Institutionalizing Crypto & The Return of the Bull Market | Roundup

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode you know all of this is with the backdrop of institutionalization for the two core assets that are coming probably in the next like seven to eight months uh if not sooner than that um how much they will actually move how much the inflows will actually be remains to be seen you know everybody has their yes um

but I I think just with that backdrop um you've got so many positive catalysts all right everyone we will be back to the program in just a moment but before we do I want to share something that blockworks has been cooking up for these last couple of months March of this coming year in London blockworks is hosting d Lon the largest institutionally focused conference in all of crypto Goldman JP Morgan 72 all in one room so you can know what the big money is doing so click the link at the bottom of this episode it'll take you right over to the homepage and use Bell 20 for 20% off I will see you in Sunny London Town in March all right everyone uh we are back I don't know if that's another episode of B Cur the industry as a whole such ay joke it's both got

Michael's Michael's one and two here what's up buddy doing well doing well uh you know once again we've shed the dead weight we have the Streamline podcast ready to go lean and mean baby lean and bean holding up the numbers you know for the Pod do what we can um yeah man it's been a good week been a good week um I guess my I I think I actually asked this to Vance the last time we recorded together but you know can't ignore what's going on pricewise here I guess my my question for you is are we back what's the The Vibes on the ground well first off I think you can and probably should ignore what's happening with prices um the the big news this week was frankly just like not price action I

think it's just all the positive momentum from announcements to launches now there's rumors of more spot ETFs in particular Black Rock uh apparently filed their um their application with the state of Delaware to have their trust they haven't officially filed their spot eth ETF application yet but it's expected that that's impending um I don't know the the sentiment here is there's just a lot of positive momentum um also happening coincidentally on the Oney year anniversary of the FTX blowup um you know and and I don't know if there's a specific day that you can point to but this week last year I mean just thinking

back 12 months how far things have changed um you know there was a there was a nonzero possibility that the industry was done at the end of last year nobody knew where the bottom would drop what was left to drop who was left to drop um feels great to put a lot of that in the rear view um and I think it kind of culminated in a lot of ways with the the rulings against s SPF yep I tend to agree with that I think that was um I people now there's a little bit of hindsight bias and everything looking back and lots of people coming out and saying yeah we never really liked SBF but the the brand that that SBF had and FTX was I mean it was right up there and

even after you know going we have rewinding the clock back three arrows when that when that first news first started to break everyone was like this doesn't seem right this this just feels wrong uh but then even even after that suspicion you start to look around and wonder who else is whole here I mean I don't think anyone believed really when the rumors started to surface about FTX they just built such a solid brand um and I actually do want to just as posed to sort of as an interesting hypothetical I don't want to start with this but I there there's talk right now there are a couple of bids out there uh bidding for FTX so I I talked to actually Mark yuso today he's uh you know figure is one of their port Co and uh they're they're bidding uh bullish is bidding as well so' be curious to kind

of game out like what a restart would look like and what the brand would would sort of be but um I guess I would like to hear Michael from from your perspective um maybe the two constituents that you talk to the most both on the entrepreneurial side of things um and then also on the sort of LP interest side of things so maybe starting on the entrepreneurial side so uh you know miles um you know one of my good buddies who's our our sixth man here uh on the show you know I was talking to him from his seat at revery and he was saying like some of the deals like the the deal flow just in the last couple of weeks has really picked up and he's starting to see like very cool stuff uh sort of come onto his plate where before he

really had to dig around around it's it's sort of noticeably picked up I'm I'm curious what um what things look like in the in the private markets from your perspective yeah so I think it's kind of the tail of of two different cities in the private markets right now you have a lot of people who a lot of companies who raised money maybe seed Capital early stage capital in 2021 with a projected 18month Runway um and second half of this year was a lot of those people having to come back to Market and Frank just not really seeing success um not enough traction had been made um Industries you know if you're an infrastructure provider you're waiting for the users to come you're waiting for

the apps to develop um and so you know the metrics aren't always going to be positive there um but on the flip side of that I think you have a lot of new ideas and new directions and so if you're starting from Ground Zero I I know um you know narj formerly of poly chain announced his fund raise yesterday um you know there there's still sort of an Capital fundraises that are exciting getting done and my my like basic understanding is that they will be met with more uh bullish perspective going forward and the timing of that could be really really positive I think the last 18 months you know has been pretty negative hard to survive through that period of time um especially if you need to raise and so we're we're deal flow

has definitely picked up um it's it's just a lot of sort of the halves and the have knots at this point um so there's a lot that are you know disqualified by default um but there's still a lot that's really interesting I'd say the other stuff too is there's things that are happening and working on chain which make investment cases even from a venture perspective um you know in Venture perspectives are things that could go you know 20 to 100x type return profiles um and and those are things that exist on chain and um maybe instead of investing in the equity you're actually you know working with the treasury advice tokens or or buy tokens on the secondary Market um so the universe of opportunity from a venture

investment perspective is vast um on your point uh around the FTX uh potential uh rebuild um we went through a lot of this last year as well um there were a ton of companies that were going through bankruptcy proceedings I believe that uh it's closed and it's all done um but I think Mike Arington put together a coalition to Reby Celsius and respin that um so I think we're going to start to see some of these things come out of uh bankruptcy proceedings and and receivership settle all of the you know creditor claims and kind of uh put a new foot forward what I will find to be really interesting and FDX you know tier

point on brand building definitely had the biggest brand also had the biggest brand blow up you know what do you do do you take the tech do you take you know any remaining members of the team do you take the brand and run with it like what are the residual values um because creditors are going to get made back hole on any assets as much as they can up to 100% and that'll take a long time um so my big question with all of these these like resp spinnings are just like what do you move forward with um and and kind of what do you keep and what do you shed so I I'm fascinated with the bankruptcy proceedings I I am as well I okay so one the other thing that I would have to imagine is that some of these bankruptcies proceedings are actually

getting made easier by the run up in prices right a lot of the collateral that folks had on these you know the Celsius of the world or the FTX or whatever the the assets were were crypto assets for the most part so liquidity going up uh token price going up that's got to be good um I would imagine it's maybe it's probably good for the for the bankruptcy uh um I guess the owners of the bankruptcy or the the debtors in the bankruptcy because uh but probably terrible for the creditors and you know most of the people that are creditors are people who deposited to your point crypto into these ecosystems lost their crypto the thing that they want back is uh uh returns in crypto form um and like I said we we kick the tires pretty hard

on on some of these options started talking to unsecured creditor groups started trying to piece together you know what these models could look like every single one of them and I was just listening to a podcast with a couple of dcg creditors as well and um or or sorry Genesis creditors um all they want you know if you deposited 10 Bitcoin they just want their 10 Bitcoin back or as close to that as possible they don't want you know $21,000 per Bitcoin in the form of cash paid out over the next four years and that's what you're looking at if if you you know ultimately get something back and so the cash denomination the USD denomination for bankruptcies I think it actually hurts way more than it helps sure it helps get

that percentage dollar back but most of these situations are on the day of bankruptcy you take a snapshot and that's the dollar basis that you're working back towards oh dude I did not know that that's terrible man I did not realize that I I think it's actually pretty painful for the people who are watching this you know price run up all right well never mind then I I just assume that they'd be getting paid back in kind uh but that sucks um okay mind if you put Bitcoins in and the Bitcoins aren't there it makes it even harder to buy those Bitcoins back can give them back yeah all right good point all right let's let's talk about what um an an FTX restart actually could look like even just from a like strategic sort of standpoint because when I when I think

about the FTX the asset that exists today you could kind of subdivide that into there's the brand right there's the and honestly I think that's kind of an interesting question whether or not that's been wholly destroyed um then there's the existing customer base so I would actually probably imagine that if like there's some percentage where If you restarted that b bad boy and you are sort of made whole maybe a little of incentive like some customers will obviously take whatever funds they have and immediately move but some will probably stay um and then the other one is the tech stack and I've that's the one that I just have no proprietary information on I know FTX the whole last bull market we were like oh they have such a good risk engine and yada yada but sounds like it was just Alam on the back end just eating losses and uh

performing liquidations themselves so maybe that's not the case but the rest of those the other two components actually could be sort of compelling for someone that was thinking about starting an exchange or that's part of their strategic road map and you know the first question that I have for you would be around the brand because even when I think about something like even for everything that FTX has done I still as a Crypton native feel differently about FTX than I do about Celsius even though ostensibly they kind of did the same thing those two things are different in my mind because FTX at one point just had such a stellar brand I think they really did I think they they had like a really Blue Chip very premium brand and I I just I'm sort of wondering now to myself I didn't have any money on FTX I

actually never used it but I do Wonder to myself like if I was a user would I go back would I if I lost some money but then I kind of got made whole again and I was really sure that there was New Management would I would I stay there I don't know what do you what do you think um uh s it's such a good question um I think one of the hardest things to do in crypto is to break out in terms of just notoriety or awareness and to your point FTX is going to have the highest level of notoriety and awareness the question though is is that positive or is that negative right and in a lot of ways I think you know people talk about brand building as you

know just having the best positive reaction with their customers and you know maintaining that customer relationship through positive interaction after positive interaction I think there's an element El of it that just because you are notable you're at least going to have an in to be able to get in front of potential customers and how many of the you know I don't know how many let's say 100,000 people or or sorry 10 million people used FTX um how many of those people would come back no idea so hard to tell I think a lot of that frankly depends on how uh well the process goes through bankruptcy asset proceedings if you get 85 90 cents on the dollar back and maybe it's

denominated in USD but you get some crypto and some asset like I I can imagine you go back and you say maybe this is worth a shot again because you've got you know where else can I do some of the things that you were allowed to do on FTX it's not really possible uh for you to get a new binance account because they've shut down um you know opening up new accounts for people um and kyc restrictions are are at the highest and maybe there's some smoke there's some fire where there's that smoke right now and maybe that brand is declining uh in a certain way it maybe you want to be able to trade perss on assets that you don't have access to in the US like there could be a reason why people come back I I'm just so hard

pressed to like actually think that that would be a sustainable business over time you could probably start with the FTX brand to break through but I I think you'd have to change it pretty soon thereafter I think it's a but in a yeah so I I agree with I agree with you in my like rational thought process but I weirdly still when I like just listen to my emotional side like I sort of still think of FTX as a cool I know this sounds so weird it's like not a bad brand like let me let me give you an example so so Jason and I um you know we do a lot of work with advertisers and one of the things that we'll do is sit down with a founder and be like what is a success story of a really great brand in crypto that you love like that you

just think like man if I could just do what this company did this brand like that would be an amazing success story in standpoint and we sat down with one today very like new up andc coming like very cool you know people would would know their name and I asked that question I was like what's a great brand success story and actually the first one they said was igen layer but then the other one was like they thought about they were like honestly before they blew up FTX like really crushed it and like what they did Super well was that they were a big company but they did a really good job of like the memes they didn't take themselves too seriously they had a good brand and I just even after all this like Celsius wouldn't use it in a million years if someone like John

J Ray that was like a beast trafi guy that was kind of good like took over FTX i' probably be like I don't know I'd be more inclined be more inclined to um yeah I mean you know um okay so going back to it the three assets you got the tech stack question does the tech stack still include the back door or not you know TBD better not better not but okay so this is my point um you know you've got the brand and then you got the customer list the brand obviously was huge it turns out if you spend hundreds of millions of dollars you know in anything you could you could build a pretty decent sized brand if you if money is No Object um and uh but I I think the the customer trust is just eroded because so

much of this is based around if you think about what is what makes a successful crypto Exchange it is um liquidity and it's security and that's basically it you know functionality I think is it you can kind of differentiate on functionality but the Bedrock of what makes a successful crypto exchange is liquidity and security they've completely eroded their trust and security uh and so there would have to be something and and you know liquidity is something that begets liquidity you're gonna have to get Market Bakers back on you're G like the investment dollars just to be able to get that that liquidity back is potentially insurmountable so I I'm just of the mindset that someone may start a crypto exchange with a customer list of

FTX but I don't think it's G to have the tech stack um or at least the the majority of it and I don't think it's GNA have the brand FTX um just because there it's it's so tarnished at this point yeah yeah you're probably right and you know the Counterpoint to what I was just saying is that if if you consider these exchanges uh bank-like I mean no bank has ever paused withdrawals and then ever survived like you once you break that trust it's a red line and yeah no one ever recovers from that so probably right but you know people are still bidding on it so it'll be interesting to see what people end up doing um there there's definitely some residual value in some of those assets um yeah and I'm sure people are taking a pretty hard look at it um and and you

know there's also a lot of interesting assets on their balance sheet in the receivership of the bankrupcy too so what they kind of like package together together and how they kind of want to parcel this out it'll be really interesting to see how it how it comes out but I mean to your point um you know bullish the the uh The Exchange that seems to have never was um I that is a case inpoint example of how hard it is to break through without any sort of brand or notoriety or awareness or hundreds of millions of dollars of marketing spend um you kind of like I I don't know like do you know anyone who's who's ever you know played around with bullish I I'm not I'm not 100% sure I think they have like a

pretty Sterling like investor list like alen Howard and Mike novogratz and all that was was involved I'm I'm not really a Trader myself so I'm not 100% to be honest I kind of had this blind spot about who actually uses what exchange because I just don't trade that much but but I do think like to your point about like yes everyone can build a brand if they have infinite money but I will say there are a lot of companies in crypto that basically have had infinite money that like have not built the brand um I think you you could look at a lot of the centralized exchanges that have spent definitely hundreds of millions of dollars and don't have the same brand um so they did something right but so I I guess we'll just have to see where it all shakes out it's kind of a fun like

strategy question I think I'm actually going back on what I argued before and agreeing with you that maybe there's some residual amount of customers you'd probably have to change the name and yeah maybe it's worth something to someone um probably really steep discount you'd have to basically rebuild Big parts of the tech stack and it would probably have to be in this strategic road map of some company like figure um who obviously has a that's part of their strategic vision for whatever they're building so um okay I've got uh another question for you here which is I mean so let's just obviously it's it unwise to assume anything in terms of price that this is going to continue or something like that actually last time um uh in on the last episode we did with Vance we're kind of going through like almost like a

bull market checklist um of like things that you would be looking for I think I think the thing that's starting to resonate with or sort of give me like flashbacks to 2018 2019 is this kind of like grinding price action that Bitcoin is doing right now which just like reminds me of and even to so to we're recording this on Thursday the 9th um Bitcoin had this really steep runup which is almost definitely I mean just looks a lot like the kind of gamma squeezes that used to happen um in the like 2020 sort of time period where uh option sellers got caught off sides and they got squeezed for it so it's like these sort of little things are kind of um reminding me of of that time period obviously no guarantee that it's going to play out the same what what are some

of the things that you sort of look for or would give you confidence to be like oh okay like that's another like check that box like this is something else I'd be looking for to give me confidence that we're in a different regime than we've been in for the last couple years yep um so I actually don't think that we're at the point of like the gamma squeeze like shorts having to cover their shorts um or like option sellers having to cover their their call options that they sold I I think broadly we're starting to see a recognition of um what is set to probably happen which is institutional Capital moving into spot ETFs um you know to take it back to where we started uh Vanek and uh 21

share or Arc um announced their uh spot eth ETFs I think like a month ago September 6th um May 2024 is when those final deadlines are due um so in a lot of ways that you see okay Bitcoin is the first mover Bitcoin is going to be the biggest you know it's going to attract the most attention in dollars um then it's like okay well what's next and I think that okay what's next is sort of what is playing out right now and um I think it's institutional probably sideline Capital that's been sitting around for a while that's making moves in and the reason I say this is um so the eth uh Black Rock ETF was announced

or expected to be announced soon they filed for the formation documents um but one of the more interesting things that's been going on is what's been going on in the grayscale chain link trust and I don't know if you've seen this but the grayscale chain link trust so you know it's a trust so there's a a market value for the actual trust itself there's an underlying value for how much link is actually in that trust like this thing has completely dislodged the trust is up like 500 600% and and completely surpassed basically the the nav of that trust I mean it's a fascinating chart but you think about okay who actually has access to that grayscale chain link trust it's institutional and it's um you know

traditional Finance people um and so I think you're starting to see you know some of the okay bitcoin's going to happen well what's next questions being being asked um and I think it's it's driving a lot of Market momentum but that's not in my mind like yeah here we go that's just so funny come on that's so funny yeah oh my God and you know that's an institutionalized product um and and what we're looking at here is I I think chain link you know at least on this chart is probably about $14 but the chain link Ray scale Trust price is something like

$45 and and that is the difference between you know the market price of the trust itself and the underline Holdings per share um which is supposed to be the representative like fair market value of of the trust um yeah there have been some pretty big premiums to nav on some closed end uh grayscale products but that is about as big as one I've ever seen hilarious um I also um uh a person on our team Adam um formerly of chain link sent me a hilarious uh screen grab of um thousands of Link Marines in a Twitter spaces um and the Twitter space title was uh $14 waiting room and you've got thousands of

people in this Twitter space is just singing to each other and like doing these like chants and it was like so funny wait and like I've forgot we've got chain link God coming on the Pod next I was gonna say yeah I connected with him I I'm just I honestly think it's one of these areas that I've just like slept on and I was like I should talk to someone about just about this and uh he's a really smart guy I was like we should do something on chaning so that's actually pretty fortuitous timing um we'll have we'll have tons of fun conversations next week as well um but so all of this is to say like I don't think that this is the blow off the top like DM squeeze where you see it rock it up and then you know get sold

off at the top like it's going to EB and flow of course this is the like animal spirits are starting to come back into the market you're starting to see these green shoots of cult-like experiences mimetic movements um and I think you know all of this is with the backdrop of institutionalization for the two core assets that are coming probably in the next like seven to eight months uh if not sooner than that um how much they will actually move how much the inflows will actually be remains to be seen you know everybody has their yes um but I I think just with that backdrop um you've got so many positive catalysts um so one of the questions you asked was what our

you know entrepreneurs saying um this is also the time of year where we have all of our like end of year hey let's check in LP calls with like our biggest LPS and Vance is actually at an LP um event right now um and kind of the broad sentiment across the board there is everybody is getting ready and they know that things kind of come back on you know in the next like two to three months um or six months and um so I think the institutions are you know the smart money they're the fastest horse they're the ones that are moving quickest um and and they're going to start to fill bags um ahead of all these positive catalysts that are that are you

know six months away yeah um I okay I've got some some sort of follow-up questions there so in terms of the some like the idiosyncratic like green shoots U bubbles there's like chain link and it's actually funny so one of our analysts went to this Goldman Sachs conference um this funny little anecdote just talking about chain link and Sergey you know Sergey nazarov the chain link founder was speaking there he said of everyone at this whole Goldman Sachs conference like people were swarming this guy like everyone wanted to talk to this guy which is just funny and look I mean chain lick has been has been rallying like crazy there's the salana thing that's taken off uh quite a bit um and then I guess there's I'm trying to think about other uh I mean I guess

those are really the big two and then there's Bitcoin and bitcoin's the sort of institutionalization narrative and and we just got the eth new sort of just dropped today but it looks like that April is sort of the rough timeline that people are now thinking about so there's kind of a dual institutional narrative and then more green shoots maybe crypto crypto natives moving I mean the other one and it was reported on last week I can't remember I think blw covered it but there's been sort of a Resurgence of um ax Ronin SLP which are web 3 gaming assets like the these subcategories are starting to make a comeback after you know the 99% sell-offs that they've all gone through um and you know a 300% 400 500% move upwards just means that you're only 90

95% down but you know it's a 3 400% return off of the low so like these aren't the crazy times this is is really just like the beginning of the start and um that that's kind of how I would describe where we are in the cycle and frankly I feels like 2019 again like the end of 2019 um you know you had these little bull Trends and then it would drop for a couple weeks and then you go up and you know this the stuff starts to take effect over a couple of these Cycles because more and more people will start to notice it and and that's when the momentum starts to shift got it let me let me ask you this so what I feel like what we saw the in the last Market cycle the the rotation went something

like this Bitcoin was the firm leader right like spot bitcoin price would of LED everything eth trailed a little bit but there was a period of time where it was like almost like one for one catch-ups like Bitcoin would run first then the market would rebalance eth up and then eth started to run ahead of Bitcoin and then that really like rotated into alts and that's when you had like the crazy axi run salana some of these like honestly like cardono and B&B ran ran super hard then too uh and then the sort of nft craze all that kind of stuff I feel like back then people it wasn't as widespread the knowledge of that Playbook um but now I feel like that's more within recent memory of everyone watching that cycle happen so you're to your point about like institutions asking what happens next do

you think that plays out the same way that it did last time or very similarly or is it different because people know it now and they're like oh I know how this works and instead of like waiting for alts to run like I'm just going to skip and go right to alts or something like that do you know what I'm you know what I mean um um if we didn't have you know the thought to be impending uh Bitcoin ETF followed by the eth ETF I would have said you know a smarter person who's lived through a couple Cycles says oh bitcoin's pumping great I'm gonna go buy you know some index bed on defi or web 3 gaming or whatever it may be just skip to the final conclusion because you know

dollars moving into those assets have a multiplication effect much higher than Bitcoin or eth or salana or anything else um the the difference though is I think if we you know have what is expected with these ETFs and then what is expected with the inflows there is going to be a different element this cycle which is um basically just duration hold of those ETF based assets um and what I mean by this is let's say um people who want to buy Bitcoin or eth are generally able to do it on you know the platforms that we're talking about the centralized exchanges maybe even like the grayscale trust I don't think

there's too much activity there though um but if most people want to buy Bitcoin in eth they can so the ETF products are targeted at a different audience and that different audience is largely made up of money managers and the way that either a money manager Works um in terms of asset allocation and you know providing their servic or you know managing retirement accounts or automated you know retirement accounts is that they allocate based off of a percentage basis and that means that you know people who are contributing to their you know 401K their Ira or they're adding more money with their with their investment manager

every single time that they do that every two weeks they get a paycheck that means that there's sort of this consistent Buy in terms of you know that 1% that 3% going to bitcoin going to eth Etc um which builds a base of duration of hold that I think we haven't seen yet in previous Cycles you know if if Bitcoin went from 5K to 25k there's bound to be a lot of the people who bought it at 5K who were like great I'm gonna take the 5x and you know pair back and see what I want to do next but that doesn't exist as much in the the professionally money money managed Industries um maybe there are people who will trade the ETF you know based off of va or based off of Swing trading that's

going to happen but the the majority of people I think are going to be Buy and Hold yeah you know what just anecdotally on that point about institutions um so we you know we we put out different different strands of of content across different channels like some of our stuff is really Crypton native some of it's really institutionally focused and honestly for a while the more Crypton native stuff has been trouncing the institutional recently within like the last like two months-ish 's been a change in sort of what people are interested in and listening to and um that also has been mirrored so we've got this com coming conference uh D London which you advance will be at it's gonna be huge gonna be gonna be great uh and you get a bell BC oh shoot

I forgot the actual discount code but you get a discount code click the link click the link in the in the bottom for your tickets but the the reception to this conference has been like we've been getting on the phone with like hey just just kicking the tires of like the Goldman's the JP Morgans 72s these big funds like hey would you be interested in speak they're like yes like not like oh yeah like like the interest is and I I feel like just it's more anecdotal evidence to your the point that you were making about uh just people being sort of ready and moving off the sidelines and wanting to get back into the mix and realizing that these big catalysts are close and we haven't even talked about the having but the having is also I think in the Zeitgeist more than it has

been previous Cycles like we last having we weren't getting notes from you know uh Goldman Sachs and Morgan Stanley being like the having isn't priced in yet you know like you got you got Joe and Aaron Ross sorin talking about it live on msnb on CNBC like you know yeah it's crazy crazy that's and and you know to be clear like historically it's been 18 months post happening for that you know massive runup um and the realization of it mostly because you've got a bunch of Miners and really the having in you know removing I don't know probably like six or seven billion dollars at this point uh worth of Supply overhang from the market um anecdotally I think you know

one of the not miscalculations but um misunderstandings of 2023 was just how much latent e Supply was left within Miners And I think that um you know they've been selling out over the course of the year and I think we've talked about this on previous episodes but you know you had that large call seller um a couple weeks ago which kind of initiated the runup uh there are all these strikes at the end of October at like 1700 1750 which had to be covered I think um Bitcoin goes through similar Cycles in that you know proof of work to proof of stake represented just a total shut off right um and everybody expected well as

soon as it shuts off like you're not going to have any you know minor selling because they've already been selling I think that that was wrong and I think that that's why you see an 18-month lag historically on the Bitcoin happening it's because a lot of these miners hold on to their Bitcoin to find opportune moments to sell um and so I think you're it's going to take the happening will be a big moment but it's really the effect you know months and quarters after The Happening where we're going to see posit more positive price trajectory I would say yeah yeah I think you might be right about that all right everyone we will be back to the program in just a moment but before we do I want to share something that blockworks has been cooking up for these last couple of months March of

this coming year in London blockworks is hosting Das London the largest institutionally focused conference in all of crypto we are gathering 1200 of the world's largest asset managers so thank trafi macro funds Crypton native funds big allocators and financial institutions so Banks payment processors Etc all in one spot it's very rare to get the likes of Goldman JP Morgan 72 whatever all in one room so you can know what the big money is doing we're diving into the themes that they care about so we're talking about the intersection of macro and crypto where we are in the cycle real world assets so everything from stable coins to unchain treasuries to tokenize assets it's going to be a blast but the other reason you really want to go it's London baby center of the world at one point you got Pub culture you got fish and chips great

beer it's going to be a blast so because you're such great listeners to bell curve there's a Code Bell 20 that's going to get you 20% off so click the link at the bottom of this episode it'll take you right over to the homepage you'll see all of our speakers and use Bell 20 for 20% % off ticket prices are going up soon make sure you go use that code I will see you in Sunny London Town in March do you ever um I actually I spoke to Adam back um last week he there's a really interesting uh chart of uh Bitcoin hash rate which is bucked this this trend that it used to have of like usually what happens with uh hash rate and price the relationship there is that price lead hash rate so the price goes up uh you know just like in any

sort of commodity producer relationship the commodity producer in this case the miners try to chase that price it brings more hash rate online um and then it ends up yeah so there's that kind of lead lag relationship but if you look at like this is the chart of what that looks like this last cycle which has been a massive deviation which is up on my screen here um like the price has been tanking but hash rate is just like a oneway a oneway uh stream up which is really um really bizarre and I asked Adam back about this and his his explanation was one of the things that changed in the mining industry previous uh and this might explain some of the

eth overhang as well is the availability of credit around this time so basically as as this was going on there was a bunch of uh you know mining equipment that got purchased uh you know via having access to credit and then what happens is there's like a a lag in between when that gets purchased and when you actually get the as6 delivered so if you get a if you can imagine like a bunch of as6 getting delivered like right around here oh okay now it's kind of a sunk cost you know the market has turned you probably can't even sell those as6 if you wanted to and so it's kind of like well I might as well just turn these things on and and mine hence why it's just been such a brutal uh Road for Bitcoin miners recently actually and

you see this weird Divergence in the relationship between price and and hash rate but that's interesting I mean yeah I um I intuitively understand that I I think the other thing so hash rate aside um the other thing I think about in terms of the last 18 months um and there's going to be natural sort of like and so many people put out these analysis of like meta's law analysis of what's the you know the network value of Bitcoin or what's the network value of any of these ecosystems and you're valuing them based like uh you know like they're a network and you know the the intuition there is that you networks grow proportionally to the number of people who are in the network and as these networks or network

value grows and so you can kind of assume you know basic understanding of of where value should um aggregate but the one thing that we don't ever really think about or apply to that is the structural process of removing major players from the ecosystem and the structured selling that was required to do so yeah was just such a massive exogenous effect to the progression of that process that we're probably undervalued to where those you know Network valuations would um forecast right now um and it's because we're still picking up barely still picking up the pieces from all of

these things um so I think you know in so I think of it in two ways there's the there's the hash rate that is you know that's something that's really fascinating and credit to go buy Bitcoin miners I mean maybe it's a good time to be buying Bitcoin miners um if there's if there's excess Supply but um then there's also the question of like if you remove the massive blowups and you know three arrows just doesn't just Fades away ft just Fades away they don't absolutely get wed um you know are we where are we where we are right now if those two things didn't happen hard to know but I would definitely say no yeah I tend to agree with you there I ju is

it a good time to buy Bitcoin MERS like I don't know but they blockchain does have this this product actually where they notice there's a honestly you know what it's similar to the relationship of uh we've talked about this before about how like public market proxies for crypto like coinbase or micro strategy end up running up more and then getting hurt more on the way down because there's this sort of hidden premium um similarly similar to mine equipment so it's like on the runup it R they the value of the A6 actually runs up more than Bitcoin and then on the way down you you get it on the way down as well which kind of makes sense to me because when the price of Bitcoin goes up everyone's like oh my God I need these things bitcoin's going up a million dollars and stuff like that so we

haven't seen any of those either we haven't seen any million dooll uh Bitcoin pricing predictions either so what are you talking about oh really I haven't seen I haven't seen Michael sailor said five million Kathy Wood said 1.5 million all right well I mean that's I will say I saw Kathy would give this ins it was like 20 we had started that podcast with pomp uh off the chain before as the pom podcast and kathywood was one of the early guests so this this must have been 2019 and she gave this price prediction for Tesla she was like our ba our like base case is $700 and our bull case is$ 4,000 and I was like my draw I think my draw was actually

open I was like I called yo after I was like dude I just heard the crazy as she said this and this was pre- stock split and everything so now it's hit but like yeah I mean it was I mean I wouldn't fade Kathy I'm a I know people like to hate on her because she makes these big bold predictions but I'm a Kathy Wood fan I like her anyone who is a growth investor over the last 18 months had a a tough time but I agree I think if you zoom out a little bit uh she will be proven right I agree with that um so you know one other thing i' I'd be curious to get your sort of take on just as someone in the industry maybe as as a post to something like uh the actual actually what happened but there was a

very interesting post from evany gavy who is the CEO at wintermute um about near and Aurora this week so um basically evany accused the near foundation and Aurora Labs of failing to redeem 11.2 million in usn stable coins for usdt as promised under a deal um so basically usn is like a very it's a very it's an algorithmic stable coin very similar to uh uh to Tera Luna they switched from being an algo Sable coin basically to one that which is back by usdt after the collapse of terara um I guess eany from the Alama estate purchased 11.2 Million worth of uh usn and then they basically said no we

actually um you know are not going to refund you so so evany made this whole Twitter post and I first of all I thought it was interesting I have I have no idea who's right in the situation it looks like there was you know some back stopping of the from the near Foundation of this of this claim um I thought about this a lot after you know when when FTX blew up and everyone's like we have to call out Bad actors in the future I just like curious what you what you think about that because then people have to like air public Grievances and no one really likes doing that so I don't know if you had any thoughts on the eany post or this idea of like calling people out on Twitter because I see the merits to it for sure but I also like I could see

where it could go wrong too just curious to get your your take on the whole thing any any sort of perspective that I have here is going to be um dislodged from any particular events because every single one of these types of situations is so specific you can't just like BL blank it say one way or another um listen there there have been historically a number of times where um people in the space have done nefarious things to say the least um and it I like I would guess 95% of them probably go unnoticed or uncared because you know it's it's you know the way that they operate you know anything from like you know it's not working so we're going to

shut it down and return the treasury like maybe you should have kept working harder on it or maybe there's another way to do this or you know you're just kind of like okay as an entrepreneur I'm gonna move on um which is totally fine but you know people may be pissed off about that um to like like rugging something you know being able to to be anonymous on Twitter and and form a protocol and this is more defi summer days but like all of those types of situations are are just not copasetic to straight up fraud and obviously we've seen that as well um but there are a lot of times where people in the space think that they you know can get away with things and I think it's

important um when you feel like you have a strong case to fight for that case and um you know from our perspective if we were ever put in a situation like that um we have a fiduciary duty to our allps and we have to make sure that we do uh as best we can to represent them when we're the ones that are in charge of you know Assets in question um if you know it's business tactics for winter mute and you know near to go after the situation that's totally fine too if they feel the need to but you know pulling on the threat of like public dismay I think doesn't really ever never get that far you may get a couple people on Twitter to be like that's it I'm

never using you know X or Y or z um but most people are just gonna the Press cyle will move on and people will forget about it um and so I think there are other means of enacting you know getting right by a situation where you feel wronged um but doing it in in public I think is just sort of like a a last resort or maybe it's you know it's not something that we would want to do yeah I because I think it's I think it's tempting as well I by the way I love Ean and witer mutant I have no knowledge of this atever I just it was the first time I'd there was a lot of chatter about that post FTX implosion it's like if you see something say something and this was the first instance of that that I publicly saw by someone that I respect a

lot and follow and was like oh that's kind of an interesting that's interesting um so I guess we'll we'll have to see if we see more of that um all right La last last question for you um and maybe it could be more of a broad almost like hypothetic iCal but I I I saw this week that near and polygon released something um so basically polygon and near bringing this ZK wasum idea uh to life where they're they're basically simplifying the way that ZK proofs work on on uh ZK proving works on near and they're sort of aligning with polygon which brings them closer to ethereum frankly it's a little bit over my head technically um so I'm just not even going to touch that but but here's my question to you because this's a good

gummy thing so there are a bunch of um protocols like now there like I'm starting to think about some of these protocols I haven't thought about in a while like near Avalanche I actually do think about this one but Celestia is a really good example of a new L1 and some of these Al l1s or like alternative layer ones have chosen to sort of counterposition against ethereum and they've been like you know what we're really different salana is a really good example of someone that counterposed against ethereum and others are like you know what we're like kind of aligned and like and sort of like you know uh like Celestia is one where it's like I see a lot of the the sort of researchy events that I go to it's like Celestia people and ethereum people and Cosmos is sort of somewhere in the middle I guess like

if you unilaterally had control of a layer one how would you think about that like would you go the ethereum alignment route and there are some pros and cons with that strategy or would you go the counter position route where you're like I'm just totally different in ways X Y and Z and this is why I'm different and unique so I mean on the ZK wum stuff and near I literally I'm looking at a tab or two right now where it's like okay I need to read this later so I also don't have like full full context on that one situation um but next week I will um the uh I don't know the the kind of rudimentary way that I think about it is there there's two main functions um for

blockchain there there's settlement and then there's execution and execution is is largely how you're going to interface with either the applications or the customers and I think we're also we'll see if this trend continues but we're starting to see maybe even a third layer which is the ux and ux uh by and large is either going to be like a self- custody or it's going to be sort of like a pseudo centralized um posted experience depending on what it may be um so like that's the basic layers of the stack in my mind you've got ethereum who is both um settlement and exec tion um and then you've got l2s that focus more on execution and transaction

throughput um at the execution layer then they do the settlement um salana monolith so uh full stack execution settlement um it's also possible now that you can have svm execution environments that are built on top of the da or settlement layer of Celestia um so like you're starting to see all the co- mangling of these different layers based off of different parts of the tech stack for these for these um ecosystems and so it's impossible to say like I think you should counter a position or I think you should align but what I do think you need to do and the only way for these blockchains to ultimately get adopted and uh is to Define an application category where you

have a true advantage ethereum and this is based off of the 2020 2021 uh uh you know run up in defi summer and all those things um they have defi they have internet moneyness um it's where the tvl exists um you know even look at the tvl chart of salana like it it's not anything comparable um it's where also the best nfts exist because of the moneyness um so like they they have kind of taken that uh Realm of the world and even today I was trying to like I we have a wallet we're trying to like Bridge assets and like trying to send ethereum from L1 to optimism like it's still such a clunky experience why

like why can't I you know oneclick swap uh you know 0.1 e just to be able to put gas into an unfunded wallet like the the exper the user experiences across these different layers is also garbage um and so I think you know salana is very obviously going after speed and throughput and there will be applications and therefore for cost and there will be applications that gravitate towards that my question is what will be the first um that hits that break out scale and when will it happen um but like that's the counter positioning that they have Celestia says hey you want to have optimism or arbitrum execution instead of settling back down to eth main net like settle on our da layer like that's totally

acceptable or you can even have eth mainnet you know settle down to Celestia um so I don't know may maybe this is like a very rudimentary way of looking at it but but that's kind of how I think about it and it will be defined by the application categories like if we look at where all of the games are being built um you know it's not salana um even though transaction through it is highest there um so you know it seems like polygon is is making great strides Ronin obviously that we're talking about um making great strides um and and I think we're going to continue to see that kind of application category differentiation um so yeah that that's my quick and dirty on it okay let let me

followup question for you here because there's the like application like what these things do and how they all sort of mechanically go together and where they belong in the user flow but then there's there's this other component of crypto which is like it's almost like the distribution mechanism and the importance of community especially for layer ones like one of the things that I think ethereum got super right right it was I mean in a sense a counterposition to bitcoin that I feel like that maybe takes away from it but what I mean by that is like the Bitcoin Community is like this really hard almost like religiously you know uh it's almost like a return to like Roman sort of values of uh you know they've got this whole thing going on you know what I'm talking about ethereum's the opposite of that it was

you know very optimistic um very like a hopeful very research-based and one of the things that was I think attractive about ethereum is you could very clearly say this is what makes a Bitcoin person and this is what makes an ethereum person I think salana had that as well like they were just like we are different and uh you can and I the way that distinguish it is like they're like Engineers they're like more pragmatic more engineering focused um just a different vibe and so I feel like that's kind of an important squishy subjective but still really important like indicator of success for one of these communities where that so that's what I'm kind of trying to get at where it's like you know you you can sort of strike out on your own but there

are a lot of these l1s where I look at it and it's like what makes a I don't want to seem like I'm picking on new but I I can't really easily Define what this person look like like a polygon person you know um and I so I wonder about that I'm like I I don't know it's that might be maybe one of the disadvantages of sort of aligning with ethereum so to speak because you like fail to develop your own person if that makes sense um so let let me play back to you um and and change a little bit and tell you more of my perspective um also just to be clear like we're very bullish on Solana we invest in the ecosystem across the board it's just more of like there are differences and and that's that's kind of what I want to hit on um like I

remember very distinctly in the 2016 17 18 19 era um of all the Bitcoin people came out with pitchforks when ethereum launched and it was like you're never going to scale it's never going to work defi doesn't mean anything like we're gonna build defi on bitcoin like we're gonna have nfts on bitcoin it's like okay sure um and I I I could absolutely see uh I don't think think ethereum will fall subject to the same issue which is okay like other blockchain over there like good luck you're never going to be able to do it I think one of the benefits of being optimistic around your approach to open source development and

building blockchains is that there could be many ways that everybody wins and and it sounds a little bit cliche to say that but like salana is going to have its own application categories that are just probably not even feasible on ethereum maybe it's more financial oriented because of the high throughput maybe it's more consumer oriented because of the low cost like just remains to be seen is is kind of the sentiment that I'm expressing but it will be different and I think ethereum also isn't going to come out with pitchforks when you know those application categories do emerge um I think they're going to be like great you know like we've got our own stuff going on over here too um so I I agree with you I I I mean I I if I were to guess I think probably consumer application

categories are are kind of the next thing to hit um just because it seems like Defi and the tvl at least for now is is staying on ethereum um and a lot of the games are trying to tap into to that liquidity um but you know the other reason why you would have a blockchain win or lose is because you're able to attract new users and I I really do Wonder like we've lost a lot of people for sure in the last cycle we're going to gain a ton of net new people in this cycle like if you were totally fresh no Dogma um no history coming into this ecosystem where would you go um and and

that's kind of the other angle here too is like where are all those net new people coming um because it it could be you know a totally new platform could be Salon it could be ethereum like that that's kind of I think you know the the really important question to answer um and we'll see yeah could be could be a totally new platform as well and that's what I like one like even outside of like salana Bitcoin ethereum I've been thinking about these like kind of like near Avalanche ecosystems as well because like there's there's so much that's what I was really asking I was like I for some of those which are like big like very big um even some of the layer twos I I wonder if this ends up being a factor as well like is there an

arbitrum person versus an optimism person I I kind of think there is a little bit like I just um I just I find The Branding element of it pretty interesting um and I and I I've been like wondering what uh you know what some of these layer ones I I sort of feel like if they're going to make it this cycle and there are a couple that are in limbo that could make it or could not um and it's like you probably have to do some work defining your your person in community and I'll be really and you know there're probably gonna be a bunch of new new ones that like monad is is launching soon like that one seems pretty cool I don't know I've got no idea but not Financial advice obviously but uh you know n I'm just interested I just want to I'm just curious to see how

it all sort of plays out um I mean I I do I will say though like going back to it the community development is something to not uh scoff at it's something to really dig into and pay attention to because everyone loves a comeback story everybody loves an Underdog Story um and you may be fresh and new and you're trying to get new people to come over with you but if you already can build the network effects of having some people there having some value there um it's going to take off and and so I think it's not maybe it's not necessarily like what has the best tech or what has the best applications it just is like what is the best option when when that onslaught of new users comes in and they're like where do we go and then that just sort of like the ball

the snowball startch rolling downhill yeah think you're probably right all right partner I think we can I think we can call it this was a this was a fun one this is great um see you next week with CLG link God baby I'm I'm really pped for that episode actually the link Marines are they're a fun Community uh so that'll be good tell me tell me about [Music] it