Public companies accumulating ETH as a new demand source

Transcript

GM. Good morning. Welcome to the Milk Road Show, the daily crypto show that knew someday, just like when Michael Jordan left to play baseball, Ethereum would make a legendary comeback. I'm your host, Jay Hamilton. Bitcoin just hit an all-time high. And would you believe that's not even the biggest story of the week. The big story this week is a new wave of public companies are raising hundreds of millions of dollars to acquire ETH. You all know the Bitcoin Treasury Strategy. Well, welcome to the world of the Ethereum Treasury Strategy. Now, not only will this pump the price of ETH, it will also lead to billions of ETH being actively deployed across Ethereum DeFi. In today's episode, we are going to explore the massive unlock for both ETH and for

Ethereum DeFi. How it mirrors the Micro Strategy Bitcoin playbook and what this means for you as investors and where are the opportunities for you to invest in this cot narrative and growing trend. Today we're joined by Kyle Reedhead, co-owner and head of research at Milk Road. We're also joined by John Gillan, crypto and macro researcher and Milk Road macro podcast host. Before we jump in, as always, I know y'all are making trades and you're making swaps. And if you are doing that, you're going to want to do it on Milk Road Swap. Why? Not just because it's Milk Road. And I obviously love Milk Road more so because it's got the cheapest fees in the game.

You can trade across Ethereum, Bass, Arbitum, and Salana. All with some of the lowest fees in the space. Only 15 bips on trades on ETH, ARB, and Bass. So check it out today at swap.mmilkroad.com. Today's episode is brought to you by Definitive, the leading multi-chain trading terminal trusted by funds, Dows, and Protraders. It's also brought to you by Letin. Get cash without selling your Bitcoin. Without further ado, Kyle, John, welcome to the show. What's going on, guys? Bitcoin alltime high. Although it was a very small time alltime high, like I think we went like a couple cents above previous. So, it's kind of funny, but Twitter's going off, so it's fun.

What are you bearish? It's an all-time high. Get in the game. What are we doing here? Oh, I'm not bearish. Look at my Twitter feed. Okay, just making sure. Well, I think we got we got further to go. We're just getting started, everybody. We're just It's risk season is coming. Uh, okay. I don't want to talk about I could get distracted so easily here. I want to today's episode all about ETH and ETH treasury companies. So, just to lay the groundwork, we have currently three, maybe even four public companies now that have purchased over either have purchased or are going to purchase over a hundred million dollars in ETH. Put it on their balance sheet as part of their treasury strategy. Let's start at a high

level. Kyle, what what are Ethereum treasury companies and why do they matter? Yeah. So I mean you can think we all know strategy or micro strategy. What sailor has been doing for about five years. For five years now Sailor has been uh essentially buying Bitcoin, putting on the balance sheet of his company Micro Strategy uh taking out loans, getting convertible notes, selling shares, doing a bunch of different kind of financial engineering uh basically in ways to bring fiat in the public markets uh and use that to to buy uh and acquire more Bitcoin. And so they've been doing that for about 5 years and it's been an incredible vehicle for Bitcoin. Um, a big reason why is because a lot of companies, institutions, investors, funds, etc. in

public markets aren't allowed to access digital assets. So they actually just can't buy Bitcoin. And so what Micro Strategy has been is a vehicle to get kind of return or outsized returns on on Bitcoin. Actually be able to access Bitcoin without the fees that come with ETFs and also a way to acquire more Bitcoin than you originally purchased. So Bitcoin per share they call it, which you can't really get with ETFs. And so what Ethereum treasury companies are is exactly that is a way where public markets, people who can't or won't purchase ETH or even those who do want to purchase ETH but want to purchase it in a different vehicle um they can give money to these or give capital and allocate it to you know ESBet or Sharpink Gaming uh Bit uh Bit Digital I think is another one. Uh there's about

five of them now actually maybe six even to uh because a new one launched today. You can basically give them capital. They'll go buy ETH with it again. They will raise capital. They'll take out loans. They'll do whatever they can to increase the amount of ETH they have. But what's interesting about the Ethereum ones versus the Bitcoin ones is these guys can also stake their ETH. They can restake their ETH. They can lend out ETH in Ethereum DeFi protocols. So they can actually do a lot more to generate more revenue or generate more ETH than something like uh the Bitcoin Treasury companies can do. Uh and so this brings kind of this new perspective or this new um functionality to these companies which I think is is really cool. I think the big thing that people need to understand of why these things play such an important role is again

there's just a lot of companies and a lot of institutions and funds and people that are not allowed to put their capital into digital assets. So they can't just go on Coinbase or go on you know whatever get a MetaMask wallet and buy ETH or buy Bitcoin just whether it's because of regulatory reasons and even I know things are changing that world they still doesn't exist uh they still don't have ways that they can do it or it's just because of like risk uh environments within their fund or you know could be regulation could be just tax purposes within you know countries like India etc where it just doesn't make sense for them to go and buy the digital asset they can use these avenues instead uh and get exposure to ETH without actually having to like hold the underlying digital asset themselves. So I know ETH people or crypto people, you

might not love this because you want, you know, self-custody. The the thing is that 99% of the world doesn't care about self- custody and actually just can't have self-custody. And so this is an access vehicle for them to not only hold ETH, but to to actually get additional exposure through staking, etc., etc. And so what's interesting is you now have the public markets. I think ESP put out a video is our marketing agency helped this, but they said DeFi yields on public markets. And that's because again, you know, a lot of these companies, not only can they not hold ETH, they also can't use Ethereum DeFi. They can't go and use a or use Lido and stake their ETH. And so these treasury companies basically do that on their behalf. Uh, and so a good way to think about these is the DeFi mullet. We've

all talked about the DeFi mullet before. Coinbase integrating Morpho into their app is the DeFi mullet. Instead of bringing people on chain to use Morpho to get loans against their Bitcoin, let's just bring Morpho into the app where the people already exist. That's exactly what these ETH treasury companies are. Instead of trying to get these people to come on chain to buy this stuff, let's just bring ETH and the DeFi yield to the public markets and so they can just sell their Tesla stock to buy this instead, right? Or sell their whatever to buy this. It's in their investment accounts, their RRSPs, their retirement accounts, all that kind of stuff. So, it's opening up Ethereum and Ethereum DeFi to the public markets, which I think is just one of the biggest unlocks we have seen in crypto in a very

long time. So, I think it's actually very exciting. Big statement. One of the biggest unlocks we've seen in crypto in a long time. Well, the reason I say that is 99% of the world's capital exists in public markets and is not allowed to buy Ethereum or use Ethereum DeFi. And this is true of all digital assets. We're getting more of more more of it with Bitcoin, but Ethereum hasn't really had that and basically no other crypto. And so to all of a sudden unlock this and open up DeFi yield or ETH yield to all of the capital in the world, well, all the US capital because most of these I think are American today, but I'm sure they'll they'll end up opening everywhere. It is a massive unlock. I think like it can't be understated how big this is for ETH and for Ethereum DeFi. And I don't think most people

recognize this yet. Most people think this is a bad thing. it's, you know, Wall Street coming to take our our ETH and create these new things that are not good for the e ethos. And I think that's just like that's missing the forest for the trees. So, right now we have this capital sitting on the sidelines. And what you're saying is even with the market structure bill coming and the regulation that's coming in the US even with that there is a lot of capital that would not buy Ethereum onchain and so the way that these people are going to access these institutions are going to access ETH is through public markets and this is the vehicle to do that are these E strategy

companies. Yeah I would say it's not just would not it's just could not. John, you know, you're from Black Rockck. Uh, previously in your days, what what did you see in this world or like how have you seen that the trify world in terms of them being able to access this stuff even today? Yeah. Yeah. So, Jay, you know what the way I would tell you to think about this is that something that we learned from the way uh strategy or micro strategy formally uh treated Bitcoin and and brought that offering to the market. What that revealed was that there's an enormous amount of pent-up demand of capital that wants to get access that wants to get exposure but is seeking a way to do that that is conforming to their mandate, their investment mandate, but also to general compliance and regulatory expectations and restrictions

that they have on their capital. There's a lot of people who maybe could go on chain but for certain reasons can't, right? Like maybe in their personal portfolio they can, but there's a lot of other uh capital out there in the world that wants to get exposure that hasn't been able to. So what Micro Strategy did was, you know, they initially announced that they were going to start treasuring the asset, but then they also brought to market several other products, corporate um corporate bonds and then different kinds of uh stock offerings to sort of strip out some of the other volatility and other things about the the digital asset of Bitcoin to allow people to get the exposure level that was commensurate with their appetite for risk and uh made it in a rapper that was compliant with their regulatory restrictions for their investment mandate. So the way that a

lot of institutions think about um this is important for several reasons but a big one uh is that the way that a lot of large um investment institutions asset managers think about their investments is in terms of risk. Uh Black Rockck everything in Black Rockck internally is described in terms of risk risk exposure value at risk. They're not so much in this because they see the the volatility of the asset or the outperformance of it the alpha. It's more of an opportunity to say okay what is my risk of not being allocated to this asset. What happens if uh Bitcoin for example finds a bliss state which has you know which is a term that means a longstanding role in the market and I don't have some the risk of that has to be hedged out if you're

trying to protect your capital. The same thing with with Ethereum. Um if the entire global financial system decides to adopt in some level Ethereum the risk of not having an allocation not be able to participate that is huge. they're trying to hedge that out. So there there's a lot of different ways that people think about this asset and think about this allocation. Um and what Kyle said is true that some people can go on chain, but for uh certain capital, certain institutions, they are only allowed to engage with certain kinds of investments that fit their mandate. It takes them a long time to evaluate those choices and to make those choices. And uh so we're just now seeing the beginnings of corporate treasury vehicles coming to market bringing the opportunity to get exposure to this asset. And there's been a huge amount of

pent-up capital. And I think this is going to be like a big unlock of people who've been wanting to get exposure but haven't had a way to do it that fits their mandate. And the reason why these companies are so far behind Micro Strategy, Micro Strategy had been doing this for 5 years. Why haven't we had an ETH one or a Salana one or something else? Uh, and that's because the SEC, right, Gary Gensler basically made it illegal, right? So, Bitcoin had the green light for many years, but nothing else did. And so, we basically had to wait. And so, finally, in, you know, whenever Gary Gensler was out, was it December or January? These things could all start spinning up. And so, that's why like in the last month, we've had four or five of them both in ETH and in Salana. And they're going to I think that's just

going to continue like I think it's only just starting. Uh, and so that's going to continue to grow. And then again, people feel more comfortable being able to and institutions more likely feel more comfortable allocating because Gary Gensler's out. The other thing is the big signal here that Tradfi or these public markets want access to crypto was was circle, right? Circle was the first IPO in a long time for crypto outside of Coinbase, which again was back in 2021. And the thing 10xed on an IPO, right? So, and it was like well over over service. like there was Tradfi is is chomping at the bit to get access to crypto, especially things around stable coins, Ethereum being the biggest stable coin uh blockchain today. And so Tradfi wants this stuff, but again, they just

haven't been able to access it. And so you wonder and you ask the question, well, why has ETH underperformed Bitcoin for the last three years? Well, it's because Bitcoin's had a green light and institutions had multiple ways to to allocate to it. Uh and Ethereum, they have not had that. And today, it's it's finally coming, right? right? These ETH treasury companies, the ETFs, sure they're finally getting allowed. They're finally getting access. But again, even these institutions, even though these exist, it's still a bit slow, right? They still have to get approvals. They have to go through this. As John said, what Micro Strategies done, and none of these treasury companies have done this yet, is they created different vehicles to invest in Micro Strategy. So like like he said with bonds, etc. So there's some funds that can only invest in bonds. They actually just can't buy risk

assets. And so Micro Strategy created a vehicle where you can invest in the bonds instead. And that gave them more capital to go buy more Bitcoin, right? And so that's all coming for these ETH Treasury companies. And so there's going to be billions of capital that can finally allocate to Ethereum because they see this as upside of of stable coins. They see this upside of all the other things going on in the space. So um the title of this is this is Ethereum's moment. It literally is. Uh and all the the people saying it before it wasn't true because you just couldn't have public markets allocate. Uh, and public markets is the most capital in the world and you need that for these assets that are 300, what's he like 300 billion. You need public markets to move that asset up. If it's just crypto

retail people, we're not moving this thing from 300 to to a trillion. Just like Bitcoin, when Strategy first started buying this, it was at 300 billion. Right now, it's at two trillion. It could only do that because it had access to public markets. So, Ethereum's finally like across that chasm, it seems. So, let's let's talk about what this means for Ethereum. And I want to approach this from two different angles. Obviously, the main question everyone's going to have is what does it mean for Ethereum's price? And then the second, what are the downstream effects of this, which you mentioned already, Kyle? Let's take a look at those those two factors because I think there is, as you said, there's a lot of people saying this isn't the way we wanted this to go. This isn't how we wanted to build this tech.

This is how we wanted to build ETH. We want decentralized. We didn't want public markets, right? But there is a lot of benefits that will come as a result of this. I think we're just not, as you say, Kyle, seeing the forest through the trees yet because it's new and we're still all trying to wrap our head around. This is, you know, it feels like every day right now, another day, another Ethereum public company, another public company says, "Hey, we're going to put ETH on the balance sheet." So, talk us through what does this mean for Ethereum. Yeah, let's first talk about what it's mean for Ethereum price and then we'll get into what this if this is a good or a bad thing. Um, first like let's take a look at some of the numbers here. I have the strategic Ethere uh strategic ereserve.xyz

website up here. Jay, if you want to bring it up, I can send it to you in the chat. Yeah, I got a link here that I can send you in the private chat. So, if you want to pop that up. So, Sharink is the second largest holder of ETH today. This thing's only been around for about a month and a half. It holds 205,000 uh ETH, worth about $570 million worth of ETH. Uh and it's basically accumulated that in I think it's about a month and a half, not even, maybe even less than a month at this point. And then you have um Bit Digital, which is at a h 100,000 ETH, so $280 million worth of ETH. You have um BTCS Inc. has 15,000 ETH, so about 40 million. Um, you've got Bitmine Technologies, the one of Tom Lee, which

just raised 250 million. I don't even know if they've they've actually acquired the ETH with it yet. They haven't announced that, but let's say there's another close to 100 100,000 ETH. All of this has happened in one month. Okay. So, we are now talking like 400,000 ETH in one month. And then if I look at ESBet and some of the So, Espet's the longest one so far, they are raising about 30 to $60 million every week in buying Ethereum. buying ETH with it. So let's say we have five companies doing that. We're going to be doing about let's say 100 to 200 million in the next couple weeks every single week buying ETH. So that's like a billion dollars close to every single month that they're just strictly buying ETH. I don't know what that demand's going to

do because then you also have the ETFs and you have everything else going on. Um but that's a massive massive demand driver for ETH that we have not seen. Now there's also a world where that picks up there. like Sailor has been sometimes done like a billion in a week, right? So that's just looking at initial numbers. And if we talk about what does this do for Ethereum, think about what all five or six of these companies are about to go do. When Michael Sailor launched Strategy, he went on every podcast. He went on every news channel. They did investor rounds. They ran around Wall Street screaming about Bitcoin, explaining what Bitcoin is in every way they could, trying to help institutions funds investors understand what Bitcoin is. And it worked. and they've raised I don't know like what $60 billion or something like that. I don't know what the exact number

is but it's somewhere around that in the last five years. So you're about to have five companies, six, seven, probably more to be honest, do the same thing, right? And so you have Joe Luben for ESB, you have Tom Lee for Bitmine, uh, and and the list goes on. Them and their posi running around Wall Street every day teaching everyone about what ETH is, what Ethereum is, how to value it, etc., etc., etc. So on an education standpoint, this is massive for ETH and for for the Ethereum ecosystem. So I think that's huge for the ETH price. Of course, when you have demand of, you know, billions of ETH a month, that's obviously going to move the price up.

And then I think what's even cooler about this that I think a lot of the Ethereum ecosystem people are missing is they're not just buying that ETH and holding it like the ETFs are. They're buying it and they're staking it. They're reststaking it. Uh there was one that uh posted today that they are taking ETH. They're they're, you know, taking out loans. They're they're um raising capital on the Trady worlds. They're going to use that ETH to raise more capital using A and then they're going to stake using RocketPool running their own validators. This is exactly what you want. This is taking public money, right? Fiat money that is in the public markets that otherwise can't use DeFi and saying, "Hey, give it to me here and I'm going to go use Ethereum DeFi." And so, I think what's about to happen is not only is the ETH price

going to go up here as a result of these treasury companies, but I think Ethereum DeFi TVL is about to just absolutely skyrocket, right? We're about to see billions of ETH get staked and I don't know what else they're going to do. Each company is going to have their different risk levels. So, will they use a will they use Sky? Will they use, you know, EtherFi or like whatever other, you know, name your DeFi uh protocol, but they're all going to probably make deals with them. They're going to have different uh strategies and how they're going to generate yield and they're going to do all the things that we've been doing in Ethereum DeFi for years, but they're going to do it and present it to the public markets and then every quarter they have to do an earnings report, right? So if you look at Michael

Strategy's earnings report or Michael Strategy Micro Strategies earnings reports, he comes on every every quarter and talks about what Bitcoin is, how much they've acquired, how they've generated more Bitcoin per share, uh you know, these like new financial engineering things we've talked about like the the bonds, etc. But what are these ETH companies going to do? They're going to have these quarterly earnings, right? and they're going to go and talk about how they used a and how they're like looping through a and pendal and they're staking using rocketpool and lido and like they're reststaking with ien like it is going to teach everything about Ethereum DeFi to all Wall Street.

I can't think of a better scenario in my life than that. You know what I mean? Like to me that's absolutely crazy. John, I don't know. Do you see the same thing or do you see a bare case to that or do you see some sort of issue there? No, I think that that's exactly what's going to happen. I will say though that as the the entire ecosystem of Ethereum continues to evolve and expand, the strategy for how they deploy those assets is going to like evolve and expand as well. So right now the strategy for how they deploy their Ethereum into DeFi is going to be what it is. Each one of those companies is going to have to figure out where they're comfortable, what they aren't comfortable with, and kind of make those decisions. But I do think it's going to do a number of things, like you said,

bring in a lot of capital. it's going to bring in institutional capital that wants to be there and is going to stay there and like you know get long and stay long type of thing. Um but then as innovation happens as regulatory clarity comes and as new products new DeFi primitives new participants come into the market the opportunity for how you can leverage Ethereum deploy that as an asset get yield you know and and find your risk level tolerance is going to evolve as well. So I think there's going to be a lot of developments there and these institutions are going to be pushing that uh innovation and development. Uh another thing I would say is that this this is you know we we're talking about Ethereum's moment. I think the key thing for people to understand here is that these institutions do not frontr run

demand. In other words, they're not going to try to build all this out on a small cap alt L1. They're going to do it where there is demand. And where they are seeing demand is for Ethereum. And that's why this is such a big moment is that once we got a new administration was giving us regulatory clarity around how to behave with digital assets outside of just Bitcoin as a digital commodity. There is now a chasm that can be crossed by a lot of different digital assets. So there people who are doing treasury companies for TA for BNB for XRP for Salana for Suite for a lot of other ones as well. But the one that that Wall Street is interested in is Ethereum. And I think that's something that should not be lost in the noise here is that there's going to be a lot

of treasury companies. there's going to be demand for those, but the one that by far has the lion share and that will get a a lasting place in in the market accumulate a lot of long-term investors from the institutional uh side of of the capital markets is going to be Ethereum. Yeah. And to Jay, your second question was around like um is this a is this a bad thing? You know, how do how should the Ethereum community or crypto people think about this? And I think what people need to understand is like look, we just created one of the greatest assets in the world, right? In terms of both Bitcoin and in terms of ETH. And I, my opinion, ETH is a better asset in terms of like it has more functionality.

You can do things with it. We're talking about DeFi. Can't really do that with Bitcoin today. And so, of course, Wall Street is going to like that and going to want access to that, right? Like what did you think was going to happen if you create an innovative new financial asset and then create all these different services to utilize that financial asset? The people that love finance the most is Wall Street, right? It's the big banks. It's the big financial institutions. Of course, they were going to come and and use it and acquire it, right? Like why wouldn't they do that? Isn't that the whole point in building this thing? And so I think this is like this is, you know, everything we've ever wanted in terms of what we're building with ETH. We want this to be accepted.

We want people to use this. like we've seen it for years. They're finally going, "Holy this is really cool. Great job, guys. Let's use this stuff." So, I think that's amazing. Now, I I understand people's concern, I guess. But here's the thing to to understand, at least this is my opinion on crypto. The purpose of what we've built in crypto is to give people a choice, right? Previous to having crypto, you had no choice. You just had to put your money in a bank. There was nowhere else you could do it. if you wanted to buy a stock, you had to give it to, you know, whatever Charles Schwab or whatever bank, right? It was the only way to actually get it except for like when you used to be able to go and get the papers. Uh, you know, but either way, that was still owned by someone else,

right? And so, we didn't have a choice. We only had the option of having someone custody our assets previous to crypto. And now that we have crypto, the world wasn't going to go and just be only self-custody. That was never going to happen, right? Most people in the world don't want to custody their own Even crypto people today, most people listening this have probably lost crypto due to self-custody, losing their seed phrase, giving their seed phrase to someone like it. It's not the greatest UX in the entire world. And most people like my mom, she's never going to want to do that, right? Institutions, they actually just can't do that. They need people to custody it for them because of rules, regulations, etc. And so I think what this does though is it gives you a choice. You have a choice to either use Robin Hood to do your financial services

and they're going to integrate into crypto as they are or Coinbase. You have a choice to give your money to ESBET or any of these other ones, let them go and get the yield for you. Or if you decide that you want to custom your own assets and you want to play around in DeFi yourself and take those risks and learn that stuff yourself, then you can do that and you can do that at any time. You have the freedom to do that. So, at any point that one of these companies does something or says something you don't like, you can move your capital off and do it yourself. Previous to crypto, that was not possible. And so, I think people need to, it's not black or white. People need to come and meet in the middle and go, "Hey, look, not everyone wants self-custody." And a lot

of people just want the easy UX and the easy way to get yield and someone else to do it for them. And in fact, not just a lot of people, most people in the world, that's what they want. Most capital in the world, that's what they want. And so, you have it either way. You can either do it this way or you can, if you're scared of it, you don't trust these companies, you don't need to. You can just go hold ETH and put it in a yourself, right? You can just copy trade what these other uh companies are doing. But ultimately, these are allocators, right? these are these companies are are basically able to take capital from people who don't want to allocate themselves and go allocate it in Ethereum D5 for you and I think that's a crazy amazing unlock but again you have a choice that's the key part is

as long as you have a choice we've done our job in the crypto world right and everyone here does have that choice so that's the key thing in the key unlock in my opinion of of what crypto provides I yeah I would add to this that that is the virtue of having an open source public blockchain right is that you have to accept that there's going to be a lot of different participants and each one of those users is going to find their own version of what that protocol means to them and how they want to interact with it. The the thing I would also tell people to consider is the alternative, right, which is that all these institutions go off and build their own siloed permission chains and handcuff that capital uh behind closed doors and it never comes public. Uh that's not good for anybody either. That's not good

for not only Ethereum but for society at large, right? So I think this is like baby steps. It's it's the first um first movement of Wall Street into these public markets. And I do think it will be a net benefit for everybody, but you have to kind of accept that if you're going to have a public uh open- source u blockchain, every user who comes to that blockchain gets to decide for themselves how they want to interact with it, what relationship they want to have to it, and how they want to abstract away some of these more complicated technical details while they're still participating and bringing their capital into the marketplace. Yeah. In traditional finance, whales use the Bloomberg terminal. In crypto, they use Definitive, the trading terminal built by Coinbase alumni, which lets you trade across every major chain out there. Definitive's combination of low

fees and advanced order types like limit, stop-loss, and take profit, make it one of the best onchain trading experiences there is. The kicker, Milk Road listeners trade free on their first 25,000 in volume. Visit milkroad.com/definitive and start trading like a pro today. Selling your Bitcoin should be a last resort when you need cash. That's why there's Letin, the trusted platform for Bitcoin backed loans. You can unlock cash in as little as 18 hours with no monthly interest payments and no prepayment penalties. They've issued over 9 billion in loans and never lost a single Satoshi of client funds, even during the chaos of 2022. If you're a

long-term hodler, this is the move. Get liquidity without selling at milkroad.comlet spelled ln while at the same time dealing with x where people are going to whine and scream and cry about the way they want it because it's what I want. It's what I like right and it's inevitable. Okay, I want to talk about investing here. So, we've got I think it's clear to everybody listening to this that there is an opportunity right now. We have a new narrative. We have an explosion of it feels like yeah every day there's a new pub code doing this strategy. So how do I how do I how do I invest? Where's the opportunity and then let's also talk about the risks. What I'm seeing I would

love to split this into three categories. I am seeing three opportunities to invest in this. I see you could invest in these public companies, right? So you could go buy ESP on a public market. You could invest in ETH. That's an obvious one here. or you could invest in Ethereum def DeFi if you believe that there's big opportunities as this money flows into Ethereum DeFi. So let's take each of those one at a time. Kai, you can go first as to how you would think about the investing investment opportunity for these three categories. Yeah. So I think you're right on line uh with those three sort of categories. So so well done. Um, I would say the the most simple, the least complex, the least riskiest would be to just buy ETH.

Uh, and and to buy it and hold it yourself. Actually, there's probably a fourth category. There's also ETFs. So, first you can just buy ETH, right? Self custody it, stake it if you want, throw it in staked ETH, uh, ST or, you know, whatever. Choose your choose your your, um, your your staked ETH, uh, token. Yeah. Protocol. And, and you just hold that. Okay. That's the easiest one. you don't need to trust another company. Uh there's also some complexities I'm going to talk about a little bit about like premium and discounts to NAV uh in these these treasury companies. So that's kind of the easy one. Or if you already have money in your like investment accounts, your retirement accounts, whatever, you can just buy the ETFs, right? There's a small little fee. Uh so keep that in mind. Um and also you're trusting, you

know, either Black Rockck or Fidelity or whoever you decide to use Bitwise. They're the guys that come on our podcast the most. So maybe choose them. And so that's also the other easy one where you don't really have to think much. you can just do that, set it, forget it. Right? Then there's the other two, and we'll start with the we'll start with the treasury companies. So, the treasury companies are great because they will get you more ETH or more um more ETH than you originally bought. So, let's say you put $1,000 into, you know, one of these companies and as a result of $1,000, you get $1,000 worth of ETH from that company. Okay? Um, but what will happen is over time they'll get you a a what's called like ETH concentration is what some of them are calling it. And basically they're going to get you more

ETH over time. And so that $1,000 you originally put in might now get you, you know, in in in a month it might get you I don't know $1,020 worth of ETH, right? And then so as ETH price goes up um you now have a,020 worth of ETH than rather than a,000. So it goes up along with the price of ETH as well. And so there is a it is a better strategy or can be a better strategy to use these vehicles if you're not going to go and use Ethereum DeFi yourself and get your own yield. Now what's interesting about these companies, it's not just about staking or getting yield through DeFi. They also can access public markets and public infrastructure to take out loans and get cheaper financing than we can get as like a as a retail investor, right? So they can get like almost 0% loans

whereas if I was to go get a loan myself it's going to cost I don't know it's going to be like five four or 5% depending on what what rates are at right. So they can get much cheaper rates and they can go buy even more ETH as a result of that. They can also sell shares of their company or sell call options in their company uh and do you know these other kind of more complicated financial engineering like we talked about with strategy to find more ways to get capital to then go buy even more ETH to then stake even more ETH. So, in the long run, these corporate treasuries can actually get you more ETH than you originally bought and probably do a better job than you could do in Ethereum DeFi yourself for most people. Not everyone, obviously, if you're very experienced, maybe not. Um,

and and all you have to do is buy it and hold on to it. You don't have to do anything. Where it gets a bit difficult is these these corporate treasury companies, they move they're so basically, let's say they have $500 million worth of ETH. The market cap of these companies can either go above that or below that, right? And so if it's above, it's called a premium. If it goes below, it's called a discount. Above means that investors are very bullish. They think that they're going to end up acquiring more ETH over time, which most of these that's their whole point. So most of them will be in a premium. And if it's a discount, they might think, I don't know, there's some sort of risk.

Uh maybe they're going to sell some of it. I don't know that that I don't even know if strategy ever got into a discount in the bare market, but that's more like bare market stuff. Um or something bad about the company, right? Um I don't think strategy ever got there. Strategy, for example, sits at a 1.92 times um premium nav. At least that's what it was yesterday when I looked. Meaning uh it's basically like if they had a million dollars in Bitcoin uh and their market cap would be 1.92 million, right? Um so people are expecting them to get a lot more. When you buy one of these companies or invest in one of these companies, you want to look at that premium to nav because if it's too high, let's say it's like 2x, right?

Their market cap is 2x the amount of ETH they have. Maybe that's too high. We don't know because these things are so new. So I don't know what premium they're going to sit at. The only one we can really go by is bit sorry is strategy which again sits around this kind of like 1.9. So if it's way above that maybe that's not the best time to buy. If it's way below that maybe that's actually a really good time to buy. Again I don't know. This is not financial advice. I'm just sort of explaining on of what we know and understand of strategy. Again these ETH treasury companies have only been around for about a month. So we don't know what that premium should be. It might be higher because they can actually use DeFi and get more yield. uh it might be lower because Ethereum is not as maybe

it's a more risky asset than Bitcoin. It's not as big. Again, I don't know yet. The other thing to keep in mind though is these companies are all new. And so there's some weird uh dynamics in terms of their market caps and their shares that happen as they start. So what happens is companies come in or or investors come in they they basically buy a dying public company or a Bitcoin mining company in a lot of these ETH treasury company uh examples and they what they do is let's say the company has 2 million shares right they come in they invest I don't know $500 million and the company adds or issues like 50 million more shares but that takes a few weeks for like the processing of that for that to go through the SEC and to

actually add those new shares to the company. And so what ends up happening is when these new companies uh get announced, a bunch of people FOMO in buy, but it's it's basically like a lowflat high FDV token that I think a lot of people in crypto space would know about. It's basically that because you got to wait a few weeks for these new shares to get added. So you saw with Sharplink Gaming or Espet, you saw it with um who was it today? Bit um what is Tom Lee's company's names? Anyone remember the name of that one? Bit mine. Bit mine. Yes. So they're down like 50% today. And the only reason for that is because they're about to add another 50 million shares. So just be very careful about the new ones. You got to make sure that they've diluted and added the new

shares from the big investment before likely that's the best time before you start to like actually understand what the real market cap is uh and start to allocate because you don't really understand the premium to nav until that's been done. Now these companies are always issuing new shares. That's how they raise capital. But you don't need to be afraid of that. So like for example, the the Bit Mining one went from like 1.5 million shares to like 55 million, right? So that's a massive gap. So of course it's going to impact the price. What these other ones do is now every week they're issuing new shares to buy more ETH, but it's a small amount. It doesn't change it impact the price too much. So it's not a big deal because they're they're raising and buying and adding more ETH each time. So it's not a

concern once the big thing has been done, right? And so most of these newer companies haven't had that yet. So you got to be very careful on them. Sharp link is the longest standing. It's past that. So now you're okay. But always keep in mind they come up with new ways to sort of financial engineer this stuff and sometimes more shares might be added and so like you got to kind of understand what's going on. Main thing I say just just pay attention to that premium uh or discount to NAV and look at that before you decide to allocate to these. John, I don't know if you have a maybe a more simple way to explain it or a different way to explain it, but feel free to to to help our listeners. Yeah. Well, the first thing I would say is again this is not financial advice

and uh anything you say can ever use be will use against you in a court of law, etc. etc. Like all those disclaimers apply here, right? Like uh and then yeah, exactly. Like this we the people on this podcast may hold positions in the etc. Right. Um so that's an important thing to say. I think the next thing is just what you said there is like education is really key here. And the the the thing I would also underline about that is that it is not a static system. the opportunities, the offerings on the market of these products, the mechanics of how the issuance of new shares does or does not dilute your position depending on what you're holding. All of that is going to change.

Look, ultimately what this comes down to is this. If you want to get exposure to Ethereum, to the Ethereum DeFi ecosystem, you have a number of options on the market for how to do that. That is expanding. It is going to continue to expand. Eventually, JP Morgan will have some version of this that they'll offer you as well, right? So, pay attention as these things come onto the market. Ultimately, what you have to figure out is what level of risk and accountability you are comfortable taking on yourself versus what you're willing to pay some premium to offsource or outsource to another company. Right? So, if you want to stake your Ethereum with Lido versus Coinbase, Coinbase charges like I think two and a half times as high fees as Lido does. The reason for that is you get a little bit more um security and

you separate yourself, insulate yourself from some of the risks involved in participating in these markets. If you're comfortable with it, you can spin up your own Ethereum node and directly stake on the network, but if it goes down or you get slashed, there's no one to to complain to, right? So, it's all about um compensating either some other company for risk or, you know, keeping the rewards for yourself, but taking all those those risks under yourself. So, there is no right way to do this, but I would say education is the place to start, but then also pay attention because as this market evolves, matures, gets regulatory clarity, the options and opportunities to participate will change and evolve with it. and you're going to have to talk to a financial adviser honestly and figure out what your risk appetite is, what makes sense for you

and allocate accordingly. But pay attention is the place to start. Let me tell you a better option than a financial adviser. Just go Milk Road Pro, okay? Because in Milkroad Pro, this is what we talk about all day in there. We do live calls. We actually literally help everyone uh wrap their heads around what's going on on a daily basis. Today, we were all in there talking about uh Bitmine and working through the shares and what's going on there. We had ESP real early. Um, and so our audience in the Milk Road Pro world uh membership, they they've been early some of this and they really have understood this and wrapped their heads around this long before we've been talking here on this podcast. So on the treasury side, just go milkward pro will help you guys navigate it. But I do want to talk about

one more thing which was Jay, you also said the other opportunity invest is in the DeFi uh tokens. But before you talk about this, I just want to make one point here, which is that um I think it's very difficult for people to understand this concept of why would Ethereum or Bitcoin, why would one of these treasury companies trade at a premium like when you could just go buy Ethereum or buy Bitcoin? Why would people pay a premium? And I think the best example is oil companies. Oil companies exact same thing. Oil companies traded a premium to their oil reserves. So, this isn't exactly an unusual It's very unusual to us in crypto because we never really wrapped our heads around public markets doing

this, but it's not unusual at all within public markets. So, I just want everyone to understand that that that trading at a premium is actually quite common for public markets. So, they will get that they will get that right. Right. And by the way, the reason oil companies trade at a premium is because they expect that the oil miners or the refiners or whatever, they're going to find more oil. And so thus once they find more oil now the the market cap of that company should go up to be based on what the the oil is that they have. So it's the exact same thing happening here right is people are expecting these companies to go get more ETH and find very interesting ways to get more ETH and thus you know if people are bullish on that and they think that they're going to get more ETH then it'll trade

above on a premium and we'll see how high these premiums go. Like I think Strategy one time was like two or 3x uh the holdings it had. Um, now it was kind of the only show in town back then. So, I think that's why it had such um and there's also I don't think there was ETFs at the time. So, that's why it had such a premium. So, I don't know that the Ethereum ones will get that high, but who knows, right? As John said, things are going to change all the time here. And so, um, we'll we'll see what happens. Um, okay. So, easiest easiest way to do to invest in this narrative right now is to go buy ETH. If you're buy ETH, you should be staking it. If you're not staking it, go pro and we'll help you figure out how to stake it. Uh,

second is to go buy one of these public companies. As you guys have said, do your research, think about it. If you need help with that, you can go pro and we'll help you with that because it is, you really do need to pay attention to the details of each of these public companies. Third opportunity and what I think might be the biggest is Ethereum DeFi. Let's talk about that. So, so biggest because they're such small assets right now, I would say. Uh and this is Ethereum D5 would be like your A, your Sky, formerly known as Maker, uh your Lido, uh list goes on and on and on, right? So all these D5 protocols. Um the interesting thing is we've been talking about a DeFi renaissance for months on this show and talking about how these are the only kind of revenue

generating protocols in the space. And so regardless of ETH treasuries, we were saying these are great investments because not only they have revenue, they have profit and they're using that profit to buy back their own tokens. Uh and so that's obviously um a lot of demand for the token. And it's why things like a and sky have have done so well. What's interesting here is these. So one of my big sort of thesis right now on the markets and I was explaining this earlier in our we did a live session with our our pro members is um the the public markets is the big signal right now. Right? This is the big amount of capital that I said is really juicy and hungry. They want to buy they want crypto. They want access to it but they can't come on chain. And so what I'm

really focused on is what assets are available in public markets. Now none of this Ethereum DeFi is available in public markets. Okay? So they they don't get that benefit. However, what's interesting through these ETH treasury companies is although you might not be able to get exposure to a from these ETH treasury companies, these ETH treasury companies are going to lend out their ETH in things like Ave. What's that going to do? It's going to increase the revenues of A. And what does a do with the revenues? It buys back more of the token. So indirectly these ETH treasury companies are actually creating more demand for some Ethereum DeFi. Not all because not all of them actually have profit and can actually buy back their own tokens. So which companies will these um ETH treasury companies use? I

don't know yet. We don't know. There hasn't really been any announcements other than that one this morning. They I I don't think they've done it. They said they're planning to do this, which is again using A and Rocket Pool. And so I've heard some rumors of others, but I I won't bring those up right now. So, we'll have to see which which protocols these companies use. But again, keep your eye on that because that is signal, right? If they like, think about it. If these guys are buying billions a month and they're going to start allocating that to to these protocols, these protocols aren't that big, right? They don't have that big of TVLs. So, like a few hundred million or a few billion is a big difference to them. And that's really going to spike their revenues.

And so if they're using those to buy back their own token, it's like an a roundabout way to take public market capital and buy or get exposure to these assets with it, right? Uh and so I think you really want to be watching what are these ETH treasury companies doing. I imagine these companies will be very public about it and they're going to talk about it and maybe they're going to share what they're doing, their strategies. One thing I would say is I know people are afraid of these companies, but like look who's running these. It's like Joe Luben, the co-founder of Ethereum, right? What do you think he cares about? He cares about all the ethos of Ethereum. So, of course, he's going to talk about what they're doing. He's he's seeing this as a way to express Ethereum, right? And and get it out there. Tom Lee has been a

bull on on crypto for a long time. He's he's all about like the little guy, like this is what this guy does. So, he's going to be very upfront about it. I think all these companies are going to um write the playbook on this. I think they're going to talk about it and be open about it for the most part. They might not share wallets because I think there is some risk there, but I think they'll talk about what their strategies are because that's a selling point, right? they want to try to be better than the other treasury company and one way to do that is talk about the strategies that they're using in DeFi. So I think um I think we'll be able to get signal from that and I think if we see Ethereum TVL go up a lot you want to look into that and look at what are the

protocols that are being used what are the ones that are seeing growth but more specifically what are the ones that are actually using that growth to buy back their own tokens. Uh and so I mean we've been all over this in book pro for well over a year now. We've been screaming that this was going to be a thing. Now revenue generating tokens is the new meta. It's not a meta at all. It's just proper business and we've been talking about that for a year. But so I think um that is another avenue. I would say it's more risky, right? Uh it's harder because there's a lot of these protocols. A lot of them don't have the best tokconomics and so you have a lot of like constant selling pressure on some of these tokens. So you need to really understand these protocols, understand their revenues, understand

their buybacks, etc. Um but there's definitely a lot of opportunity there because again most of these things are very small, right? They're a billion less than a billion market cap and so they have a lot of room to grow if they if they really see some some growth in their TVL. Yeah. I would also add to this that sorry I I would just add to this that the the new chairman of the SEC has publicly said within the last couple of weeks that one of the primary focuses of his ad of his um agency now is bringing clarity and regulatory um frameworks for DeFi specifically. that he called out, right?

The sitting president has his own DeFi protocol. Uh the bulk, as Elizabeth Warren mentioned in the Senate today, the bulk of President Trump's personal net wealth of around 7 billion is in crypto and most of that is in Ethereum. So I think that there are a lot of changes coming to how we think about DeFi and what is allowed to be done in DeFi. So, as Kyle said, the protocols, the D5 protocols and primitives on Ethereum right now that end up being the net winners from this influx of capital will also likely have regulatory clarity to do a lot more interesting things with the revenue that they're generating from those um those influxes of capital. So, buybacks or direct revenue sharing, which has always been something people have wanted from

Uniswap for example, all that could happen. One final thing I'll say is that um people announced an integration with Mastercard that allows I think it's something like three billion um users of Mastercard to make direct purchases on chain. So uh the the John I muted you. I love you man but uh your your audio is crapping out. Let let me run on what he was just talking about there. So what's interesting about Ethereum DeFi as well is it's not just um ETH treasury companies. Um but we're starting to see adoption in some ways from other companies as well. So John was talking about you know regulations changing allowing others to come in and and use this stuff. So I think that's very bullish but even look at like Coinbase

for example. Coinbase has integrated Morpho. They've integrated unis swap. They've integrated a drrome right into their app where they have what is it like 9 million monthly active users. Robin Hood is about to do the same thing, right? They just launched or are soon to launch Robin Hood chain. I guarantee you they're going to have integrations into the existing DeFi protocols. Um, and it's not going to stop there. You're going to see a bunch of other fintech companies, maybe even banks. Eventually, they'll be slower, but you're starting to see um this play out. And then even the ETFs are going to start staking, right? I think we're going to get that in the next like month or two. Um, they probably won't be using DeFi in terms of like, you know, lending out and stuff like that, but they'll maybe they'll use Lido or Rocket Pool or

whoever to to stake. they're going to have to do something to stake, right? So, um, you're seeing this come from from many different avenues outside of just the ETH Treasury companies, but I think the big thing of these ETH treasury companies is it's going to educate all of Wall Street about DeFi. And I think, um, you're having this sort of like regulation coming at the same time you have these big companies, you know, educating Wall Street all at the exact same time. Um, and so it's it's setting up for, you know, what I'm calling Ethereum or sorry, DeFi summer 2.0, right? The last time we had such a big moment for ETH was when all these Ethereum D5 protocols launched. This was 2020, summer of 2020, and this is when ETH just absolutely rocketed. And the reason was to use these protocols, you had to buy ETH because you needed to

transact and so you needed ETH to to to pay gas, but you also basically at the time ETH was the only thing used for like trading pairs and unis swap. It was the only thing used for collateral and maker and for a etc. Um, and so we're about to have that same idea, right? ETFs, crypto treasury companies, etc. Um, they're all going to use ETH in DeFi. And so, it's a big moment for for ETH and and ultimately Ethereum DeFi. And I think um, you know, it's it's what we've been waiting for for a long time. Ethereum's moment. Exciting times. I feel it it feels like the energy is back for ETH in a way that has not been for a long time, which also, let's be honest, markets are really they're narrative driven and they're they're as much sentiment driven as they are fundamental

driven. especially in crypto, they're often more sentiment driven than they are fundamental driven. So, having the sentiment that we have right now feels feels like, hey, we're back in a big way. And and by the way, we're going to see these ETH treasury companies with a lot of assets like Salana already has, I think, five or six of them. Um, you're going to see it with Hyperlid soon. I know of that and and a few others. Uh, and so I think there's going to be a bunch of them. Not all of them are going to get demand. So, I don't think everyone should just like FOMO into all of them. Uh, as John said kind of earlier in the show, a lot of of the Tradfi world, they they know about Ethereum. They trust Ethereum because it's been around the longest. Uh, it has the least amount of risk. Risk really

matters in the institutional side. And so they feel more comfortable putting it there than they do anything else down the risk curve, but that's not to say nothing else will work out, right? Salana also has really good yield. They can get 8% there, right? So that's a big deal. Um, now if they look into where that yield come from, it's a little bit different. A lot of that is kind of incentivized or inflationary yield. So, do they care about that? I'm not sure. Salana has a lot of good DeFi, too. Um, it's not as battle tested as Ethereum DeFi, so maybe it's not as trusted. Can it handle billions? You know, I don't know about that yet. And then really after that, I don't know that there's much more that really has a really strong built out DeFi ecosystem within it. I think we'll see a bunch um and

we'll see a bunch across many different jurisdictions. Right now, a lot of it's in the US, but you're going to see it everywhere. Um, and so I think we're in the early stages of this uh which is good. I would say one thing to keep in mind. Actually, two things to keep in mind. Some of these companies are going to blow up. I promise you that. And so, be careful, right? It'll be these smaller companies, I think, but it's going to be the ones that are are trying to get additional yield. They're looping in DeFi. They're doing kind of crazy stuff just like many of us Dgens have gotten blown up before in in in DeFi. Um, these guys will do the same. Wall Street, as much as they're professionals, and this is what they do, they also get euphoric. are also humans and they get, you know, uh, over their

skis. Um, and they will do that. They do it every time there's any financial innovation. Uh, Wall Street blows up. That's just what finance people do. They get too excited. They lever up. So, this will happen. Now, my assumption, or at least my hope is this probably won't happen in the largest ones. Like, strategy probably doesn't blow up um because they're they don't need to be the riskiest uh anymore. The newer ones, the smaller ones, they have to be riskier to try to catch up to Micro Strategy. But Micro Strategy is all the liquidity, all the volume. So the big players, they can only buy Micro Strategy. You can't deploy a billion dollars in like, you know, some small little Bitcoin treasury company. You can only do that in the big ones, right? And so same with these ETH ones. The big ones won't need to have crazy like yield

strategies that are super high risk. The small ones will. And so later in this cycle, as this goes on and you start to see every day there's a new one launching and they're launching on all these different assets, that's where things will get a bit dicey and you need to be careful for that. And so again, as as John said, do your research, understand what you're buying here. I'm telling you right now, some of these will blow up. Now, the good news is the bigger ones might just buy them and be like, "Hey, you've got a couple thousand ETH. We'll take it off your hands at a discount." Right? And so like maybe there's a backs stop and hopefully it's not the big ones. I obviously don't know, but I think that yeah, I think they'll do this the right way, some of them, and some you just got to be

careful of. So, so if you're going down to the small ones, it's like if you're buying shitty little meme coins, know that they can go to zero. And that can happen in public markets, too. And it probably will. Uh my assumption is it's not just these treasury companies that some of them blow up at the end of the cycle. I think tokenized stocks, some of these companies are going to blow up because they're going to get too risky in the way that they do it and it's not going to work. I think RWAs are going to blow up. I think we're going to have multiple different things in this blending of of of crypto or DeFi and Trady um that are going to blow up and that's just natural. That's how financial markets always work. They go through these cycles and whenever there's new innovation, people get over

excited and overlevered uh and things blow up and that's okay. It happened in 2021 and we survived. We we licked our wounds and we moved on and we got better and we've created better products since. Um it'll happen again. I don't know if it'll be this year or next year or you know which where it'll happen. Um but just know that it's very likely going to happen. So, I just want to make sure we understand that those risks. Yeah, thanks for that, Kai. I'm gonna end today's episode uh with a reminder on a look back in time, which was uh that when Sailor and Micro Strategy started to buy Bitcoin, it was a $300 billion asset. Five years later, today it's a $2 trillion asset. Ironically, ETH today is a $300 billion asset. So, same starting point five years ago.

Where could ETH be five years from now? Now that all these public companies and institutions, these big pipelines have access to ETH, could we follow the same trajectory? Time will tell. That's why you got to tune in every day to the Milk Road Show. As always, thanks for joining us, y'all. Truly appreciate your time. I got to remind you, none of today's episode is financial advice. Should always do your own research and think before you make investments. If you need help with your investments, you should go pro and join the Milkro Pro community to make sure you're on top of everything happening on crypto and other things as well because we're we're we're just cooking over here at Milkro. New things every day. So, GoPro today. Thanks for tuning in y'all. Have a wicked awesome day. We'll see you back again tomorrow.

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