Ethereum Bull Case - with Cobie, Su Zhu, and Hasu

Transcript

Welcome to Uncommon Core, where we explore the big ideas in crypto from first principles. This show is hosted by Su Zhu, the CEO and chief investment officer of Three Arrows Capital, and me, Haisu, a crypto researcher and writer. In this episode, Su and I brought on legendary crypto trader Cobie, who is @cobie on Twitter, to talk about the bull case for Ethereum and its upcoming catalysts, whether ETH can flip in BTC, and what advice has helped Cobie to survive several market cycles to date.

Enjoy. Thanks so much for joining, Su. Yeah, you too. And our special guest today is Cobie. Welcome. Hello mate. Hello, how you doing? Thanks for having me. I'm doing great, thanks. So, you know, you you have a huge Twitter following, and like you've been forever basically in crypto. One could say you're a real dinosaur. And but you know, that considered, it's just crazy to me that I didn't know you until like half a year ago.

I I only joined the space in 2018. Um So, did you did you like take a break or something? Or have you always been around all this like No, I think what is, you know, is like you're a serious person, aren't you? Like you take this You take this thing quite like you do you write research and and and stuff. And my account just tells jokes. And honestly, they're not even very good jokes. They're they're like low-brow humor. So, I think I think a lot of people see the account and ignore it thinking like this account is like like why would I follow that? It seems it doesn't even make sense most of the time.

And then after a while, it just it ends up on their feed so often that they capitulate into the follow button. You know, I don't think I don't actually don't think that's it, but you're very good at the safe degrading humor, I must say. Um, no, it's just that, you know, for these accounts that have been around forever, there are so many accounts that have like a couple hundred thousand followers if they have been around for like in like 2017. But it's almost like an anti-signaler because, you know, some of them are just way too rich to care. They've stopped following the space, stopped learning. Um, they're just selling out, but, um, you know, when I sort of found your account, I I thought it that it's actually like completely different from how you'd expect like a

large account from, you know, back in the day to be. Um, because like your tweets are actually extremely intelligent. Um, I really love the humor, but I'm also taking uh, a lot away from your commentary. Yeah, you know, I think a lot of the old accounts um either changed hands or they truly lost interest and missed out on the on the run and like there isn't many, um, people that were on Twitter the same time that I was on Twitter that like made it through each cycle and and like capitalized on each of them. I think uh a lot of those people lost interest in

the bear markets. They got wrecked over-leveraging themselves, um, in like a period of sideways, um, and really missed out. So, there there there's a few of them like Angelo, um, is a king and, uh, you know, he's still half around now, semi-retired, tweets every now and again, currently 10 million underwater on Dogecoin or something but um I think the majority of those like big, um, like early accounts, that the account ownership has changed hands or they they like lost interest in the space and now they're they're bitter cuz they sort of missed out on the um, on on the greatest bull run of all time.

Yeah, it's it's funny that you that you say this. So, tell us a bit about sort of who you are, where you're coming from, but I'm especially interested in how did you manage to sort of rekindle the interest for crypto like for so many cycles and for so many years. That's that's the most fascinating thing for me about you. Yeah so I had a like a bit of a unusual or strange life to be honest where I I like optimized for doing loads of stuff. I optimized for having as many experiences as possible cuz I believe that um uh variety makes you younger in that every

time you have a new memory, you do something new that doesn't blend into the ordinary, you experience it like more profoundly and more presently. Uh it extends your life in a in sort of like a a way of multitude of experiences rather than just the same thing over and over and over again. But yeah, I like have a computer science background, did computer science at uni, dropped out of uni to play in a band for a while, went back and finished my degree.

Um did tech startups and in parallel like did hobby crypto stuff all along. Um I guess the reason um I stayed interested in crypto is like I I don't I don't want to be a dude that says I'm in it for the tech, but I find like the tech side pretty interesting. So, I find that easy to like slowly plot along and keep up to date up to date with. And I find the cyclical nature of the market that we've had over the last 10 years has been hugely favorable to anyone that was able to address the reality and say, "This is sideways. This is, you know, a period of pain. During this time, all you have to do is sort of

grit your teeth and wait, rather than over-leveraging yourself and uh like like getting liquidated on a candle that like if you look at the chart now, you can't even see anymore because it's just like noise. Yeah, and I mean, I strongly relate to what you said about sort of making new experiences. And that that's one of the things that really shows you how subjective our, you know, we experience time. Like when we learn something new, then somehow this you know, the passage of time seems to slow down. And that's one of the really beautiful things about life.

Yeah, I think this is the reason that the guy that started Airbnb said he started Airbnb, but maybe it just sounds pretty. Um Yeah, we definitely get into a sort of your experience through the different market cycles and so on um later on and also um pick your brain um uh like a lot of things um in the crypto space. But first, so I have a question for you, Su. Because in October 2020, when we released our episode with Light Crypto, and you know, that did very well, got a lot of attention, and a lot of people yeah, are still listening it today, and we still get a lot of you know, messages um sort of about what we said about Ethereum

in that episode. I think at at that time, we were basically like peak peak bearish on Ethereum, especially you. And 6 months later, you know, you're now super bullish. So, um what happened in the meantime? I think I think as traders, we sometimes use hyperbole just to just for impact, but um no, I think at that time, there were a lot of inflows into BTC in the OTC market, but Bitcoin USD. That That was around the time of the sailor inflows. It It was well before the I think the price is probably around 12K, 11K then.

And ETH/BTC was around 0.031. It proceeded to go to around 0.024 be be before starting to bounce and and I think I mean that at that time it was just a backdrop of the institutions are coming for digital gold thesis and this is something that I I I mean I still believe if everyone comes together and says this is the digital gold, then wow we then yes, then Bitcoin will definitely separate from the pack and and ETH/BTC ratio would go down quite a bit. Um but I think to the contrary of that kind of believe you've you've also saw a lot of interest in what DeFi's actually doing um to

to to challenge the traditional financial rails and also you're seeing Ethereum tokenomics improve and you're seeing Ethereum community improve as well. So, I think in that backdrop, I mean we can go out into it more later in depth about the bull case for ether, the bull case for Ethereum, but I do think the bull case has been stronger than ever uh at this moment. Yeah um I totally agree. And yeah, I think if we have sort of a high-level topic for this episode, why not make let's make it the like the unpacking sort of the bull case for Ethereum.

Um so, let's jump into some of the different catalysts and why you think we are more bullish than ever. So, maybe starting with um EIP-1559. So, um to both of you, how how does EIP-1559 change the the tokenomics of of ether and make it more attractive? Yeah, I mean I don't know the exact number, if I'm honest, but I I think it's something like if 1559 and the merge were active already, there would be something like 800 ETH new ETH issued yesterday and like 15,000 new 15,000 ETH burned.

Um and the validators receive like 6,000 of those ETH in transaction fees, which if you annualize works out as like a 60 to 70% APR from um from staking. But if you take a look at those numbers a little bit more closely, 15,000 ETH burned is gigantic compared to the daily issuance now. At the moment, I think it's about 70 million um go to miners every day and about half of that is uh is from inflation like new ETH issued.

Um if it's going down to like 800 issued with so much um supply burned, the pure really basic supply demand equation just becomes incredibly favorable um to to Ethereum. Um not to mention that the staking reward also incentivizes people if it gets to 60 70%. I think it might get to like 50% and it incentivizes people that hold ETH to lock up their ETH for even longer, which like compounds this uh um the supply demand issue even further.

I I think it's massive and people are not truly factoring in. And I think they're not factoring in because ETH 2 has become a bit of a meme like ETH 2 soon ETH 2 soon like the merge is going to happen soon and like like it's like 2021, I think, the current year. Um and we still haven't merged. So, I think people are just saying are going like, "Yeah, this this is not real. This is not going to happen ever." Um but the truth is like EIP 1559 will happen in summer and the merge will probably happen later in the year. So they'll both be reality by the end of the year, I think.

Yeah, I think philosophically, right? It gets back to the question of what did Satoshi invent? I saw this by Vitalik presentation at one of the DevCons where he said he invented crypto economics. That's what he invented. And I think that that idea is is I think a startling one because what it would mean is that if there were a coin that um managed to get its community together to coalesce around its value proposition and also to transact and use it as the underlying chain that they work on, then then that would be I mean, basically Bitcoin is also that.

And so to sort of compare and contrast their valuations, you also have to compare and contrast how they function in their ecosystem and how they function um not not just as a store value in the mythological sense or in the narrative sense, but in its ecosystem itself. And so from that point of view, it's quite easy to see why EIP 1559 is is hyper bullish because it represents a it represents an assertion that ETH is the native collateral of Ethereum and that ETH uh will accrue value within this ecosystem and will try to be as as sound as possible as something that people will hold. Uh so, but I do think that there are also good arguments

I mean, they're always having good arguments on the Bitcoin inside that ETH is changing too much all the time. But I think that if you look at the stewardess or not the stewardess, but the stewarding of uh the the Ethereum project, it it it has been done in such a way that it is generally protecting the rights of ETH holders. Um and and as long as that continues, this confidence has only been increasing over time by people, so. Yeah, right. I mean, people have to point out that, you know, ETH ETH's monetary policy has been changed um a few times before. And then you have sort of the erratic-seeming difficulty bump where issuance tends to slow down and

then all of a sudden the difficulty bump is reset and then issuance spikes up again and it's it's just makes for an incredibly ugly-looking graph. Um and I I actually thought that, you know, sort of the ETH community sort of breaking or ETH developers breaking this this rule that they would never increase issuance for the beacon chain where they where they generally like added a second issuance. I thought that also back in October that this was would be perceived as more, you know, sort of breaking this narrative that you'd never um increase issuance, only lower it.

Um but it hasn't at all, so that was one of the things where I would say, yeah, um I was wrong. I thought the market would pick up on this and it didn't at all, so I mean, personally, I'm okay with that, totally. Um Yeah, I think it's interesting because uh a lot of um like the the core Bitcoin um maxi camp often cite this as a uh a thing that's bad about ETH and in many ways you can agree with them, right? Like if your um goal is like a political or philosophical argument around removing sovereignty um about having sovereignty and removing um state from money, then Bitcoin is by far your best bet. Um it's by far the most uh decentralized and the most difficult

to change. Like you saw with Bitcoin Cash that um uh like large highly influential um participants in the ecosystem tried to make a relatively big change to Bitcoin and it was and it and it was rejected. But I just don't think those things are investment theses. Like I think it's like it you can have that as a your political belief or you can have that as your philosophical belief and you can also at the same same time take an unbiased look at the tokenomics change and say mhm that's probably favorable for the price

of Ethereum which is completely disconnected from you know from unless you're entirely allocating capital based on philosophical or um political reasons which if you want to do that go ahead but I'm not someone that you should follow in that in that case. I think if you separate those two things out I think it makes a lot of sense. So I agree with a lot of the Bitcoin maxi arguments like Bitcoin is the most decentralized currency not having a central financial planner that's changing tokenomics makes for something that you don't have to you know rely on a certain group of people it makes it something that you don't even have to trust cuz it's going to stay the same all the time but I just don't think that's an investment argument. I think

it is something totally different. Yeah I mean it's um on some level you would think that the goal of every coin is to basically just maximize you know the value of the Bitcoin for its holders and that's how it wins. That's how it wins you know. So everything safe moon. You would think so right but something like that moon with levels of sophistication on top of it. I would say I would say the other dimension is probably sustainability. Right? I mean you can you can design we have learned a lot about basically tokenomics and you know pumpamentals if you will from the first DeFi summer.

I would say books will be written about sort of the one on one of of, you know, how to pump a coin based on that. Um but, you know, not everything is like like the higher your pump momentum is, the lower the sustainability of the pump tends to be, right? Yeah. And um I think for that's also something that, you know, on a very different time scale, Bitcoin and Ethereum have to also look at and deal with, right? How you How can you really create the best economics as possible because the coin with the best economics for its holders will be and the most sustainable, right?

Tokenomics will be the coin that wins ultimately uh at least on a very long time scale. And I also think that EIP-1559 just dramatically improves um the tokenomics of ETH, and that's why I see it as, you know, a very positive catalyst. Yeah, what I find more interesting than the pure tokenomics or the explicit changes to supply and demand is the attitudes towards these things from each um each like both of the communities, the holders, the developers, and stuff. The attitudes towards um how you should approach monetary policy uh

attracts people that agree with the same thing, right? So, it's like these sort of self-reinforcing communities where if you believe that um like sort of feel like like Satoshi at some point was a central planner, and he wrote the tokenomics for Bitcoin, and now they exist forever, and they should never be unchanged they should never be changed. It's like that that's set in stone almost biblically. Um then people that believe that flock to this community. And for people that are take a lot more of the Facebook move fast break things, um you know, uh change things when they feel necessary to be changed, they seem to flock to the Ethereum community. So,

what I find more interesting is how over time those individual attitudes will, um, will scale and will, uh, sort of grow with the network because um, on one hand, uh, as Ethereum ages, it may lose, uh, that sort of "Yeah, we can just change things." type of approach and it might become a lot more boring and, uh, stable. But equally, it might just be something that's fostered into the developer community and just something that exists forever and, uh, you know, for the rest of time you have to read exactly what's happening on ETH week to week because things might change from October to April.

You know, I definitely hope that it would I mean, it's good that they can sort of pivot into the better designs and that's what we're seeing right now is the but I would think that they have to, you know, tune it down at some point instead of the iteration because already today, um, if you don't pay it, like if you build a large application on Ethereum and, um, you you don't pay attention to sort of the governance and it it could just be that some of your competitors get a proposal into the next hard fork that that sort of wrecks out your smart contracts and this is something that should definitely not be the case. Like, you should definitely strive for, I mean, I sort of like how Vitalik puts it, you know, with

the sort of the credible neutrality. If you build on Ethereum, then you should have the guarantee that your application is, um, is good, you know, for at least a few years at the very minimum. Um, so, um, but moving on, um, apart from EIP-1559, we talked about the merge, right? Um, and this was basically accelerated accelerated by so the miners getting angry about EIP-1559 threatening to stage like a a um a demonstration of power on April 1st that then didn't happen.

Um but still it sort of showed the community that let's accelerate so that the transition to to to proof of stake and as I understand you're probably following that closer than almost anybody because of your involvement with Lido. Is that Is it Is it Can we talk about that? Yeah yeah yeah. Yeah. So I um was part of the Lido team for the majority of last year. Uh and now I'm like part of the uh independent member of the down no longer a member of the uh the core team. But um Vasily from the uh the core team is one of the uh smartest crypto people I've ever met. Um maybe just people. Maybe I

don't need a prefix with crypto anymore. merged into the same thing. Um and yeah happy to happy to chat about it. Um Yeah so Lido is a is a staking service basically, right? For for ETH 2 currently on the beacon chain but then I mean for you the the merge is uh super relevant, right? Because it basically expands your market by like 100x or something, right? On Ethereum. Yeah so the the main um the main goals behind Lido were initially to uh fix the staking user experience issues for Ethereum. So you know there's a the

they design it in a slightly like a non-user-friendly way, which is um maybe maybe just how they do things. But the you know you can't stake um anything except multiples of 32 ETH um problem. And when you stake ETH on um ETH 2 like if you stake today uh you like spin up your invalidator and stake today, you're basically moving your ETH to ETH 2 and you're earning rewards that you can't access until transactions are enabled on ETH 2, which is like some point in the future maybe. Like whenever whenever they've whenever they've um finished up their bits and bobs. So, having is like a very big commitment

um and a like 32 ETH now is you know a decent amount of money. So, it disincentivizes or prices out retail. That's Ethereum's motto for 2021, isn't it? Just pricing out retail. No matter what you do, you price out of retail on Ethereum. Um, but it was initially to you know solve those two issues to create a two-way door for staking ETH and allowing you stake smaller amounts of ETH. In the bigger picture, the primary goal is to solve the competitive equilibria between participating in DeFi like participating in on-chain lending and securing the Ethereum network.

Um, mostly if you participate in DeFi today you can get yields that are greater than um the yields you'll get from staking your Ethereum. So, any um self-interested rational actor would take the higher yield available for from DeFi than securing the ETH network and getting your you know 12% or whatever you get today. Um, Lido allows you to compound those yields. So, you can stake your Ethereum, you get a an on-chain derivative of staked an ERC-20 that represents represents your staked Ethereum, which you could then use in DeFi. Um, so if you follow this train of thought

you can imagine that some point in the future the new base currency on Ethereum would be staked Ethereum rather than ethereum because it can uh do everything that you can do everything that ethereum can do except you get the base yield. You get the sort of risk free yield. I did air quotations. No one can actually see me, can they? You get the base yield on your on your ETH and it's already like ERC-20 wrapped for DeFi and stuff. So, that's the core purpose behind Lido for anyone that is listening that doesn't know what it is or why it was created.

And how's that going so far? How do you see adoption using like the beacon chain and especially adoption of the the staked ETH token? Yeah so I think about 7% of all ETH staked is staked with Lido at the moment and nearly all the other staked ETH is staked with either Kraken, Binance, Swiss, or like stakefish. So, a lot of the big exchanges have gigantic market share.

And it and it sort of makes sense, right? Because the way staking was designed with these huge lockups and lack of liquidity, a lack of like the ability to unstake was a perfect setup for exchanges to launch a centralized staking derivative like you can unstake within their own centralized market. Yeah. So, of course they can provide the the superior experience to you know, solo staking or joining some some pool. So, I think Lido is the only a staking derivative on chain staking derivative is the only staking option that can match and is

probably superior to exchange staking. So, I I that adoption has been pretty good because of that. There's, you know, like billions of dollars in Lido now. I think I just like over a billion dollars staked in in Lido and there's a gigantic curve pool of ETH to staked ETH so that if you want to unstake by selling your ERC-20 staked ETH, you can do that with like relatively little slippage. Like I think at the moment you lose less than half a percent by doing so.

But you've also seen a lot of on-chain staking derivatives that have tried to do it, not reached sufficient liquidity and their users just get wrecked. If you stake and then you try and unstake, you immediately lose 15%. So I think having the liquidity around like the two-way door is super important and I'm glad that Lido's been able to achieve that. And having like being the generally accepted uh like staking solution early it is pretty helpful.

After the merge happens, the product gets much more interesting because you no longer have price risk when unstaking. You can stake, you can unstake after the merge transactions are enabled. And at that point the product starts to like come into its own, but it also loses the moat of um like competitors can now vamp attack you much much more easily. Competitors can provide better products and the 1 billion in liquidity that's in Lido is no longer stuck there by the by the like properties of the merge. But in the future I can definitely see a time where you, you know, instead of you have your optimism and your Arbitrum

or whatever roll-up takes like market share. And in that roll up you use staked ETH as your base currency. Um and you earn a yield on whatever you're doing in Ethereum, whether you're trading, whether you're um providing liquidity somewhere. I can I can imagine that being um the future. Brings the question of why didn't ETH build this native into the into the protocol, but um So, do you have any thoughts on the um merge to ETH 2?

Yeah, I think uh I definitely agree that with staking derivatives on ETH, it's going to be quite a lot of winner-take-all effects because like you mentioned with liquidity, everyone wants to stake where everyone else is staking, but that's how you ensure the the the liquidity process. Uh if if you go into a pool that not that many people are going into, you you're taking so much risk for zero gain. You have nothing there's no upside and only downside, right? So, that I think um people should consider. I think also uh with the merge itself, um it's going to be really interesting to see what happens. There's some people who've been asking like, you know, is there going to be a proof-of-work fork

of Ethereum? Is there going to be like a like are miners going to protest? All this kind of stuff. And I really do think if there is a fork, it's not going to do very well at all because who would support it at this point? Um and who would be incentivized to support it? Very few people, right? Um So, it's it's very it's very hard to see how the merge will get stopped by forces that be that that will say I don't like the fact that POW is being turned off.

Just because I think the general strength of the Ethereum ecosystem now is so strong with the application layer and with the status of the Ethereum Foundation and and and I think with the certainty they have on the road map now and that the community is behind it, it's I think there was a time a year and a half ago, two years ago, where people would have said, you know, just cancel ETH 2, cancel ETH uh proof-of-stake, just do like 1.5x or 1.x and then do uh you know, proof-of-work plus rollups and that's done, right? I think the there was a time where that was actually a popular that was a popular view uh like among very large ETH holders that that that would be the right way to do things and

Yeah. Agree. I think now that's definitely shifted where there's a there's a resurgence of interest in this ultra-sound money thesis and and this idea that ETH sufficiently differentiates itself from Bitcoin by being purely proof-of-stake. Uh so, I think that you'll hear that narrative a lot at that time where they can start extolling some of the benefits of being purely proof-of-stake. There are of course also downsides, uh but there's uh it opens up a whole narrative uh mind space, I guess. Uh So, it's going to be interesting to see how how that develops.

How would you compare proof-of-work and proof-of-stake also in that sort of the eyes of the market, especially? Yeah. I think if you ask people two, three, four, five years ago, there was a lot more respect for proof-of-work than there is now. Uh it used to be that, you know, it's unforgeably scarce, it's creating this unforgeable quality from the physical world, it's bringing that that that that cost into the system. But, you know, with the launch of a lot of these proof-of-stake networks like Polkadot, Cosmos, um and so on, Solana, uh it just it just has moved the Overton window so far to the direction

of saying proof-of-stake is just one other way, one other consensus mechanism. And so, that that normalization of proof of stake, I think, has been um actually, I mean, get given the issues that EOS had with its proof of stake if with its delegated proof of stake network, there there also was a time where it looked like proof of work would, you know, the the the uh proof of work maximalists uh seem like they had a good argument. Um and it could also be that proof of stake hasn't even been around long enough that we've seen some of to to test some of the edge cases.

But where it is now, uh uh the the market is comfortable with proof of stake, put it that way. They're comfortable with high staking rates, they're comfortable with the governance around them roughly. And so, that I think the market, in a way, views proof of work as as a bit archaic, I think. That's why you haven't seen it like new proof of work launches. The main ones that have launched during this bull bear market, Grin and uh you know, the two MimbleWimble coins, Grin and Beam, they've absolutely collapsed. You saw the FPGA-based ones like Kadena, uh and those have also absolutely like just not going anywhere and and and so, there's almost this idea now

that if you launch a new proof of work coin, you're like wasting It's like an incredible waste. Uh so, that that's been interesting to see. So, the the market definitely sees it as archaic, and so, so proof of work definitely has an increasing image problem, I would say. Also, with the like the rising so impact investing and, you know, environmental narrative behind it. But there's also just this sort of the mechanistic so like the the the supply and demand argument behind it, because in proof of work, you do actually leak value out of the system constantly every year, right? Because you pay sort of parties that are external to the system that are not your own holders. Whereas proof of stake sort of completely uh

eliminate that, right? So, there's just far less selling pressure. Um So, I would say that even or I I increasingly think even if proof of stake like proof of stake can be can be less robust, but it probably still win. Like unless it's like far less robust. But there's like some some uh some margin there where it can be less robust, but still win just because it's so much more attractive for holders, basically. Yeah, I do think it's a big dynamic shift of um the majority of inflation to miners versus the majority of inflation to large holders. Um It does make a difference like who's holding the stuff and and who's um therefore going to be um going to be

selling it. Um But I don't honestly I don't know enough about like the economics of the miners business. I always just say it here on Twitter or on like some on-chain analytics Telegram group that the miners are dumping, that's all I ever hear. Um but I was I was surprised the other day that someone said that, you know, in in after 1559 and the merge, Ethereum will have lower issuance than Bitcoin. And I was like, "Wait, Ethereum has higher issuance than Bitcoin? How's that possible? It's so much smaller." I was like, "Wait, this is super bearish." Um That's crazy that it'll eventually have only in percent rate.

Yeah yeah yeah. But um it's still it's still it's still crazy that um that inflation is so high and that 50% of the um reward per block is uh from fees. Um I I think it's I think it's over 50% of the average reward per block is um not from um direct mining reward, it's instead from fees. It's just seems enormous, 35 million um a day or something.

Yeah, right. I mean, now like this is something that people didn't really see coming, right? Most people anyway, that um nowadays miners earn revenue from from three sources, right? The inflation, uh then sort of the the the transaction that just I would call them like congestion fees, right? Just people wanting to get into the block that is wanted want to be included, doesn't matter uh at what place in the block that they just want to get in. And then you have the MEV, right? So that the value from miners um getting transactions in early in a block, um making arbitrage in in DeFi, liquidations, and so on. Just getting getting to stuff early.

And this has been growing at such an enormous pace, and that's sort of this sort of hyper-charges the whole proof-of-stake narrative, right? Because proof-of-stake internalizes all the money that currently goes to miners, and miners just found this sort of unexpected but huge revenue source that's in itself bigger than the inflation and the fees combined on most days in like the last 6 months. And all of this money would then also go to stakers.

And that's just Yeah, that's just such a powerful thing, you know. Yeah, MEV after the merge is going to be pretty interesting because validators who can extract MEV are going to be able to compound their stake and earn more yield compared to regular validators. So I you can imagine there's going to be an arms race uh in a way because exchanges are going to need to do this so that they can have a competitive offering on yield. Um Also, like the uh products like Lido, anything that where there's a a pool is in a good spot because the odds of proposing a block um uh has a lot of variance. So, pools

extracting MEV together are going to outperform, I think. And then in Eth 2, you know the slot proposer in advance about 15 10 15 minutes like 12 minutes in advance, I think. So, it can like be a literal arms race like to parallelize like who's coming up with the best ordering max MEV extraction, unique strategies, pools of pools, services centered around all this. It's going to be like I like I don't think people have thought about that enough. Maybe people have and I haven't read a good piece on it yet or I don't follow the right people.

But, I think there's a an MEV arms race is on the way. And I don't really know how to position properly for that yet. I think Lido has a pretty good position in that, you know, there's a validator set of extremely high quality of validator is working in a pool together. Um And I Yeah, I just don't know how to position for for that yet. Otherwise, um but I think it's going to be super interesting over over this year. So, the validators that currently work with Lido, the largest ones, do you have any insights in if into if they are already preparing and thinking very hard about how to extract the most MEV

after the merge? Yeah, I don't know. I I think it's also going to be interesting cuz I don't entirely understand how um how the roll-up stuff uh is going to interact with it as well. I I think we're going to see elimination of a lot of the unsavory um MEV pretty soon. Um But yeah, for for on the question about the validators, um like I know some people in Lido have been um thinking about it.

The some of the people at at Paradigm have been thinking about it a lot. And I think Lido and Flashbots are chatting to each other. On a per validator basis, I'm not sure. I know p2p.org has some special software in a in a bunch of their networks and that's why they offer a higher yield for a bunch of their protocols than a lot of the exchanges do. So if you I think it's like if you if you stake Polkadot with p2p.org versus Kraken, you get like double at p2p.org or something.

But so I'm sure yeah, individual validators are working on it a bunch as well. Okay, so we discussed EIP-1559 and the ETH 2 merge as potential catalysts for Ethereum in the next like 6 to 12 months. So do you think that the launch of any particular layer 2 solution or even like several of them together does also represent a like a viable catalyst? In what sense a catalyst? Can you can you explain?

Do you think that it would just allow you know, Ethereum and DeFi to do stuff that are currently not possible? Right? To me it seems like many people are actually priced out of using Ethereum right now. Yeah. And that's sort of that that also is what explains sort of the rise of Solana, the rise of BSC. Do you think that sort of those people would quote unquote come home? I think actually there will be a lot of use cases that can come back to Ethereum once there's layer 2 scaling. I I think with ETH 2, it's too hard it's too far to say. It's too far in the future to say what the UI UX impacts will be because they can create

new problems easily just as quickly as they solve old ones as we as we know about Ethereum. So but I do think that it doesn't even matter if you you know, if people come back because I think you expand I think what BSC showed uh I had that tweet that saying like BSC is very the most bullish catalyst for Ethereum I've ever seen is that you it's it showed that actually the Ethereum ecosystem it got it all right. It has, you know, Etherscan is great, MetaMask is great. Everything is great. EVM is is is great. Developers can use it. They can audit it. They can deploy safely relatively safely.

Um it kind of solved all those questions and especially given that Binance had tried to do it with with Tendermint before and it didn't go anywhere at all. It really showed the network effects of Ethereum in it like in a huge way. And it showed that with let's say a 10x increase in throughput you can get 100x increase in in usage. And so it just makes it that much more likely that the smart contracts vision for the world uh comes into existence, I think, because it's it's proving to the market that there is this demand to act on chain even if it's less decentralized for now. Uh

so Yeah, I completely agree with that. If you think about it from a product point of view, right? You are seeing product market fit of EVM with users. Um so I totally agree. I see uh the the rise of um of BNB and BSC as hugely bullish for Ethereum in the long long long run. Um also very bearish for Tron. What were they doing? They totally like they was all available for them. They had the right idea, right?

Do anything. Um the the the flip side of it is one thing I think BSC is incredibly good at um is this sort of like Binance are also incredibly good at marketing, right? They're good at marketing, they're good at uh saying outright, "Welcome to the greatest casino of all time." Um you know, the stuff that's popular on BSC now does not even have the pretense of being legitimate a lot of the time. Some of it is like is simply we design the tokenomics and I hope that this will go

up so we can all get rich together. Um in some ways honestly kind of I find that a little bit more honest than all of the 2017 um participants but um BSC are also incredibly good at marketing. They're incredibly good at saying, "Come here. Um you know, these things are going to go up and you're going to make some money." Um and if Ethereum like I I genuinely believe that BSC could be entirely centralized um sent back and forth on like a Google Doc or something and it would um a a lot of the coins on there would have performed

basically uh basically the same. Um so as things um as new things are built, I think Binance can just integrate whatever it centralized in it so they can just go if Solana does well, let's slap some Solana in there. Um They can do whatever. So I think that their strength is access to new market participants via directly marketing to them because if people are um interacting with BSC um and BNB, they're using Binance, they are acquiring a user for a a company which is then like a like that user has like a you know, a lifetime value for them and and stuff. So I do think that's a bit different from um Ethereum and while I see it in the

long long long run as super bullish for Ethereum cuz it's clear product market fit between EVM. It also I don't think you can say if Ethereum had um the scaling today, all those users would have been ported onto Ethereum instead. Because Binance is still going to be doing their marketing, they're still going to be pulling people over, and Binance is still hugely incentivized to pull people onto a a chain that uses BNB as collateral. Um so I I think it's interesting. I I I think it's interesting how uh that part of the ecosystem will um will like how that narrative will be written over the next few years because so many things on BSC are just going to

zero. Like so many things are just like a a Ponzi or it's a meme or it's like it's going to zero, and a ton of those users will get burned. Um and are they are they going to blame Binance for that or are they going to like but like they're just going to exit crypto entirely? And then how the regulators going to approach something like this? Like um like tons of basically illegal securities being launched on um a relatively centralized chain where it's like what, 10 to 20 validators or something? It's um it's not super censorship resistant.

Should uh Binance have a like a fiduciary responsibility to be um interfering or uh or whatever? It I I like I don't know how any of that's going to play out. It's um it's going to be very interesting. Honestly, a lot of this space you just kind of got to sit back and be like, I don't know what's going to happen. I'm just trying to watch it all so that when they make the movie in 10 years, I can be a consultant and I get to meet the new Leonardo DiCaprio and go to go go on the red carpet and go, "Look at me." That's my that's my primary motive. Um do you see Is there anything in DeFi um that you guys are waiting for in terms of uh you know, that really gets you excited that's about to launch or in the

next 3 to 6 months? Uh loans that are not like incredibly over over collateralized, but I don't know anyone that's doing them. I don't know if it don't know if it's about to launch, but I think that'll be um interesting cuz everything's so over collateralized. Um I think that'll be interesting. Do you use um like recursive borrowing on compound Ave and so on Maker? No, I'm too simpleton. Okay. But you can like you you you can do like 3 to 4x leverage, right? Like today if you want. You just have to leave it in the protocol. If you can't borrow it, yeah.

Yeah. Other than that, um I'm not super sure. I think like a bunch of the upgrades are going to be interesting. I think Uniswap UniV3 is going to be interesting to see how it plays out with uh with Curve and um with Sushi and stuff. Um but the I'm in like it's not DeFi, but I'm excited about Arbitrum or Optimism or whoever comes around and launches because I don't think people are properly quantifying the uh the scaling benefits that rollups will provide.

Um so I think rollups is like a 100x increase in throughput. Um and Eth 2 and shardings only like a 50-60 I can't remember the exact number. Um I think it's like 65 or something increase in in throughput. But those two things stack multiplicatively. So, rollups on top of sharding is like 6500x increase in um in throughput. And the Eth 2 roadmap is like move to proof of stake. Um sharding of data but not of computation, and then eventually full sharded transaction processing, which is like that's going to happen in 2030 or something. Like I have no confidence full sharded transaction processing is

Yeah, I think it's years away. So, full on-chain um scaling like sharded applications on uh on ETH 2 is still still years away. However, the rollups on top of um sharding of data, I think is going to be pretty soon. Like next year earlier. I don't know what the projections are from ETH 2 is, but it means you get that 6500x increase in throughput pretty soon. Um comparatively.

Um So, I'm pretty excited for Arbitrum or Optimism or um whichever ZK one um actually ends up beating them to market cuz they've taken so long. Um those are things I'm most looking forward to, but uh yeah, so what about you? What are you looking forward to? And also, if any of them are still fundraising, can you like slip me a intro? Of course. Uh I mean on on the DeFi side, I think you know, just DeFi perpetual swaps, DeFi leverage trading. I think is a is I mean, dYdX obviously with with uh layer two on StarkWare.

I think that's definitely one to look out for. I think there's also a number of other ones that are good uh that people should just try out. A lot of them are in liquidity mining phase right now, so you're going to get paid to use them. Um and I think in general, those have all worked out very well for early users. So, it's something for people to look at. I I think on the rollups point, I 100% agree. I think people really don't get how much scaling can come from rollups. Uh I think that um I think that even if they didn't do ETH 2 sharding, it would there would be ways that you could do like roll like a kind of a network of

roll-ups and and that would already be enough scaling for Ethereum. I think the other big points to add to is that like in 2017 and 2018, there were already talks about layer two, right? With Raiden and with Plasma and these kind of concepts and a lot of those teams and those team members later on joined uh for-profit commercialized, you know, layer two companies and solutions and I think what was missing then was that the the application demand and the application quality wasn't there yet and and the and the users weren't there yet. So, people didn't know exactly what they're optimizing for, what were the pain points, what was going on. It was all research, right? It was all more theoretical. Whereas now, there's you know, there there's so many different

implementations and there's so many teams competing to be the first to market, to to win applications, to win mandates and so now you're in the you're in the very free market phase. You're in the very competitive phase of Ethereum layer two and that's incredibly bullish for actual deployment. There's not a chance that not that roll-ups don't get deployed in a big way in the next year, right? There's zero chance. And what whereas in 2018, like despite all the hype about, you know, Casper FFG, Plasma, all this kind of stuff, it's just like, you know, it's just all an idea. It's an idea in someone's head.

So, applications have driven the infrastructure now so. That was that's I agree, that's what was missing back then that you had actual application demand. And now, sort of Ethereum is sort of, you know, breaking at the seams um because they have there's way too much application demand for like the the little infrastructure that we have. And that's that just creates this huge incentive to improve the infrastructure and then deploy it in sort of a rapid manner. So, I'm really looking forward to that.

Personally, I'm a bit more hesitant to to call any of this like really scaling. Um because I'm still not 100% sure like how Ethereum will actually look and feel when we've transitioned to this sort of asynchronous um execution model, right? Where all of a sudden like yeah, like stuff that you do on one roll-up that's that's sort of atomic, you know, um like you're used to today. But, once, you know, there's something that, you know, touches the base layer and the roll-up, that's no long no longer atomic. Once there's like stuff between two roll-ups, that's no longer atomic. So, how do you think about sort of the move to to the asynchronous um execution model?

I think the problem is that it is now inevitable because since uh roll-ups only use like use the chain only for data and not for computation, and they'll be able to use the the sharding of data um like pretty soon, and you get that 6,500x throughput um quite soon because of the combination of those two things. By the time base layer scaling happens on Ethereum, it's going to like no one's going to care cuz it's going to be 2 or 3 years away, and it's going to be a performance decrease versus like the um the the two things um

like that stack that we'll have this year or next year. So, I I just think it becomes inevitable, and I've read that um even Eth core now is saying, "Okay, what does Ethereum look like if you build like a roll-up centric um road map for how you build Ethereum?" Um So, I I to me it just seems like it's an inevitability um now.

But, beyond that, I don't have any strong opinions. I have a question for you actually, a bit off-topic, but do you think that if Ethereum were to flippen Bitcoin, that Bitcoin USD would still be able to sustain levels and people would still buy Bitcoin as a store of value? Or do you think that that would be challenged substantially? I think the flippening is now inevitable, um but I think it would be incredibly temporary. So, I think that the like I think you'll have a massive blow-off top. I think the ETH blow-off top will be like either slightly before or slightly after the the Bitcoin

blow-off top. And at the ETH blow-off top, it will like temporarily flippen. Um I I've never felt more confident in the trade in my life. Um not financial advice to your to your listeners, but um and the reason the reason is that the total addressable market of things for Ethereum is just gigantic. So, even if Bitcoin gets the store of value, it's digital gold narrative, gold the market cap of gold, the total addressable market of gold is still lower than the total addressable market of everything, like of all money.

And when the internet launched, the people got the internet wrong thinking it's like a you know, an additional channel, like you've got now you've got TV, radio, and internet, rather than realizing like no, the internet is just a new medium for all channels. You have TV you have TV on the internet, you have radio on the internet, you like it creates uh new mediums. The like macro vision for Ethereum is that for all of money. Whereas the my provision for Bitcoin is like now digital gold store of value.

Um, when you talk about crypto equities or um, or stable coins or uh, whatever, people never go, "Oh, is that on Bitcoin?" Like you automatically assume this thing's built on Ethereum. Like uh, Great Britain's doing a a stable coin trial and uh, Path message me and was like, "Do you think this is going to be on Ethereum?" Um, that's your default. That's what you default uh, assume. Um, like it's not going to be on Binance Smart Chain, is it? But um, like that is your default assumption.

It's like, "Well, this is probably going to build on Ethereum because right now 90-odd percent of um, things that have usage in the crypto ecosystem are built on Ethereum. Maybe it's like less than 90 now cuz uh, Binance is like super popular right now. But even even Binance Smart Chain in a way is built on Ethereum cuz it's just the same source code. Um, so I think the the flippening is um, is inevitable. I think in bull markets Ethereum hugely over performs and bear markets Ethereum like goes to zero while uh, Bitcoin does pretty well.

Um, like performs better on the downside. Um, so I I I do I do think we'll see a a very very very tem- temporary uh, flippening. I think Bitcoin will be able to sustain um, USD values because I think the narratives for the two things are are very different. I do think you'll see a bunch of institutional adoption of Ethereum soon. I read a report um, the other day uh, by a guy called Alexander who who a a fund that works with um like helping institutions get access to crypto and it was just all about Ethereum saying it's like, you know, um it's like a a first-class peer of uh Bitcoin in in their eyes now.

Um But yeah, I I I I do think there's going to be a bit of a um a bit of a move from I think it was you that said to me you're going to start to see some cold wallets moving and uh taking allocations to Ethereum and there's a lot of people that are under exposed to Ethereum. But also, I think a lot of the people that have bought Bitcoin have not bought it to um sell the sell the next one that comes along, you know, they took 10 years to buy Bitcoin. It's not They're not going to uh go, "Oh, wait, we bought the wrong one. Let's like quickly buy this other one and dump all our Bitcoin." I think a lot of the people that are holding Bitcoin now are in the like we'll never sell um never sell camp. And worst-case scenario,

they'll uh go, "We should also allocate to um to Ethereum." They'll take another 1% out of their treasury or something. Um but that's in like a that's on a really short time frame, so it's like, you know, a flippening happens, Bitcoin doesn't go immediately to zero. Um it you know, probably sustains well and every like it deflips and everyone goes, "Haha, that was a what like, you know, Bitcoin's back or whatever." Um on a longer time frame, um I do think the bear case for Bitcoin is Ethereum.

Um And I I struggle I struggle to see um I struggle to see without it like performing similarly or without the um like the bear market safety, what the narrative um sustains us. Because I think the majority of crypto markets is like no one trades on reality. Everyone just trades on what everyone thinks reality is. Like the the the post-truth era has um has gone too far in the crypto markets. It's like everyone just trades on on on on narrative now.

Uh it has become super super super important. So, I I do think on like a if if you have a flippening that sustains or Ethereum largely gains on Bitcoin, um I think it that becomes troubling. A temporary flippening I'm I I like no problem for Bitcoin USD, but if the you know, the average price of ETH to Bitcoin over the last sort of 5 years has been what like is about what it is now, right? Probably if you averaged the price out over if that if that changes significantly and if it goes to, you know, .1

instead of .04, um and sustains over a longer period of time, I think stuff like that starts to uh starts to damage the narrative of um Bitcoin a lot more than a temporary flippening does. Because a lot of people I think have like like they got scared out of buying Bitcoin. Uh these institutions, family offices, and stuff, they got told not to allocate to Bitcoin by JP Morgan and Goldman Sachs either because they were dishonest or naive.

And now, come 20 20 2021, they're considering taking positions cuz they're seeing Elon doing it. And now all of the people that told them not to do it are saying, "Oh, actually, yeah, we've taken position on that now." But they see the price of Bitcoin as far too high or their bull case scenarios for it go, "Well, maybe I can get a triple out of this. Um And if I'm getting a triple, I can go, you know, I can go participate in like some like risky stocks where I don't need to do a bunch of additional red compliance stuff to it.

For it to be possible for me to get exposure. Um if I'm going to do like the funny money, if I'm going to do the weird internet money, I need more than a 3x. And then they start looking down CoinMarketCap um or CoinGecko or whatever. So, in some ways, um I think it's kind of funny that they got like fudded out of uh the greatest bull run of all time, and now they're digging through CoinGecko to find the I've missed my gains. I need to pick up some light. I don't know. What's this Cardano thing? Um but in the in the other sense, it makes it bullish for stuff that uh still has a ton of like market cap upside.

Um So, yeah, again, I think it's going to be um I think it's going to be interesting uh how it plays out. Um but I do I do think the flippening is inevitable, but I think it'll be very short-lived. And the reason you think it'll be temporary or short-lived in this I guess this time is just because you think either will not be able to sustain that momentum, and there will there will be too much selling back to BTC, there will be too much selling to USD. Or you Yeah I Yeah, I think for the flippening to happen um in this cycle, unless this cycle is the um super cycle sponsored by Suzy. If it's like if it if it's not like, you know, just

up for um like the next three or four years, and it takes three or four years for ETH to flip, then I'm like, yeah, cool. Maybe you'll have a sustained flippening then. But in that case, the writing's going to be on the wall for three or four years during this like uptrend that um like signals uh market share like evaporating and moving to ETH. If you have a 2017 style we're currently at like 0.0 five or something and then three candles later you're at you're at like 0.15, you're just going to have too much um too much selling pressure, too many people that are at a decent profit, too many people

saying it's not different this time, um I'm you know, taking profits here and then that um you know, selling pressure just turns into a like three candles back in the other direction. Um but in crypto and maybe in all things, I don't know enough about other markets to be honest, but in crypto things grow in bubbles. So, you have these huge parabolic bubble-like run-ups and what's important is where the price settles um after that parabolic rise. Like if you have a parabolic rise and then you have the new floor settling like, you know, 100% 50% above the previous floor,

I think that is way more important than like did the peak flip in the market cap for seven minutes or did it like it was actually for two days or whatever. I just think that that stuff's like vanity and it's stuff for like people to argue about on uh on on Twitter. It makes a good talking point, but it's not that interesting cuz it's like a data point that existed for a like a matter of hours. If you're the floor establishes significantly higher, that it gets super interesting. It means like the demand for ETH versus Bitcoin now versus several years ago has substantially changed. Um and if it can sustain that for like

a year or multiple years, I think that's way more interesting. Um personally um Cuz like, you know, Dogecoin dark, Vergecoin, whatever, that went to like infinity, didn't it? It don't matter. It don't matter that it went to infinity once. True. So, so so, um assume you're, um, you know, a bit more bearish on Bitcoin after a potential flippening. Um, I'm undecided, actually. I mean I think that there's kind of two ways to look at it from my point of view. I think one is that even if it flippens, that Bitcoin has its unique value proposition, and it has a different set of

potentially a different set of buyers who kind of more objectivist in nature, so they just view it as, "Okay, this is the kind of this is the first chain, so I just collect it, and I don't think too hard about it. Orange coin good." kind of mentality. And, um, I do think there are a lot of those people. Um I mean, you saw how little of supply moved as we went from 20K to 3 and 1/2, and then back up to 60K. Like, a ton of supply is not moving. These guys are just not Like, there is literally exist no information, no They're anti-Bayesians, right?

There's no info new information that would make them sell it. Uh, and and that is actually very powerful. Uh, and Bitcoin ha- kind of has that. And and so, that's I think the the the bull case. Um, and also, I think you know then being the biggest proof of work chain, there will be proof of work advocates who, you know, countries with cheap energy costs, um that that kind of um game theory will be interesting. You know, if Bitcoin were to dip because of these people selling, because either flippened it, who's to say that some of these governments won't bid it up, and then be like, "Okay, now now we all love Bitcoin, right?" So, that That is kind of the big bull case for it.

Uh, not to go down. I think on the on the other side of it is that you know the the the biggest advantages that Bitcoin has right now are one it's the most liquid uh way to trade crypto. And two is that um it's it's dominance as a pricing pair, it's dominance as something that as a treasury asset of crypto, right? So that does get seriously challenged if it's no longer the most liquid and the largest because um then people will say, "Well, why don't I denominate in Ether instead? Why don't I, you know, trade Ether pairs uh as people do in Uniswap?" Or why don't people trade uh back to Ether and and hold Ether as a store of value if it's if it's more

liquid anyways? And so losing that liquidity advantage is very dangerous for Bitcoin in that sense because um I I started to play with this kind of idea that Ether's almost more anti-fragile than Bitcoin because Ether can exist in in in kind of hum along happily for years at 10 to 30% market cap of of Bitcoin. It doesn't matter, right? It It as long as it serves some purpose for itself and and for its people. Whereas the question is can can Bitcoin hum along at like X% of Ether, you know, like like 50% of Ether, 20% of Ether?

Uh that gets harder because its value proposition, one of its biggest, is to be the biggest coin. Uh once it is not the biggest coin uh you really do need that kind of uh very strong holders uh to to to say and that that may or may not happen at the prices that people think. Um so I'm of the view that I mean I'm of the view that if flippening were to happen, it would actually I think the last one was a very temporary one in the backdrop of a of big scaling debate, Bitcoin Cash going to .4, .5, XRP BTC going to absurd levels and I think that

kind of in like the history doesn't repeat, but it rhymes way. I almost feel like if it were to happen this cycle, uh obviously there's there's no cycle cuz it's a super cycle, but like just speaking in those terms, uh if it were to flip in um then it will kind of be much stronger this time than last time just because like it just cuz of the way the history is. Just my intuition about history uh kind of makes me think that. Um and be and because sort of the hype will have been validated like in a way.

Like like the like the product and the and the narrative would have caught up with the hype. Um So, I think that that kind of it's kind of that that that that reflexivity is harder to break on on that upside um than last time where it it's much more chaotic, I think. Yeah, I'd say that that's all great points. I strongly agree. Um I would add like on top of being like just the biggest coin, like that being one of the reasons why people hold it. Like I would say people a lot of people also hold it because they think it's like the lowest inflation asset that you can have, right? It has zero inflation after all, but I feel like it's almost like a new paradigm

where people didn't consider before that if a Bitcoin like that is that the race to the bottom doesn't stop at zero, actually. Like you can go below 0% inflation. And why should a coin that has like 1% deflation not be preferred by the entire market over a coin that has like 0% deflation, 0% inflation. Um and I I personally think that, you know, a lot of people in Bitcoin are like generally scared um about this proposition. Yeah, it's interesting. I I often think with a lot of the people in in Bitcoin, I think they organize into a bunch of different

categories. And some are just philosophically and um uh philosophically believe that you cannot have um that active uh like centralized planners that Ethereum has of you know the the few teams that closely collaborate together. Um and so like a a monetary system that's going to provide the world that they want to live in. Um I think then you have a bunch of people that got like in that 2017 time got completely wrecked by buying like rubbish and now they only really follow Bitcoin.

They think everything else is um is uh is a scam. Uh and they don't really keep up with the information enough to know what's changing because like people talk about the flippening as market cap, right? Like is Ethereum going to be bigger than than Bitcoin on um on market cap, but there's a bunch of other interesting metrics uh as well that probably don't like have high correlation with price now, but show adoption in other ways. And the two Ethereum performs the worst is Google search interest, which is like 15% of Bitcoin, and market cap, which is about 30% of Bitcoin today. And then on everything else, Ethereum does like

really really really well. And the most interesting one is if you think about the amount of USD settled every day on the ETH chain, it is like multiples multiples larger than on Bitcoin. Partially because you have so much stuff built on top of ETH. So you have like all the stable coins built on top of ETH. The the of stable coin activity happens on ETH. I know there is some on Bitcoin, but um, the majority of it happens on ETH. You have all the tokens and all the tokens have gigantic market caps and everyone's sending them around and stuff. But And the arbitrage between them is probably about like 30-40% worth.

Yeah, it's just just gigantic. And if you look at um, there's a a site that has like a flippening metrics uh, flippening index that maps all of these together and how they um, how they trend together. That has been steadily moving up for a uh, for a long time, like a couple of years. And um, at some point uh, it seems to me that like market cap has to follow this um, these user adoption metrics if they keep trending in that way. And it's probably not highly correlated, so it's probably not fast.

Um, but it would it would make sense to me. I hadn't really thought about what Sue said, like the the narrative for Bitcoin as being, you know, like the big store of value, it doesn't do much else. Um, if that's taken away by ETH, that's that is quite bad for Bitcoin. Um, I hadn't really thought about that uh, too much. Like if you go to CoinGecko and Bitcoin's number two, it feels like super super super bearish. Um, for Bitcoin. I hadn't thought about that. Um, too much. I also agree with Sue that like 2017 is regarded as like, yeah, we don't talk about that. That was just crazy like chaos, like that didn't really happen. Everything was irrational then. Whereas now it seems a lot more like um,

uh, like it's less it's frothy again now, but it's been less frothy as we've uh, risen up and institutions are allocating and the uh, like the trading volume isn't entirely like 95% retail like it was um, like it was back then. I also believe that if the BNB frenzy was happening on ETH now, the flippening would have already happened. You know, there wasn't always a like a link between stuff like trading volume and like the the settlement sort of that happens on ETH or the arbitrage.

Um until basically EIP-1559 and the merge, which then internalizes all that revenue that is generated as a result. So, you know, puts it into the ETH token and um I think that is in my view, that is basically the catalyst that is needed to to finally translate all the numbers where Ethereum is already performing better than Bitcoin into, you know, actual price appreciation. That's my guess. Yeah, that makes sense to me. That makes sense. I have one last block of of questions and because I I feel like we should more leverage the fact that you have uh like you're such a large trader and you have survived um through so many

market cycles and um lean a bit on your experience. So, how would you describe um what what's your approach to to trading and like how do you survive for so long? Yeah, so like financially survived, but man, my health my self-respect uh um my friendships um for me um I think it's a few things. Like my whole approach has been to survive. Like I all my thesis was always if this thing

is really going to be a big deal you know, if the the last 8 years is is going to happen the way it happened. Sorry, one sec. Then then then best thing to do is to take it slow, because the implied price to the future implied price is so gigantic. Uh it's like a the chasm of difference that just being exposed to this market will be enough and outperforming the market by 2x or 3x will be a phenomenal

uh increase in in net worth. Um I didn't realize it would go like it did with such massive boom and bust cycles. Like I was really shocked that the 2017 cycle went so high and then went so low again afterwards. Um I thought as the market cap got bigger things would mature and it would become less volatile and I still believe that. Uh However, Susan now telling me we're going to have a super cycle where it's going to go over a billion in a single daily candle. So, um maybe maybe I'm naive still, but rather than taking a you know, go from net worth of 100 quid, 100 dollars for any Americans listening, to 10 million dollars in a year,

it was always instead try and play it safe, accumulate as much Bitcoin as possible and like play the play the long game. Um And positioning that way I think was really helpful. Um I'm naturally quite bearish so uh like I struggle to believe in in anything. I can always find like the flaws and why things won't work. I can always like that's naturally how my mind works. It's like this sounds dumb, this sounds stupid, this is never going to work for these reasons.

That's my natural disposition, which I think is quite helpful in crypto markets um in some ways, as long as you're able to confront that and you know, out trade yourself and and and recognize that that's your natural disposition, and say, "How do I modify this instinct within me in order to be profitable?" Um a way better natural intuition in crypto is like, "This is going to infinity. I'm going all in." Cuz the people who've done that over the years have have done very well. But because I felt I'm naturally bearish, I'm naturally skeptical, it means I've treat uh altcoins a lot like musical chairs. Like I know intellectually that they're going

to go up because of market participants believing these things about them and the farce and people wanting exposure and everyone's kind of playing chicken with their money. So, I understand that, but I also inherently believe that it has no value and therefore um I need to ride this and and exit safely. And a lot of the time I'm Newton on that meme where it says like, "Newton exits happy." Often that's me. But I just don't reenter cuz I'm like, "You know what? If I get a 3x or a 4x or 5x, and it goes like a 100x, I'm happy with my 5x cuz I'm playing like a 10 to 20-year um 20-year game. Like, you have some money.

You still keep investing. Like, you still still keep doing stuff. And that's the the game I'm playing. I'm not trying to you know participate in the casino of putting it all on um a single horse and yeah, maybe making a 100 million in a single trade and then like uh exiting. While I'm sure that feels great, I don't think the people that do that even then walk away. They just keep gambling and my approach has always been like, take it steady, try and um outperform the market respectably a little bit, but don't try and like 10 20x outperform the market every single year. A lot of the time it's not possible and you'll just

like chop yourself up. Um in In bull run years, it's incredibly easy to outperform Bitcoin by a factor of 10. Um like even just holding like some of the altcoins alone, you would have been able to do that. Um but in the bear market, like it you just have to accept the reality of the world that like right now it's much harder to make money. It you're not going to get the revenue that you earned in the bull market the year after that the year after the bull market or the the one after that. And the the mission is to survive um through this whole thing. And I think the people have done that have done uh really, really well.

And I think it's also why you see so many of the the biggest, most influential funds or um investors in in crypto got started in 2018, 2017, 2018 because surviving those um like the down periods like they were pretty brutal. In 20 19, 2019 I just said, "You know what? I'm not going to do anything. Like I'm not going to trade at all. I'm just going to like I'll keep watching the market.

I'm going to like go do some traveling and have a rest because when things like in 2017 I had very little sleep. And when things go like that again, I want to not be burnt out. I don't want to have wasted um a year margin trading myself to death to like outperform by like 30% in a bear market. Like it it's really not worth it. Um so I always optimized for like keeping myself occupied and having other things to do um you know, after the 2017 run, I like built a startup and uh built something that adds value to the world and like um tried to keep myself like really, really

busy. And And the bull run comes around and I, you know, quit and focus on the bull run and try and outperform by a decent chunk. But, I genuinely believe it's all about playing it safe. Like, keeping your leverage down, um keeping like your um like keep your exits like uh like safe and sustainable and um just play it safe. Like, everything goes up a million percent. Like, if you like you just all you need is exposure to the market. That's that's literally all you need, and you'll do fine. Um the people that don't make it are the people that try and outpace, and they have like a sense of greed around it, and they go, "Shit, I wasn't positioned properly for

this bull run. And if I had positioned properly, I'd have this amount of Bitcoin or this amount of Ethereum. So, to get back to that amount of Bitcoin or Ethereum, I'm going to have to up my leverage to 5x and trade perfectly for the next 4 months." And they put a bunch of pressure on themselves, which makes it impossible for them to trade anyway. Um like all those people get ruined. I haven't seen a single person um uh make it in a scenario like that. Every single person I've seen make it has been "I'm doing all right. I'll keep doing all right. I'm going to keep it chill."

Um and they've just done that over the course of like 8 years. Or 3 years or 5 years or however long they've been in the game. What do you say to people who you know only joined like half a year ago or something and now feel like they've missed the train? Yeah, so like every single bubble I always thought, "Oh, That might be the last one. That might be the last time we get to do this." Like, in 2013, it went up so fast, and you know, I got into crypto in 2012, early 2013. So, it went up so fast that I like felt, "Oh, wow, maybe I've missed out." And then, you know, bear market, zoom out, think about long-term thesis and stuff.

Um so, I think everyone always feels like they've missed out. But the level of crypto adoption now versus the level of crypto adoption if, um, you know, this becomes a like global consensus currency or like a uh a base money in the world is dramatically different, right? Like at the moment you've got Ellen going on the Ellen show to make fun of NFTs and Saturday Night Live like making fun of, um, like Ethereum and stuff in little skits because it's new and it's weird and they don't really get it.

And you have relatively little adoption. Like institutions are buying crypto for the first time, um, over the last couple of years. Um, it's only just really on their radar and the big banks are only just going "Yeah, maybe this thing is legitimate. By the way, sorry that we like fudded you out of it for you could have been very rich if you'd ignored us." Um, all that stuff is just starting to happen. Um and the realization of, um, the like the most bullish cases for, um, crypto that the upside is still really far away.

Um, you know, um, like Bitcoin wouldn't just be flipping in gold, wouldn't just be, um, you know, taking the market cap away from gold. It would be realizing what gold would have been had Bitcoin never existed, which is, you know, multiples larger than gold is. Um, Ethereum's most bullish, um, possible case is like, you know, Ethereum is no longer speculative. It's just the uh utensil or utility that you need to interact on this, um, consensus computer that uh everyone in the world uses for in order to not trust each other, which is a maybe a little bit, um, a little bit dark, but whatever. Um, and like

the upside for even the majors is like still um, super super super high on a medium to long-term uh timeline. In addition, I like to um, I like to continually think that things can get better and like what we have today is not the best thing that we can ever have and therefore it's I believe that like new things will be built like you know, um, if you were in crypto in in 2012 or 2013, it is still possible that you missed out on Ave, you missed out on Synthetics, you missed out on Uniswap, you missed out on Curve, you missed out on you know, everything that were like

Chainlink, everything that was built over the last few years because you were early to crypto, but you need to continually pay attention to uh, like innovation and um, the way the space is moving in order to um, take advantage of those things and the amount of information asymmetry and the amount of new information daily um, that's generated by an open-source uh, community that has direct financial incentives is gigantic and that gigantic amount of information makes um, a bunch of opportunity for people who are willing to dig in and are willing to you know, um, like like become

independent thinkers about um, what is going to be important over the next sort of 5 years or so. So, if you're joining today, I like I I have two main messages, I think. One is you're not going to go from $1,000 to $5,000,000 in this cycle. Some people might, some people will, there'll be a couple of people that do. You know, we just saw someone on SafeMoon do like $200 into 42 million. I don't think he sold but some people will do that, but it won't be the average.

Now, if you're willing to stay engaged over the next sort of 5 years or so, those sort of returns I think become a lot more reasonable um if you play your cards right. So, you're not going to become an instant overnight millionaire in this cycle. Um please stop trying, reduce your leverage. Um like genuinely don't margin trade at all if you just joined crypto. Um The second message is I think it's going to be slightly harder than it was back then in some ways cuz back then there wasn't an overload of information.

Like there was like Bitcoin and then there was a bunch of stuff that was crap um that pretended to be good. Um and then 2017 came around things got a bit more confusing. Um Ethereum um came around and uh you know, things started to get like alternative projects started to get a bit more credible. Whereas now there is so much stuff happening and the complexity of the projects has increased a lot. Um so, I think it's harder to have exposure to the good stuff early because you need to do a lot of work to figure out what the good stuff is.

Um but because that work is needed there's a bunch of opportunity as well. So, you're not going to become overnight rich. You need to stick in the space for a bit longer, try not to lose interest, and um yeah, it won't be as easy as just riding like Bitcoin upwards, but um there will be things that reprice much, much quicker than Bitcoin repriced. Uh but if you're willing to do the work, you can get exposure to. Sorry, I I said the same answer like four times now, I think. No, that was very that was very, very good advice. So to before we wrap things up, I'd be curious. So, based on the beliefs that we discussed today and some of the strategies.

Um how are you both positioned for the next um 3 to 6 months? My our audience always loves it when I ask this question. So, starting with you, Su. I mean, I think Cowl on our recent podcast recently as well and just mentioned that we're quite overweight either. I mean, we are we are definitely very overweight either. I think we're we we should be one of the largest holders in the world of either right now. Um I I think that actually and the main debate that we have is just do we want to sell at 0.1? Do we want to sell at 0.15? 0.2? Never sell.

And obviously when I say never sell, I mean it as a trader. So, it doesn't actually mean we can be doing a podcast in 2 years and we'll be talking about why either is a scam. But, no um I I we're very overweight either. Um I think application layer we've done some investments into uh some Solana based ones. Also BSC. I'm applications continue to be very bullish on. I think it's been a bear market a bit like almost like in between all the fraud, it's kind of been a bear market in E DFI.

Um you know, stuff like Ave is still 30% off the highs. Stuff like Sushi is 50% off the highs. So, um I do think that with layer two with resurgence of E, these projects um you know, will will get the attention again. So, um I think I think on the alt layer one side, I mean, I do think that there's quite interesting stuff happening there as well. Um yeah, I I I I generally see the next few months being a little bit bearish Bitcoin dominance. I just see it as something where um you know, you've you've had the seller narrative a few times and you've had the you've had the digital gun out a

few times, and there's big sellers at 3x all-time high. So, you know, from from all those things happening, you know, the OGs have gotten comfortable and deployed out to alts, you know, the uh you know, the newcomers are coming in, and they have not a bone of maximalism in their body, right? They come in, and they just straight skip the first five coins and just go from there. Uh so, that that that's definitely the flow that is coming. I mean, some of the retail fiat on-ramps that I speak with here, you know, the flow is 75% ETH versus 25% Bitcoin. So, you know, the retail flow is strongly pro uh non-BTC. And I think institutions seeing this price action, they also want to participate in it. And and and that

kind of will just add fuel to the fire. So, I think I see ETH BTC 0.05 as a key psychological level. I think when you break it, people are going to be like, "Okay. Um That that that kind of really gets people's attention." So, that's generally my my my view and my positioning. Yeah, very similar. Soon I spoke about this on on Twitter DM not long ago, maybe a couple of weeks ago. Um I I don't even own any Bitcoin anymore. Like, first time uh in my life since 2012, 2013, um where I where I don't own any.

And like, I rebalanced a lot, but I've never entirely rebalanced out. And in um around December um of last year, I started uh entirely rebalancing out of Bitcoin into um into ETH um just for the the merge and the EIP-1559 stuff. So, um I um yeah, I'm like hugely overweight um ETH as well. Uh and exposure to like the D5 stuff that I just think is sort of like a staple. Um Yeah, it has underperformed a a little bit recently, but I just feel comfortable sort of back holding um that kind of stuff. I try and like

position my portfolio in a way where it's like not mentally taxing for me, where I can just kind of like back hold it and like I can go get drunk or I can go like if I'm away from the internet for um for a week accidentally all of a sudden, I know that I'm not like going to come back and be like, "Wait, I'm poor now? What?" Um and it's just like whatever. I can just hold it and I can feel fine about it. The only other thing that I've been doing a lot of is um I'm taking a lot of exposure to uh seed rounds of things.

Um Either where the vesting is relatively short and I'm like like like it's a bull market, things are getting frothy. Short vesting, I will take that. I'll do the Alameda like accept your thing and like sell it, fine. Um so I've been taking that and also anything where I'm like this is genuinely a good project where the like it might have a four-year vesting, but in four years I can still see this existing as a thing. So I've been doing a lot of that just because I'm um I'm a bit scared of heights on a bunch of things um at the moment, so I've reduced allocation to stuff where I just can't tell myself I um I believe it. Uh I believe this is like

a viable thing or I can't get a thesis behind it working. Um I'm more than happy to like miss out on profits and I'm sure that I will because um I think like the market is relatively detached from reality um at the moment. Like there's been a disappearance of shared objective standards for truth and uh instead um you know, like the fact that maps.me can be in a bull market when it like literally doesn't even make sense. Like it's a offline maps app with a D5 wallet in it. Like the majority of the users of maps.me use it because you can't use maps online. Like that's the primary use case is like this is better than Google Maps when you're offline. So they've

added a D5 wallet. Like when you're offline in the middle of the forest and you need to quickly access your vault. Like this doesn't make any sense to me. And that's in a bull market. So I'm sure I'll miss out on profits when I can't figure out a thesis that makes sense. But at this stage when you know everything's up 20x, 30x, or whatever, I tend to transition that like the instinctive bear in me tends to transition to a like a protect a protect sort of scenario where I only hold stuff that I can later in like a year or two if I lose all my money, I can at least explain to you how I lost it and I say, "Yeah, well I held these things. I believe they were good for these reasons and that's how that's how my investment didn't work

out." Whereas if I'm holding, you know, maps.me and I have to explain to someone how I lost all my money and I'm like, "Well, this offline maps app didn't do very well in the D5 market." And it's like like everyone's going to laugh at me. So I've moved a little bit into that sort of protect uh uh pattern now. Except with with like seed rounds where you like no one else got in at a cheaper price and it it seems like a fair fair bet in this in this sort of market. Basically shame minimization strategy.

Yeah, exactly. Like the like if you're married and you lost all your money, what would you tell your partner? And you don't want to say, you know, um I lost it all because I believed that they were going to put this token that got made by an anonymous developer on the Binance Smart Chain was going to get integrated and it was going to be the primary way you buy electricity in a Tesla. I I don't want to say that cuz I don't believe that's true and like my partner's then going to leave me. But if I say, you know, I thought the fees that were earned by this protocol were um you know, uh like outsized versus the fees earned by um this other protocol and the market

caps meant that this one was a better bet. Plus, I thought that the um like liquidity locked in this protocol would be more sticky through um like the next uh the the market I expect over the next 12 months. At least I can take away something away from that and learn something from it and do something better next time. Um I like I think it's really important in a market full of like irrationality and and and froth to remain an independent thinker and remain uh like least true to um your thesis and like what you like make moves that you can at least back and believe in and learn from if they go wrong. And sometimes you can't learn

anything, right? It's like sometimes the learning is Okay, so Hassy just messaged me to say he lost a little bit of the ending recording and none of us can really remember what the lesson I said was going to be. So, I'm here recording a post podcast to announce uh that you kind of got rugged. You kind of got rugged. Um we didn't talk for too much longer anyway. Um and I mostly rambled about uh the simulation heuristic and its application to crypto markets and how often the outcome we expect is the one we can most easily imagine and that

tricks us uh into not betting enough or not betting at all or tricks the unit back bias kids into thinking they'll be billionaires or tricks people into selling early, whatever your natural sort of uh tendency and disposition or expectation um uh, imagination is. Honestly, I don't think it was a very high quality rambling as you've just witnessed in this follow-up ramble. Um, if I'm going to make some closing remarks since I've got the opportunity to record my own, uh, closing of the of the podcast, um, I I I'd say that everyone I've seen do extremely well, both in in this space and in the non-crypto world, too, have two sort of common traits.

They're exceptionally curious and they have high conviction in their own analysis or their own talent or their own uh view of the reality of the world. These people are often, uh, resistant to being told how to think about the world or how to think about certain ideas and they're meticulous about what's true and what's not true and what's real and what isn't. Um, and that that combination of endless curiosity and high conviction in your own, uh, sort of beliefs or analysis allows people to make bets, dig in to follow through with their bet, recognize when they're right or wrong, and learn from why.

It's much harder to learn from something if you don't really understand why you made the bet in the first place and it's impossible to hold high conviction in a bet when the analysis is somebody else's work and you're underwater and you're, you know, feeling stressed. So, I think conviction and curiosity are both muscles that you can train over time by changing your circumstance and approach to problem-solving on new information. Like, if you're in a if you're doing stuff with your time now that does not cultivate your curiosity, you should change that and figure out ways that you can, um, force your curiosity, uh, more to like a to be more present, um, in your day-to-day life.

Some old trader or gambler or whatever said something like, "You can't win if you don't bet and you can't bet if you wipe out." So, before I say goodbye, I'll remind you to reduce your leverage, play the long game, remain curious, keep learning, make small bets, learn from them, repeat, etc. Thanks to Sue and House of Value for having having me on. I'll be off. I'm going to go back to Twitter to write some jokes. Uh up only. See you later.