Second Order Impact of ETH ETFs | Roundup

Transcript

so I'm trying to decipher what's priced in and what's not I I look at it from a medium to long-term perspective and what I see is this pivot in in politics and Regulatory regime is is massive and should not be uh discounted it it what it does to me is it doesn't necessarily mean we have to go up in price tomorrow or next week or next month but what it does is it removes in my mind that that work wor case outcome of like actually gender's going to go scorched Earth banning all this stuff this episode is brought to you by SE say's V2 upgrade introduces the first high performance parallelized evm already live on public

devet mayet comes later in Q2 you can follow along with the say Journey on X say Network say is spelled s eii go follow say onx say Network scary stat for you the odds of falling victim to online crime times are one in four Aura provides digital security protection to keep your personal information passwords online activity and Technology safe from online threats for Empire listeners Aura is offering 14 days free plus up to 55% off an Ora subscription when you visit AA a.com blockworks terms and conditions apply see site for details you'll hear more about Aura later in the show this

episode is brought to you by Kinto the safety first layer 2 that that features user-owned kyc and Native account abstraction to solve the two biggest roadblocks to mainstream adoption One Security and two user experience their founder Ramone sent me the onboarding flow it's engine gen. Kinto doxyz I would highly recommend becoming a founding member of their launch program you'll hear more about Kinto later in the show this episode is brought to you by mantle mantle is an L2 backed by over a $4 billion treasur obviously one of the largest in the industry they recently launched their airdrop program called the reward station to distribute both pre-sale token allocations or listed tokens to MNT holders who stake

their MNT mantle has nailed their Rewards program recently would highly encourage folks to check out the mantle Rewards program at mantle. XYZ rewards station all right everyone welcome back to the Roundup Santi is missing this like uber bullish Roundup we've got here so we had to sub in the goat Quinn Thompson from leer Capital Quinn welcome to the show man thank you I know it's a probably disappointment not as good-looking guest so everyone's gonna have to listen to this one on on their apple podcast instead of I see I'm just excited because uh Mike usually has you on on on the margin and I have stolen I can't let Mike have the better roundups

than us so yeah he's got some competition within the blockworks community now so uh you know maybe if I like this one better I might have to protest yeah we're taking you how's life man how's the week been good good I just came back from a a trip to New York it was up up your neck of the woods for a week it was beautiful great time of year but good to get back in back in the saddle any like favorite meetings or people you saw um released a pod with uh pomp yesterday that was fun uh had had kind of a good mix of crypto meetings and uh met with a couple traditional macro guys as well which was which was fun to to you know I like to stay rooted in in

both worlds so it's helpful for my process but yeah super successful productive trip how's the how's the fun been since launching good good we went live last Wednesday officially on the 15th so exciting time launched on CPI day and then you know obviously uh I went on my crazy person rant last week on on on the margin getting bullish so things have been good uh let's you know knock on wood I'm I'm getting some uh traction on My Views here so you know now it's probably the time to start fading whatever I say the Twitter's been good the Twitter's been ripping yeah I like it honestly the if you just followed your calls the last like probably six to eight months you would

have been made a boatload of money so that's why I wanted to have you on is because uh I'm in a group chat with you and I'm gonna um not bury the lead here and you said if you gave me the a blank blank sheet of paper told me to write down the most possible bullish things to happen in the next few months I don't I don't know if I would have even drafted this list what am I missing I'm like basically said like I'm Uber bullish um and I've seen you be bearish and I've seen you be bullish um and this seems like the most outsized amount of bullishness I've seen from Quinn toson so let's let's get into it two big topics for today uh eth ETF obviously and then a lot going on on uh policy and politics uh obviously the big one this

week was fit 21 but then there was Sab 121 last week there were some more like quiet things like the uh chair of the FDIC resigned toxic workplace stuff um so let's let's start with the EF so this week um I mean the big tweet that kind of set everything off was uh n Nate from uh the ETF store said SEC decision deadline this week on spot e ETFs SEC must approve both the 19 b4s uh which is like the exchange rule for uh exchange rule changes and the s1s which is the registration statements for ETFs to launch technically possible for sec to approve 19 b4s whatever Etc that was May 19th so that was I think Sunday and then

Eric balunis comes out Eric's the senior ETF Analyst at Bloomberg him and James seford have become kind of like the ETF guys Eric comes out with a banger tweet 320 on on Monday says update James and I are increasing our odds of spot ether ETF approval to 75% up from 25% hearing chatter this afternoon that the SEC could be doing a 180 on this as it's increasingly a political issue so now everyone is scrambling like us everyone else assumed they'd be denied see Nate sweep below for probability order of events but again we're capping at 75% until we see more Market was like slightly slow to respond I'd say eth had like a nice like I don't know three to five to 7% bump and then it rallied I

think I don't know what it's at today actually I haven't checked the prices today um but I think it pumped around 20% so dude give me the give me the like macro meets crypto view of this like how are you looking at this uh pretty big news update in in from your seat yeah no the when it hit I mean it was just like scrambling to know if it's uh if it's they got hacked you know I was right I was messaging James and those gu like tell me you didn't get hack you send me a picture with a shoe shoe on your head uh so but you know it's obviously been confirmed through the the issuers and a lot of things since but kind of backing up a little bit to last week I felt that the the the positioning was just

completely one-sided I mean I had no clue and I I thought my base case was the EF was a 2025 event uh just post election when the regulatory regime changes um but last week and and coming into this week even Monday morning I I was just getting very constructive um relative to where asset crypto asset prices were trading relative to to the rest of the macro sentiment environment um so I thought you know people were overly uh defensive and and you know the thing I said last week was it's a huge uh week of events with Nvidia earnings which is big for traditional risk assets and stocks and the EF and and barring I said barring

catastrophic news it's like a pivot point to the upside for for these assets and Nvidia is up pretty big today I think um and obviously neither of these were catastrophic news the thing I'm you know thinking about going forward is we've had this huge reating like up 30% or whatever in eth and up in the in the broader um in the broader you know industry so I'm no longer sounding like that crazy person there's a lot of other people now so I'm trying to decipher what's priced in and what's not I I look at it from a medium to long-term perspective and what I see is this pivot in in politics and Regulatory regime is

is massive and should not be uh discounted you it it what it does to me is it doesn't necessarily mean we have to go up in price tomorrow or next week or next month you know there's a lot that needs to be sused out the ETF might not even launch for a month uh the these bills that are going through the House and Senate you know have a lot of work and likely revisions before they they get into final form so these are more longer term catalysts but what it does is it removes in my mind that that worst case outcome of like actually gendler's gonna go scorched dir banning all this stuff like two months ago I was bearish eth BTC for the reason that I didn't

think the market was estimating how the that it you know I thought there's a higher likelihood that he would actually go scorched Earth on eth to try and you know dig his heels in and and that's that outcome's been taken off the table so you you think okay if our downside potential was minus 50% for this asset or you know whatever your case may be I think that that bottom you know 25 to 50% worst case outcome of the probability distribution is off the table now so you know that that changes your your expected value to upside and I think the Market's reflecting that um whether or not it's immediately uh you know extremely

positive for price I think there's going to be other macro factors and and micro factors that that play into that but to me overwhelmingly positive like like you said you know you couldn't couldn't really think of much and it's democracy at at work really uh you know the people it's all stemmed from Trump you know putting his foot down as Pro crypto clearly that resonating with with voters and and in the polls and and the Democrats realizing they have to compete and then all of a sudden out of the woodwor you had 70 some Democrats you know in the House s siding with Republicans on these topics so it's really really positive to to go from this like political hot button rivalry where Republicans and Democrats just

took sides for ideological sake to making it a bipartisan win-win so that's what I'm looking more forward to yeah by the way guys we are um we are recording this Thursday morning which is a tough time to record this because uh today is actually the vanak deadline so today later this afternoon we will find out if these things are getting approved um so we are just going to assume this bad boys getting approved but it's very possible that this doesn't get approved again 75% chance from the Bloomberg guys uh not 100% chance so we'll see what happens Friday but don't beat us up if uh some of our takes are wrong um yeah this was interesting so if you talk to folks over uh if you talk to folks last week and even over the weekend the this

this was definitely not happening right until this kind of came out and then the ETF guys you know they they basically heard whisperings and said look something something's happening over there I don't really know what's happening and then it came out so the E the SEC basically said look to all the to all the applicants here are your here are the comments on your 19 b4s get us new updated amendments by tomorrow morning right 10: a.m. and that was you know I think so then they basically had to scramble overnight uh it sounds like talking to some of these teams they pulled some pretty some pretty fun uh overnighters fueled by uh Celsius um and now they've you know they got their applications in they got the com the amendments in and then today's the deadline so if they approve they're only the the only approval here is the

19 B4 right and then we're going to need the S1 so my understanding here correct me if I'm wrong is this could so they approved the 194 then there's the S1 which is the regist so the we even if the 194 happens you still need to do the s1's and so we might not even have we probably won't have e an eth ETF live in the market until what June July August maybe maybe like September post Labor Day something like that yeah it's it's definitely not tomorrow like the Bitcoin you know there was many months of preparation on that side so it shouldn't when they remove the staking that's a huge element that should speed things up uh I think that's consensus at this point so a lot of it can just be contrl F search replace BTC

with eth but then there's obviously the risk factors and things so I'm optimistic that it's like one month out but I am no expert in this nice so there I think there are two big stories in my mind here one story is this is it's not just an e an eth ETF like bullish eth story this is this is an SEC retreating story this is the combination of U fit21 which is kind of like it felt like kind of the house taking back control a little bit over over the SEC saying look we're we're in charge here and then this story it's the it's really a story of the SEC retreating but this is also a story of um a move like this that's so drastic is not an internal midlevel SEC person changing their mind I don't even

think this is coming from the top of the SEC I don't think this is Gary just getting right if it's not coming from the mid mid-level SEC person then you're like okay maybe it's coming from the the top of the well we know Gary He's not changing his mind on this so that means it's coming from even higher than that it's coming from a White House official and the story there I think becomes look I think they were kind of caught off sides realizing that okay I don't know how many Americans own crypto I think it's somewhere around 50 million Americans own crypto let's say 30 million of those are voting are like let's say 50 million uh Americans own own crypto let's say 40 million of them can vote let's say 10% of those or 5% of those live in a let's say 10% live in a

swing state um so that's uh maybe 40 maybe 40% or maybe it's higher than that maybe it's 20% live in a swing state so so now it's 8 million people live in a swing state and maybe 10% of those are one issue voters right now you're talking about like a million people who are they're trying to get a million people in swing states to vote on crypto or to vote for them uh and if they realize that crypto is the issue I think they were really caught off sides here um and between like you know the oped we had two weeks ago and a lot of celus stuff and the Trump Mar Lago uh event and these and the Trump coins and the sab1 121 and fit or Sab what whatever it was and fit and this

thing it's like it feels like there's this is no longer an SEC conversation there's something at the top happening where they realize they were caught off sides I don't know what you think about that but yeah I think you know I've I've heard some discussion in the industry is to like how can this be that meaning if we agree it's just a political um CH chess game how can we be that excited about about the the change that potentially might come you know I think um some people have said it's it's just we're just kind of the the poker chips on the table being being moved around to benefit the parties you know to some extent that's true but that's also how democracy works when uh enough people speak up and it's finally heard

the voices that it's an important topic uh I think I think that's just how how things evolve and how change evolves and it takes time I mean Financial systems money uh wealth these this has for a long long time been been a single issue for for many voters right like people vote on taxes all the time people vote on uh Financial freedoms and their ability to to choose between different service offering and accessibility so it's not that strange um but uh I do think I do think it's it is pretty timely obviously it's all coming from

like denzler as as recent as this week released that letter opposing you know these these latest uh things bills passing through the the Congress so it's clear it's not him even some of the supposedly the staffers were shocked at the 180 and the issuers are saying that it's out of any ETF they've worked with the SEC ever it's the most frantic scramble they've ever had so it's definitely the case that um Biden you know he can barely stand up and talk now so like they're they're going to be pulling out all the stops but look we'll take it these are wins for the industry and and um there's a the worst part about it is they've been um you know making out all the best actors in our space look like

the worst right so they have suits against coinbase uh Robin Hood Unis swap consensus I mean these are the most standup organizations in the industry meanwhile you know gendler was buddy buddy with you know some of the worst people so it's just like a kind of writing of the ship in my my book and and what needs to happen for us to evolve yeah did you see the Hayden tweet there's like a un swap cop there's a Unis swap copycat on like that was running ads on like Subways or their taxis and like had their Billboards plastered and he's like so you're telling me like they're coming after us they're not coming after this like clearly scam company so yeah and that's really what

everybody's asking for right I mean coinbase has been saying that for like a million earnings calls in a row it's like guys just give us a rule book to play by we're gonna play by the rules we're a$ 50 billion dollar company we're not going to jeopardize our our Enterprise we're going to play by the rules but like just give us there's no rules to play by so it's positive steps and and obviously the the read read between the lines around potential stable coin bills coming and and other areas we can get agreement and and DC it's it's going to be big Catalyst down the road this episode is brought to you by SE say's belief about the world I think is a good one they believe that the evm is here to stay agree with that they believe that the evm is going to

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first one it was with Athena they offered 2.5 billion Athena shards to Holders of their native token MNT so the reward station program distributes these pre-sale token allocations to MNT holders who stake The Tokens The second one they have going on is with myso myo that gives out over 990,000 miso tokens worth about $50,000 today that starts on April 25th runs through May 2nd if you want to check that out you got to stake your MNT and you can check out the reward station at mantle. XYZ SL reward station big thanks to mantle for sponsoring Empire take me into uh take me into the markets so like this news hits um right here I can pull up the chart so if you're looking at the eth chart here uh eth had been let's see

this so eth was like you know back in March was flirting around 4K just hit some like huge resistance around 4K flirted around the like 3250 range for a little bit fell below 3K in early may like e sentiment eth sentiment was real low um I think actually Mike had M Mike had a very good call May 18th on I think Friday or Saturday said look e eth feels like a a ripper of a buy here I I forget the exact words but like sentiment is just too low I think sentiment has been low probably since January like eth sentiment has been like tough all year um Mike had a really good call on this one but yeah if you look at the chart I mean eth pumped from 2900 up to I mean

what are we at what are we at today 30 3,800 right so we had a massive move up um there's some interesting stuff on like I think V doubled uh the coinbase premium Joe mccan was talking about this right the price on coinbase versus like the Heather price on binance kind of a signal of institutional Capital if you're a good institution you're probably trading on coinbase um yeah like biggest coinbase premium he's ever seen so take me into like what you saw just like in the markets this week yeah it was funny Mike and I had dinner on Sunday night and uh we're talking about what if this happens and what the Market's position for it it again it was just to that point of uh of everything being off sides it was the last I I rotated out of my last Bitcoin

um late last week into into mainly Ethan soul and um it was the LA you know first time I had it own Bitcoin in a long time so I think yeah as mentioned earlier it's it's less clear in in the immediate term you know how bullet you know at the end of the day this is a very positive Catalyst for eth but we still need eth eth won't just go straight line up with the rest of the market not going up so we need that broader Environ to be supportive and I I think the the things pieces of the puzzle are there let's see if it continues probably the thing I have the greatest conviction on is uh that this I don't really see this being

that positive for Bitcoin in the near term um you know there's some nuances to if the EF gets approved today but starts trading next week versus in a month or two you know what the market does in between there and there'll be some volatility of course and and moves to shake people out in both directions I'm sure um but eth really like you said since I mean it's been 8 to 12 months of just straight down only for for ethereum relative to bitcoin and there's a number of reasons right salana really kicked things off there as as competition it it captured all the attention and and activity given the low fees for smart contract uh layer ones so

all the meme coins a lot of the nfts and um you know it really just was in my book that that Salon move a lot of it was a reating to fair value for salana relative to to where it should be less so a knock on ethereum as an asset you know ethereum's still been uh you know building here with a lot of l2s and other Innovations so I think that combined with then the Bitcoin ETF was like this double whammy blow for eth that just kind of threw it to the Wayside you know people were like all right if I want to be in a safe asset I'm going to be in Bitcoin and we have the benefit of the institutional inflows coming you know there's $60 billion

dolls sitting in Bitcoin ETFs today and then uh if I want something further out the risk curve I'm going to go into salana that's where the memes that's where the nfts that's where everything's happening so it suffered from this like middle child syndrome I think that's you know it's a different story to right so for the last six eight months the Market's been trained to to fade these eth BTC rallies and here we are though with a a much different fact pattern right now uh you know we're in this broader bull market environment where uh smart contract you know layer ones usually do better than Bitcoin just given there's increasing onchain activity and fees uh and better

Revenue profile and that wasn't the case but but now you have Bitcoin in on equal footing with ETF accessibility and I think that's that's the core component here so over the next month whether that's you know my highest conviction is probably eth BTC up and that could be at different times from BTC being down more than eth right so you know let's there's going to be some funky stuff that happens today around the actual approval and extreme volatility but I think over the next two months eth BTC settles higher than than where it is today so eth BTC hit a so eth BTC topped out when top of the top of the market November 21

has been riding it down since bottomed it like what 045 yeah exactly up to which was like the peak kind of pre the pre you know in 21 yeah so we're sitting at 55 today what do you think like if you look out maybe towards the end of the summer or end of this year what do you think EB finishes up yeah it's uh it's hard to say you know it's going to it's going to depend on the the flows to the ETF in in some ways it's almost better if the ETF uh gets released in a in a month or two because it gives these issuers and teams time to start marketing the product in the same way they had three to four months to market the Bitcoin ETF

to institutions retail High out worst advisors Ras so you know if it Go the sooner the E ETF goes the probably the more it's to sell the news because there might be a little bit of airpocket here between like oh the issu is just found out they're launching and they have not done any work on it and when it goes live um and be before the flows actually start coming but the one thing I'm thinking hard about is when what what the Bitcoin ETF launch did not have is $60 billion of capital sitting in you know the let's call it adjacent sister ETF for for the asset

which I'm referring to the $60 billion sitting in Bitcoin ETFs right so um eth is a you know about a third the size of Bitcoin obviously less volume you know needs requires less inflows to to move the price the same amount just given the relative size and if if I'm trying to get conviction around what percentage I believe that in the Bitcoin ETFs would perhaps rotate into the E ETFs and I don't think it's I don't think it's 50% or 30% but I don't think it's zero and there's a number between there that could be actually very impactful and potentially even offset the bulk of what we might see from eth outflows you know in the grayscale side so that's where I

kind of come up with I have a hard time seeing like eth really meaningfully out underperforming Bitcoin from here um and you know I guess the the true answer there lies in and how important that is H that's interesting what do you what are some other like outside of eth BTC what are some other like second order impacts from this like I'd be curious to get I mean you can take this anywhere anywhere anywhere that you want to go like uh I'm curious what you think will happen to staking post the E ETF um like impact on something like a Lio curious how you think about maybe coins that the SEC was targeting like something like uni does that get a move um maybe something like there's a there's a way to play this

about uh what's the next ETF that's coming I was watching CNBC and they were talking about the salana ETF I think there are other ones that people could be shocked by there are things like xrp do like a doge ETF would not surprise me um which might seem ridiculous but uh I mean Litecoin ETF which seems the most ridiculous but like I wouldn't put it past people so I don't know just take me through like how you think about second order impacts of all this yeah the big devil in the detail is uh when the SEC approves assuming they do what how they delineate between because they will have to say acknowledge that ethereum or unstaked ethereum is a commodity not a

security if if this goes live so uh as we know that's been regulated by the cftc and out of the sec's perview so it'll be very interesting for the rest of the industry to see how they Del lineate between calling unstaked ethereum a secur or a commodity and if they maintain their stance and and that staked eth or the act of staking eth is a security my guess is that they um you know point to the yield and things like the the active participation of of the investor having to to take action to stake the E you know in these components but that's really you know that that has

the most knock on for the consensus the Unis swap the coinbase the Robin Hood cases um and there's there's a tight RPP to walk there because there's a little bit of in congruence there I mean it's a new asset like there's never been anything like it so it makes sense that it wouldn't be the most clear-cut thing to to opine on um but the industry just is looking for clarification the following ETFs it's it's I mean it's I feel like I've seen more about salon upcoming Salon ETFs than I have about the eth ETF at this point and it's like that just is um uh shows you where sentiment is right that shows you like how overlooked eth has been as an asset and and um where positioning is it it's

you know probably a lot of people talking their book um there's no way a salana ETF is gonna happen without salana Futures right so that's what that's the basis of all this so actually in my in my opinion uh like those some of the Legacy alts that you mentioned probably have a better chance particularly ones that are proof of work still like a Litecoin or Bitcoin cash or Doge you know no one really cares about them but they've had grayscale trusts exist for some of the longest right next to bitcoin and eth and coinbase has filed uh coinbase has filed for uh you know Futures Trading with the cftc for some of these assets I think Doge

Litecoin bch some some of that so I don't see a reason they couldn't be you know like I think they just need the Futures up and running and then I think I think I don't see a reason those don't become ETFs like Grays scales have had those trust vehicles for a long time and uh some of them are actually quite large that that uh the ETC trust I think is 10% of of ethereum Classic's market cap I mean that's massive really wow yeah so so who's out here buying e like the who's buying that that was when Barry was Shilling you know back no I know that I mean that's Barry coin but like Barry who's who's buying that well no one but that's why

because the discount on those trusts are like I don't know what they're at these days but they're they're ridiculous so there's there's probably some interesting things to do there um yeah I'm sure some funds in the space are are looking at it um what you got you got the pudgy poster behind you like what um I think in Mike's tweet or maybe was in another one it's like look the the move here is to start thinking about the second order impact of some of this stuff and he where his mind went immediately was NFS so I'd be curious how you think about what this will do for whether it's the mem coins the nfts like longer out on the rist Spectrum yeah I mean I had this big nft thesis in in at the start of the bull in

like October and I piled in um Pudgies being my favorite I memes Capt should I mean memes have like overtaken is the the speculate speculative vehicle of choice this cycle so I I it's not really something I want to fade just given it's a more liquid version of an nft to speculate on and you can kind of have the same mtic characteristics as as nfts I love Pudgies because there's an actual business being built and I actually think it's it's a more interesting uh play than most protocols in the space so um but finally it's like I'm not I'm finally like excited to be an eth holder again I I wasn't for like eight months

so that makes me happy because anything denominated in eth should should do decently well um we've seen obviously memes on on eth run harder than memes on salana lately um yeah I think though broadly speaking you know people aren't dumb like so like the Market's not going to just blindly ape Soul because there's a so like there's probably not not a soul ETF coming so I think we need this banana Zone environment to to tea off before we really get the full prolonged bump and and the longer tail stuff eth you know Uni's got caught a bid uh Lio and E def's caught a bid so let's see how those stick I'm I'm a little

skeptical right because like it's pretty different the the read through here um Stacks you know was a big Bitcoin beta play into the Bitcoin ETF um there's basically one Bitcoin beta play in that Stacks like there's not really anything else for ether's a trillion fragmented eth beta plays so there there will definitely be some winners in there I I I just don't think it's as like close your eyes throw a dart at board and you're going to win uh scenario as it might have been what about coinbase coinbase coinbase Andor Robin Hood yeah over a medium term those those businesses again I I think

of it similarly where it takes this this Improvement in regulatory stand you know positioning takes the bottom 10 or 20% worst case outcomes off the table most likely um Robin Hood crypto is just still fairly small percentage of their business I think it got up to like 30 or 40% of Revenue and in the previous bull it's probably like 10 to 20 now or something so they they have a bunch of other things that you have to take into account when looking at it um they would stand to benefit if we see a prolonged uh movement in the meme stocks right we we've seen a little blip in that I kind of think it comes back again this year but not something I'm like it's kind of just a hunch it's not it's not

necessarily high high conviction coinbase like we talked about all the things that came through right in this in this new political stance is like a potential stable coin Bill the potential for banks to custy digital assets so coinbase could acquire a bank and um that would you know lower their cost of capital and and uh operate you know on an even playing field with the Wall Street institutions um and then obviously the E side and and staking uh their coinbase is leading the way with these other futures for different alternative assets so you know they just launched that that golden golden oil feutures which I'm not sure how many crypto Traders are

trading golden oil uh I look at them for my macro processes I I don't really trade them that much so I it's just cool to see though right like I think that's like the whole long-term thesis of tokenization of every asset is like they're they're stepping into that Arena and showing what can be done and how efficient these things can be traded and the data and transparency involved so I just love what they're doing over there um you know and circle IPO would be huge I think base case probably for a lot of people was that the circle IPO couldn't happen until there's a regime change in Washington but maybe that's pushed up too and and coinbase would be the biggest Public Market beneficiary of that given their ownership stake and circle and and how much they benefit

from the growth in usdc so there's a lot of good a lot of good things to like there um that the thing to maybe be more cognizant of for for coinbase and hood is just uh they do trade more with crypto you know they trade more with traditional macro and equities than tokens do you know there's that relation uh given the equity beta within um so there's other factors you have to look at besides just their their correlations to to bitcoin yeah yeah I mean I'm I'm biased because I I hold coin but um I mean I just think like the coinbase play is such a ridiculous no-brainer at this point like retail retails just starting to come back into the markets um coin

makes a coin if you look at like uh coin's earnings earning reports um the profit margin they make on retail is pretty ridiculous uh the I mean the eth ETF obviously like stable coin Bill coming coin and circle are like pretty joined at the hip uh SEC changing changing their like I don't know just I don't know change I don't know if the SEC is changing their belief on crypto but like someone is pushing the SEC to change their belief on crypto biggest risk for coinbase has usually been like SEC l ation uh fdsc chair just stepped down which we can talk about he was behind choke point 2.0 so like that's pretty big uh I think they're

pushing into I've seen Brian tweeting about banking a good amount that's very interesting um and then actually there was a I think this went under the radar a little bit but um coinbase derivatives expanded um uh I think it was last week or the week before coinbase derivatives expanded to include oil and gold futures um so they're launching retail sized oil and gold Futures on June 3rd um so this is just like if you think about the rwa narrative like Commodities are the rwas that you've been waiting for um so like you know on coinbase you're gonna be able to trade oil gold crypto I you got to assume one day equities um so I mean

talking my bag here because I own coinbase but like so just want to be like overly uh descriptive about that but like man it it feels like a ripper right now yeah it's funny to me the um you know everybody the Bitcoin ETF was a sell the news event clearly the hype was just for the for the short term was overdone but the flows were surprised everyone I mean even the everybody that the Bloomer guys are generally the closest here to things and and even blew them away so I I see once again um and the other you know there's that component where where everyone now still everybody I talked to in New York in the last week they're like oh that's great news that we're

getting an ETF but it's going to be a flop everyone no one really expects the the flows to be that good citing either um you know less understanding of of eth as an asset relative Bitcoin or it's more complex or just less demand broadly which there's some fairness to given e Futures ETFs haven't done that well um but the other component which so I just wouldn't fade Black Rock right like they're going to find a way to get some money in this thing they did they did with Bitcoin um they're going to do it again so I wouldn't fade that like like people are doing um the other thing that I find interesting is I read in a lot of the equity research that that the street puts out on coinbase that you know everyone's very concerned about two

things with that business which is the compression of their margin on the retail side so institutional trading is the the vast majority of their volume obviously just size but they they can charge way less because there's much more competition on on the institutional side and and retails their higher margin but less volume and and where they generate most their profit from so um people look for that to compress over time which it will but you know coinbase has done a tremendous job they've actually gain market share over the last year uh as they've been able to kind of just create better products and than what else out there expand internationally and the other side of it is people you know kind of look looking at coinbase as as a detriment you know

the the ETFs as a detriment to their business because volume's going through um going through the ETFs instead which also to to some extent is legit um but they also benefit right with the custody they they provide they're the largest custodian to the Bitcoin ETFs likely to be the same for for eth if there's ever eth staking it would likely have to go through coinbase so I think there's a lot to like and just broadly like more eyeballs on the space is is good we're we're still very much in a positive some game where a win for ETFs or anything in the industry is a win for everybody so we're not mature enough yet as a space where like it's it's that kind of sharp elbowed so I I think definitely the Tailwinds are there and you can make a

pretty big bull case over the next 12 months yeah should we talk policy sure we're both experts on it so yeah yeah we are the two best people to talk about this so I'll I'll give my best explanation of what's happened basically tldr one line Democrats have pulled a big 180 since Trump endorsed crypto a few weeks ago uh Trump endorsed crypto a few weeks ago marago event uh since then it feels like Demps have pulled a complete 180 uh why they're doing that I don't know got to assume they're they're realizing that uh the anti-crypto platform is is not the right platform so last week was Sab 121 the big story here was uh 12 Democrats kind of voted against the Democratic party uh join the

Republicans um to to to veto Sab 121 Sab 121 is a reminder we talked about it last week on the Roundup with case uh but if you're a bank right now if you're a bank and you hold assets the way that you make money on those assets is you just charge fees you don't actually have to put those assets on your balance sheet Sab 121 said you actually have to put that crypto on your balance sheet as a liability so because it's a liability you then need the assets to actually match those liabilities so what that's going to do is it's going to drastically increase your capital requirements to offset the liability uh and if you think about how much what that actually means like let's say you have 10 billion of crypto that you're holding for someone or even a billion of crypto that you're

holding for someone that's a billion in liabilities you you now need the capital to on the asset side to match the liabilities it just becomes too expensive so you're basically outlawing what ZB 121 would have done would like just completely Outlaw any bank from ever being able to custody crypto uh so it wasn't actually saying it's illegal to outl to to hold crypto on your balance sheet it just made it so ridiculously expensive that no one ever would have ventured into it um the there are a couple of banks lined up to custody crypto like bny melon for example they've been ready for like a year or two they're not doing it because of things like Sab 121 so the Vita was pretty big I think uh it's now on the I think it's on Biden's desk does

he or is it where where is it Quinn do you know is it on Biden's desk yeah they still might be to it uh yeah so we'll see I don't know when that's supposed to come all right we got so that was Sab 21 we got fit21 pass the house big passing of the house uh now it's on to the Senate uh passed the house by I think I mean much wider margin than I think anyone thought would would pass I think it was 71 Democrats voted with the Republicans huge margin of Victory um the initial response was like boom beautiful good I even tweeted this out I was like what a win blah blah blah BL uh I think if it like the the good sentiment right out of the gate was like look if this passes uh it means crypto

companies can come home fit provides Clarity on what is a commodity versus security and how dexes are classified all we've ever wanted is just some some clarity on regulations this is I saw some people tweeting this is the biggest step forward to crypto uh crypto legislation ever uh in the US this is a dagger to the to the SEC uh another one we you know we now have bipartisan support for regulatory Clarity on crypto right long crypto long the US long Innovation etc etc that was kind of the sentiment yesterday woke up this morning sentiment seems like you know we had Gabriel gra Gabriel Shapiro Lux Noe on Twitter tweeting out you know fit21 illustrates just how easy it would be to scop everyone into supporting something

that we don't actually like because it's quote symbolically good for crypto how do you know it won't pass the Senate and what he's saying here is I think the under I think it was a maybe David Hoffman was tweeting like look yes fit21 is not something to be excited about in terms of actual policy but that's fine because it's not actually going to get passed in the Senate so the House vote today is really just to vote of confidence in crypto and Gabriel I think is duly pointing out look like why are we betting on the Senate to like make this thing a better bill um when you know like and you know let's say this thing do let's say the same bill is prop let's say it doesn't get past same bill is proposed again next year like how are we going to backtrack and start to

criticize this thing um and I think as Stephen paly said look I finally forced myself to skim the fit21 bill um and I do not like it at all it needlessly creates more jurisdiction for the for cftc over spot and a wal Garden for incumbents among other things but you [ __ ] keep asking for new laws so I don't know if you've uh again we are not probably the best people to talk policy but I don't know if you have thoughts on this one yeah I talked to a couple lawyers in my network I think the it did sound like uh similar feedback people are split um it's it's it's one of those things like it again it's the first time it's a new asset class it's a new industry

there's new everything's new about it and uh it it it's there's not a clear-cut path to to what the regulation should be and it's it's these Frameworks are actually very complex like if you if you try and draw up what what should occur here it's it's not straight for forward so um I think that the hoopla in the industry is is like finally we we're being talked about on the main stage and we're being heard our voices are being heard and and people are paying attention to us so that that all feels good right like everyone's like really excited but I I would bet uh less than 1% of people actually read these bills and what's inside of them yeah and even smaller number of those who read them

probably actually understand all the Nuance of everything in there so yeah I I I believe the lawyers that there's a lot of things that need to be worked out so it's probably good that it doesn't pass right away and it it gets input from from all the industry leaders but resounding positive step in the right direction just to get get this stuff on people's Radars yeah in Washington uh but you know first there's always going to be a lot that changes between the first and and last iterations yeah and if you I mean I guess the last counter to this would be like if you think about the cftc everyone's like yeah we want the cftc not the SEC but if you remember the the cftc were the were the folks who you know behind the UK da attack that

was pretty that was a pretty gnarly attack um you know like it's basically just taking out people who are posting in the governance forums like that's a pretty ridiculous thing so I so my I think the most interesting part of the bill um there's this five prong decentralization test to determine whether or not an asset is a digital commodity um I I honestly need to read through it and like actually understand it better but like I would recom well I'll put a link in the show notes to to this tweet thread that somebody did uh I think it was Dr Jasper um but the I would read through the thread especially if you work at a protocol um I would expect all protocols to pay very very very very

close attention to this test um it's like his name is Jasper the Friendly Ghost on Twitter he did this like whole overview of it uh you got to assume like every L2 every defi app like everyone is paying attention to this new like five prong decentralization test one of the things in there was like I mean I I skim through it it's like yeah like based on this new test like a majority of the l2s a lot of the Native tokens with admin rights just these like multi- sigs um they will they would be deemed a Security based on this new test so I got to assume people are paying pretty close attention to this yeah yeah the it all all this too the funny thing is it hinges you know there's big change coming in November so

um depending on the outcomes of that and obviously all the jocking and positioning that that's going to happen before that like by the time these things actually get passed in the law the political regime could be different we could have two new heads of the CFC cftc and SEC and right maybe their roles will be reversed and who likes crypto and who doesn't in those right so uh hopefully for everybody we have we have Hester uh taking some prominence and and and give her all the power but you know careful what you wish for I guess that is yeah you never know I mean there was a time when we were we were wishing for Gary Gary G yeah yeah exactly and then he and there was a time when everyone

hated Jay Clayton and then Gary came in we like man I wish wish Jay Clayton back so um give me your take on just the election like you you follow a lot of these like the polls pretty closely and you follow you're just like a good macro thinker so like zooming out from crypto for a sec just like I give me your honest take on the election and your read on what's going on here yeah I um I I I actually don't like politics too much I only I only um you know really form views where it affects markets and and it's really election years is about it that does um and actually I a believer that Trump or Biden doesn't really matter they're actually very similar I think over a 8 to 10 year period

perod I think the result would be the same no matter who you elected um specifically for crypto you're talking here uh yeah for everything really I'm I'm not a big believer that either I think the system kind of is is um the path has kind of you know been set and and it's just the path you know the destination set and and the path that is the volatile thing that might change based on who gets in there in the short term but my view is um I think Trump wins I think I do believe with what vivi's uh speculation is that they moved the debates up to the earliest there's ever been a presidential debate to uh is that thunder in New York thunder in New York it is dumping right now nice crazy

New York actually I think I think Vivic speculation is right that they're moving the debate as early as they've ever done in presidential history so that if Biden flops it kind of gives the Dems a reason to to slot in gap or Michelle Obama or something CU like I think it's becoming very evident it's almost roles are reversed right in previous elections for Trump it's like Trump you're gonna win just don't be an idiot and say something that you're gonna lose uh it's almost reversed where it's like like just let Biden talk because he's he's you know people are it's gonna you know just don't don't open your mouth so um I think there's a lot of combination of factors if you go back and look at populist years uh in the 70s when

there's High inflation and these types of environments it's actually really bad for incumbents um like significantly statistically significantly bad um relative particularly to to normal environments where incumbents win upper 90s per of the time there's a lot of eight-year terms uh in these inflationary populace periods there's a lot of fouryear terms and and lack of re-election for incumbent so that's just like there's a lot of like T like structural things going on um and reasons for that and then you look at the inflation problems still here the southern border I think you know that's going to help Trump win Arizona and Nevada which are two huge swing States and he really only needs one Pennsylvania Michigan um or Georgia after that and so when you boil it down

to how the Electoral College works there's a pretty strong case to be made um and something you know there's going to be a lot of stops pulled out to to compete but it it's looking to me like he's going to win and and you know the markets are a little bit trading off that the polling swings so that's good for crypto it's good for business it's good for uh you know regulatory red tape getting cut I I truly don't think it changes the direction of the markets that much like uh I I see like a liquidity problem on the horizon after like 2025 um like things like that what do you mean what do you mean by that one the last two years the the US economy has significantly

outpace the rest of the world um Europe UK Japan China everything's been much slower than us and everyone's sitting here like why is this happen why has this been able to occur and the fiscal spending by the US is the answer we're running large large deficits that we'd only spend like during Wars and recessions um so it's pretty clear to me that that's the reason for this economic strength and and separation but then the the second order question is well why can we just print a ton of our uh sovereign debt and our currency stay strong and if anybody else in the world did this their currency would fall apart I.E Japan um I.E emerging markets and the answer to that in my opinion is the

the some of the liquidity facilities that the federal reserve put in place during covid and postco which primarily the reverse repo they actually stimulated so much in 2020 and 2021 that they built up a 2.4 trillion doll Reserve stockpile of excess at the FED that they started drawing down in October 2022 and if you look when risk assets bottomed it was October 2022 and that's coming to an end later this year where eventually then they will have to issue all new debt directly into the market won't have this liquidity buffer um so there's things like that in the background that I think play play effect here and whose

president doesn't really change these things um but you know you can look to I think I'm also looking to 2016 right as like the re Market reaction to Trump's win like you you're getting that you know rates went up because there's higher growth expectations Banks performed well oil and energy performed well but then the the kicker is to look at what's sustained throughout his presidency and and where were those just one two-month blips on excitement about his election or were those um faded and ultimately didn't come to fruition so really really interesting time for the markets and there's a lot of game theory and positioning things that go in here and um you know it's I'm just excited that the industry is no longer the

laughing stock and and um nice to get a little bit of uh you know Clarity on on the regulatory front definitely anything else man I don't think so man I've been hearing my own voice way too much so uh wait disclaimer to the listeners I got a couple things right here in a row so probably should start fading whatever I'm saying what are you guys talking about on on on on the margin tomorrow probably uh probably more macro you know you guys I was I was looking forward to Santi being on here so we could uh you know we come at things very very different from the investment side he's way way deeper and smarter on a lot of the stuff and um we'll have to do this

again I know I don't know he's on a he's on some some vacation somewhere these VC's man these VCS can't trust the VCS I want their hours what are you what are you investing in out of the fund are you doing just like all liquid stuff like what's the allocation to like crypto tokens versus like things like coin or Robin Hood yeah I do both so it varies time to time I could be all cash I could be all invested I could be all tokens I could be all crypto equities it it's like just where I see the opportunity right now I think um I am biased towards I think tokens at this point um let's see on the equity front I think there's other risk factors there

um but I do have some allocation on that side and and um I've been yeah kind of Lucky on on some of those calls last week to to move out the risk curve into to things other than Bitcoin and I'm I'm yeah I think things are a little more fully priced now for like the immediate term so kind of watching this this political and stuff and and other factors around the macro to see where where we go in the near term but yeah I'm hoping for bananas on summer as much as anyone man it's uh there you go I hope I hope R's right I I I want to see his revenge tour I had a call with r last week and uh I was like dude no you are a master of uh these little

onliners uh that like just get everyone rallied around a thing he's like dude that's the that's the name of the game baby yeah it's fantastic it's fantastic so good so good I M a buddy I was like like gu one of you know the mem coin expert in my network I was like you got to like last week or week and a half AG go I like you got to make a banana own meme this thing is gonna go viral and sure enough someone did beat us to it though I I uh I'm not a meme coin guy so I I didn't get uh on the opportunity D you got your little whiff thing in the back yeah I support I support the crypto Vibes you know I think it's fun and it it helps you gota you take things serious but you got to have some fun too

so lean in a little bit true Quinn pleasure man appreciate you coming on yeah thanks for having me Jason all right you heard about say a couple times just want to give them one last shout out big thanks to say for sponsoring this episode of Empire there are a ton of reasons to build on say if you want to get in touch with them you can reach out to me I'll put you in touch directly with the team you can also get in touch with them on Twitter at say Network you can follow the journey at say Network they are currently live they've got SE V2 on public devet today mainnet goes live later in Q2 really excited to have SE sponsoring and partnering with us on this episode of Empire [Music]