Coinbase and Robin Hood which was hoping we we'd be able to get to as well. Um, from what I've seen so far this bull market, and I would say this bull market's been going for about two and a half years essentially. Um, we haven't had a lot of new retail capital come into the space, right? We've got

the retail capital that's here that moves from one thing to the next. They moved to bare chain when it launched. They moved to Hyperlid. They they jump around from one thing to the next. So, when you see an altcoin do really really well that's taken a spotlight, generally there's something that was doing well that's that's now getting worse. So, that that capital is very mercenary and just kind of moving around. the new capital that's coming into the space is institutional capital and it's finally like being allowed to come in both um still not a bunch of it coming on chain and like using DeFi or even buying like digital assets yet because a lot of them still can't do that but they're be able to access crypto through public markets that's why the Bitcoin ETFs have done so well I think Ethereum ETFs have done so

well this year you've got the Bitcoin treasuries there's a lot of companies funds etc that wanted access to Bitcoin couldn't hold the digital asset so instead they just bought strategy and and the many others that exist. And so that's why in my opinion Bitcoin has done so well over the last two and a half years is because you could buy Bitcoin as an institution, as a fund, as all the capital that wants to come in and access crypto. That's just the only place they could do it is public markets. And I think the other reason you can see this is like Circle launched uh you know, what was it now two two months ago or something, whatever it was, and it went like a 10x off its IPO, one of the most successful IPOs we've seen in forever. And that's institutional demand that's just like

wants access to crypto but can't go and buy these things on chain. And so every time something comes, you know, on in public markets, they're like, "Yeah, we're going to eat that thing up." Which is why we're now seeing so much demand on the ETH treasury companies as well. It's like, "Hey, we can't get it anywhere else. We can't access Ethereum DeFi because we can't get our our assets on chain, but we can buy SBED or we can buy whatever, and that's where we can get our exposure to to Ethereum DeFi into the Ethereum yields." So, in my opinion, the way I'm kind of seeing the market is all I want to see is the ability for an asset to be accessed through public markets. And if it can't be accessed through public markets, I'm not very bullish on it because I just don't think that there's and maybe maybe

something changes, but there's not a lot of new capital coming from retail, which means like coming putting their money on Coinbase, moving it into a MetaMask wallet, and buying whatever token. I just don't see a lot of that happening. And I don't especially like what we've talked about like the economy is good for assets. It's not necessarily good for like your average person. And so I don't think there's going to be a lot of retail capital that even comes in at all for the next little while here. But I think institutional demand is going to pick up and just go absolutely berserk especially as these new structure bills and stable coin bills come in. And so for me my eyes have just been glued to public markets. And so like I've been very bullish coin and hood for a while now. Um, and anything that like all of a

sudden picks up steam in public markets, like I don't know, let's say, you know, there's a few Salana treasury companies now, there's probably going to be a bunch more. That to me is a signal because at least the big capital that isn't going on chain can still access those tokens, but otherwise, if it's not available with the public markets, I'm pretty bearish on a lot of it. So, I don't know if you're seeing the same thing. Um, I haven't heard a lot of people talk about that, but I wonder what do you hear? What do you think when you hear that? Yeah. No, I think that's this is like a a really good time to be sort of looking at all this and and running the analysis. I'm definitely seeing it and you absolutely have to pay attention to this. I mean, when you see Robin Hood

announced that they're building on Ethereum, Robin Hood was up like 11% that day, but Ethereum was basically flat. I think Arbitum went up a little bit, but like Robin Hood outperformed the infrastructure, right? So, you you got to pay attention to this. Um and then coin started catching up. We saw like circle do like a 8x. So there's like there is pent up demand. There's there's very clear pent-up demand uh on Wall Street and from larger institutional capital to access crypto. And like you said, they can't do it uh on chain. Um so you absolutely have to pay attention to this. I mean we have like 20 we've been holding coin and hood since the like the last bare market and that's that's two out of eight of our

asset the eight assets in the portfolio. So like 25% is in crypto equity. So it's definitely something and now you know after seeing circle it's just making me think even more along these lines. And I totally agree with you on like there's very little retail interest in crypto. I think people need to realize this like some of the social uh sentiment indicators in terms of like right uh what you see on social media, YouTube views, you know, anybody like yourself or myself that has a newsletter, we we tend to like see what's happening with new people coming in. We saw a lot of that I think uh towards the end of last year and the beginning of this year, but it's like now like down to like lows of like the bare market. So definitely not

a ton of like just retail interest in crypto. I have I will say that um I've had like I was at a wedding uh like recently and like people were like interested in crypto. Some of my friends who historically have stayed away from it are now like how do I get expo like asking me about crypto and stuff. So I'm getting a little bit of that. Um and so that's that's factoring in. I also don't want to like go too far to the other side of this and like just sort of dismiss the sort of longer tale of assets in crypto because things tend to move in cycles and like the market like eventually like people at the end of the day people people want to gamble, people want to take risk. I think we'll still see that and there's certainly enough

crypto natives like you said where the capital can sort of like the hot ball of money can can move around a little bit. Um but I totally agree. I totally agree with you and it's something you just you have to pay attention to this um because a lot of these a lot of these tokens have lots of unlocks and if there just isn't enough buyers out there these things are not they're not going to do well. So I I just think the riskreward is just so much better in the public like crypto assets that are available in public markets than than not, right? And even I mean Coin and Hood are close to 100 billion uh valuation now. And I still think it's a great risk award uh because there's just like there's an ever evergoing bid for it, you know what I mean? And there's still I know there's

going to be a bunch of IPOs coming up, but there's still not that many crypto assets available in public markets uh like there is on chain. So um I think they're just they're going to continue to have a demand. How do you think about investing in in Coiner Hood? Uh you said you've had it held both of them for a while. I get this question a lot from from our audience, you know. Um should I be holding both? Should I hold just you know more of one? What's your sort of like thinking around who's going to win? Uh and uh and how you might think about investing in playing that? I like them both. Um I who's going to win? Um it's a tough it's a tough one to say. Robin Hood has sort of the infrastructure for like trading of these equities and like you sort of probably

want to bet on them for that. But like Coinbase has like you know seven or eight lines of businesses that can be billion-dollar businesses in themselves. So um I like I like them both. I kind of have like equal exposure honestly for for my portfolio and I sort of view them both as like the like the Morgan Stanley and the like JP Morgan of the future and like that just feels kind of clear and I think that's probably what you're hinting at with like these you know they've gone up a lot and I think they're both trading near all-time highs or at alltime highs right now. Um so I'm not buying them right now but like for on a 10-year horizon like they're probably like significantly undervalued uh right now. So yeah, I think um yeah, those those are the two. And I I I'm

curious what you think about Circle. Like what's crazy to me is like you can actually get exposure in public markets to some of these things and they're going up like multiples, right? Most of the time people are people are going into crypto assets because they know in a two or three month period you can get a 5 to 10x, right? Um I'm not getting that with Bitcoin, but on the longer tale, but you're seeing that in publicly traded equities, it's pretty it's pretty wild. So, Circle, uh, to answer your question, Circle, I'm I'm less, uh, bullish on, I would actually say I'm even bearish on for for two reasons. One, I think they've had a cliff with their investors. And so, like, their their investors that were preipo just haven't been able to sell. And so, it's it's like a bit of a squeeze that I think has

happened. I don't know when that cliff comes, but I think it was maybe six months or something. So, like, at some point, that thing's going to bleed back out. But just when I think about the business, what I love and what you brought up, what I love about Coinbase and Robin Hood is they have a bunch of different business models and a bunch of different revenue streams, right? And so they can use that. It's kind of like the Apple model where they can use one revenue stream to undercut a different revenue stream, right? Um, and so yeah, Coinbase's like exchange volumes and what they charge is pretty crazy for retail. And so like banks might undercut that, but that's okay because they have the execution revenue that they get over here on base or the custodial revenue that they have for the ETFs and and all

that kind of stuff. like they can shift their revenues around and that's okay and they can keep moving and be agile with the market whereas Circle has not established that yet. They have just like one revenue stream essentially. Um and uh and so like that to me they don't have a strong moat today. They do have a lot of liquidity obviously and that's tough to get and so like liquidity bay gets liquidity so like they do have that. I just um there are big players that could eat that could get some big liquidity pretty quickly uh if they launched. The thing is like I know everyone's like yeah banks will eat their lunch. banks are going to be so slow to do this stuff that I'm I'm not overly concerned for like, you know, this bull market anyway.

I think they're going to be much later. I know there's there's always announcements that JP Morgan is going to launch according to this or that, but they're so slow to do it that like it doesn't worry me today necessarily. But yeah, I think um Circle's business just less defensible and they just they haven't built out as many revenue streams like like Coinbase and and Robin has. So that's why I'm I'm I don't own any Circle and I never have actually. Um okay, let's let's talk about the tail end. We're excited about ETH and we're still excited about Salana as you said, you know, still think against the USD they both go up a lot. Maybe ETH outperforms. Who knows? Um I don't think we really know there. But if someone wanted to go farther down the risk curve, how do you think through that?

Are you a memecoin guy? Are you a DeFi guy? Like how do you play the beta to either ETH or Soul, whichever one you're looking at today? I I'm I've historically done pretty well with like sort of the the high beta like the pairing up the L1s with uh riskier assets that are more like the memecoin, culturecoin. These are the larger meme coins. These are not the the like ones that are just launching on pumpf fun. But pairing up something like uh you know soul with bonk or soul with whiff or um you know ETH with Pepe is kind of like what I've historically done done pretty well at. Um the other thing is looking at so so I think an interesting pairing for ETH right now and we've we've written about this is Athena. Um

and Athena is like very reflexive to open interest on ETH. So as ETH price goes up you'll see open interest rise. You'll see um traders open up like long positions in the per markets and Athena is essentially monetizing that. Um, and so, you know, I think that if and it's also like there's there's a a lot of this has to do with just like the stable coin narrative as well. And Athena pays a yield via its um via the via the earnings it gets from shorting uh the purpose markets because longs are paying them to open those keep those positions open. So, I just think like this is like potentially you what's interesting here is you've got like the stablecoin

narrative and then you have like this reflexivity tied to ETH and ETH open open interest that I think makes this an interesting altcoin um for for if ETH outperforms. Um so that's that's one too, doesn't it? What's that? Looks pretty oversold here too. It looks over Exactly. totally. Um it's definitely oversold. um it struggled through this this period where basically open interest went down. There's been less demand for traders to go long in the perish markets. Uh and I think this is this is basically correlating like to just sentiment in some ways.

Yeah. And I think from what we talked about in the beginning, if we're going to run the economy hot and we think ETH is going to do well because there's all these treasury companies, you're going to get a lot more open interest. And like right now, I think Athena's stable coin is like 4.2% 2% which is pretty small but that should pick up big time and as as the demand for for ETH picks up. So, um, yeah, I agree. This this could do could do well here and and yeah, it's crazy that it's it's it's gotten impacted this much, right? So, it looks like actually a decent opportunity versus like some other Yeah.

Uh, because many I mean, we've been calling a lot of the Ethereum DeFi tokens, but they're well past all-time highs now. Things like A and that they've already kind of had their moment now. I think they'll continue to do well, but um I know you like to find your, as you call it, fat pitches. And so you like to find the things that are that are uh you know undervalued and and ready to to to to move. Anything else you're looking at or or should we wrap up here? I think that's it. We did a report on Worldcoin which this is a project also. This is related. This is um something people should understand with Athena too. These products have unlocks and that this is the biggest risk on stuff like this especially like we just mentioned if there's not a ton of uh retail interest and and demand. Um I I

really like Worldcoin. I do think the token economics are are a bit challenging but we did a real big deep dive on that. I think it's a incredibly important use case for crypto for the future of the internet. Um I think it has to be solved with biometrics. This is really the idea that people can uh use the use the internet like pseudo anonymously but be able to verify who they are and share information as needed and control that. And I just think like anybody who's on Twitter right now knows that that user experience is just being just degraded by bots and um you know basically AI. And so like if there was an opportunity where you know I was able to use Twitter and I knew that everybody was a verified human on that like I I

would absolutely want want to be over there instead of on the in the cess poolool with all the bots. So, I just think that as the as AI grows, the user experience on web two from from a web two perspective is going to continue to degrade and these web two companies are going to have to opt into something like this, right? And I just think Worldcoin is the only one that's solving it the way it needs to be solved and it's got a really strong team behind it. Um, it's, you know, it's so early stage, it's hard to say how that monetizes and how how it all plays out. Obviously, the token economics are are a bit of a challenge, but I think it's a really interesting project and and we wrote about it recently if people want to check that out.

Yeah, definitely check it out. It's a great read. And I mean, in terms of actual users, they got to be one of the biggest in the entire space. I know you can look at wallets and they you know, you got a lot of apps that look big, but they're they're really not. It's, as you said, a bunch of bots. Um, but what's good about about Worldcoin is like you it's just humans. You can only see humans. That's the whole point of the project. So, you actually know how many legit humans are on it, which is um which is quite interesting. It's in the millions now. So, it's it's been growing quite a bit and and they're expanding really fast into the US and other places this year. So, um yeah, I completely agree. They're doing uh they're doing a great job there and I'm excited to see

something actually like come to life there, right? Like they've had to do it's a long process what they're doing, right? Like you got to onboard and onboard and onboard and then the value is there and that's just, you know, it takes a while. Um but I I'm also excited for what they're doing. Yeah. so hard to do what they're doing and they're kind of rolling it out similar to like how Uber rolled out like they're going like city region by region. Uh they're going to be rolling out those orbs like in malls and like uh convenience stores I think soon. So hopefully we'll start to see more more of that. And then the stigma of getting your iris scanned. That's another challenge with the project, but I I think that will be overcome at some point. Um, but yeah, that's that's that's kind of uh the trip around, I

guess, from macro all the way down to the farthest end of the the the risk curve. So, well done. Great story, Michael. Fantastic to have you on, man. Love having you on the show. Love to pick your brain. You're you're one of the best uh that does it in the space that does analysis and research. Uh and so, again, if you guys aren't following the DeFi Report, go check it out. Um it is uh it's some very quality content and they're they're creating a lot of like net new um ways to look and think about these assets which I which I really love. So Michael, thanks for everything you do and um and I wish you guys all the best.

Likewise, Kyle, appreciate it, man. All right, everyone. Thanks so much for listening in. Jay will be back uh in the next episode. So that's all you get from me, but thanks uh all for listening in and have a wicked awesome day. If y'all are making swaps or trades right now, highly recommend you check out Milkroad Swap. This is a DEX that we built in partnership with Cow Protocol. Why did we build it? Not to make money, just honestly so we could have a place to do our swaps for the lowest fees that we could find. This is the fees on Ethereum, Arbitum, and BAS are only 0.15% fees. Uh this is a huge difference from uh other centralized exchanges that charge half a percent or even up to 1.2% fees on their swaps. Also, you can swap

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