SotN#24: TRIUMPHANT! w/ @nic__carter (2017 vs 2020 Bull Markets, What's Different this Time?)

Transcript

if you are looking for the front page of defy look no further than xerion.io xerion is your home base for managing your d5 portfolios xerion offers a central place for you to engage with all of the d5 protocols and assets that you engage with on a daily basis but all in one central spot here you can see i've loaded up a wallet and xerion is giving me the portfolio performance of all the assets in this wallet over time as well as a breakdown of all the assets that i own as well as all of my transaction history that i've ever done in an easy to view fashion xerion also lets you invest right into d5's best yielding financial opportunities right from their home page xerion also makes

it super easy to access interest in defy using applications like compound and ave in the background and you can also exchange your assets using the xerion app using an exchange aggregator in the background to make sure that you always get the best rates you can even use the xerion mobile wallet to add your metamask or arjun or another ethereum address right into your mobile wallet so you can see your portfolio and engage in defy on the go here i just loaded up my argent wallet and now i'm going to load up my meta mask as well and xeron will do the same thing it will add all of my assets and wallets together all in one space and give me a portfolio summary of what's going on adding wallets is trivially easy if you already have a meta mask you can get it

right into the xerion app and it can sync with your desktop app as well and the best part is you can also buy ether right into the app itself use the invest tab to look at all the things that you have invested in as well as other opportunities and coming soon to the xerion app is the ability to buy and sell your assets straight from your mobile device as well so download the app it works on ios and android go to xerion.io plug in your wallets and get a historical report of your portfolio over time as well as a comprehensive breakdown of all the assets that you own and how much yield they're generating for you we're also brought to you by monolith monolith is your cool new defy account your d5 savings account your d5 checking

account except the cool thing about the monolith defy account is that it gets software updates right you actually get to increase the usefulness of this over time so here are some of the features monolith is a smart contract wallet with a lot of the features that you would expect if you've come to know defy and what it is you can you can add money to it you can put that money to work in compound and accessing yield uh but you can all and you can also swap through unit swap what was cool with monolith is that they will send you a very sexy monolith visa card that connects to your smart monolith smart contract wallet on ethereum so it's really awesome tool to live a bankless life with a a savings account that gets software updates so this is

something that you're never gonna find out in the real world but you can still do real world things with you know real money and like buy your groceries so that's just fantastic coming soon to monolith actually already here to monolith is now you can buy die and get it sent to your wallet directly right so it's also being an on-ramp so you don't have to go through your centralized exchange like coinbase or gemini or wherever you can just go straight from your bank account right into your monolith checking account smart contract wallet so check them out at monolith.xyz hey everyone welcome to episode 24 of state of the nation we are in a bull market my friends dave and i are super

excited to be with you at the very forefront of it let's talk about state of the nation what we do is talk about what's happening in crypto and relate it to you in insights and action items this episode comes out every tuesday we release it on youtube and it comes out live on youtube and you also get it in bankless podcast form so however you'd like to tune in to state of the nations audio video you've got it both ways today we are bringing on nick carter this is his fifth appearance on bangla so he is a veteran guest uh we're really excited to have him to talk about the bull market and then david uh what what are we talking about after that yeah well so nick carter is going to

come on and talk about all the different metrics that are are at all-time highs for the bitcoin ecosystem we're also going to ask him about like well why is this bitcoin why is this bull market different than the last bull market like what are the new what's the new infrastructure like like why is this unique and different from the last time we've seen these bull markets before nick's going to answer that question for bitcoin and then in the second half of the show you and me ryan are going to answer that same question for ethereum because ethereum has gone through plenty of growth and maturity and development and so a bull market that happens on ethereum is not going to look like the same bull market that happened in 2017 so we're gonna do a little bit of comparison here absolutely all right guys and uh before

we get to the show and introduce nick yet again uh let's talk about a few things that are new david we had our episode with melton damier's coming out that came out this monday actually and that was a spicy episode it was a lot of fun like i think it was uh the most fun i've had on a podcast for sure you know maybe it was also the spiciest episode where we got into this conversation about bitcoin versus ethereum and tribalism um but i feel like it ended in a really good place uh what what was your take on that yeah melton is just a ball of energy and so making making a show with her was a ton of fun uh and she comes in with uh just a bunch of data and metrics and she has slides that she uh shared and so that

was actually our first video podcast uh and so the the start of the conversation is all about how like the state of the world is now different right in in the same theme of things that are different nowadays she comes in and with just this torrent of data and shows like well the world is about to go basically the conclusion was money printing this is a theme that you hear on all crypto podcasts bank that's no exception uh and then we kind of turn into that we do a little bit of a pivot where we start to talk about identity which is actually something that we've talked to nick carter about previously is like what is the identity of a bitcoiner is she a bitcoin maxi and she she turned the conversation into the metaphor of dante's circles of hell like what what circle of bitcoinerism is melting in uh

and for what it's worth i actually consider whatever circle it is uh melton and nick are roughly in the same circle uh they both understand the macro outside landscape and they are both uh self-identify as bitcoiners um but i wouldn't classify them as maxis yeah and to be clear nick uh who's listing you here off stage we do not think this is a circle of hell that you're in just uh you know just just fyi there okay and then we also have an episode with uh blodgy srinivasan coming out next monday dude i'm super excited about this this was maybe our longest episode i'm not sure if we fully edited it yet but um we're talking about the digital nation with bellagi it's going to be a

it's just a killer episode you talk about a ball of energy bellagio is just like a ball of like revolutionary ideas and we got right into them and how they apply to crypto so that's gonna be super cool yeah but we often talk about the the metaphor of the nation-state as a crypto nation like a digital nation on a bitcoin digital nation with ethereum but logi is taking this a full step forward and making this much more concrete and so that's basically what the podcast was about like how can we literally make a nation out of this out of this world david we've been promising uh that we published some memes and we also published some pretty slick memes uh that that can be purchased but i don't know um we're going to talk about this in the second half but like

ethereum hit its number yeah right we got staking up yep uh ethereum's going to launch the community on december 1st the community rallied together the community did its job we played a minor role in in helping on the meme propagation layer and it feels really good right now i know we'll get into that in the in the second half of this but uh super excited about that it's a good day to be an etherean absolutely all right well um last thing to mention is of course this is uh thanksgiving week black friday deals ledger is putting out probably the best deal i've seen this year where it's like 40 off ledgers we will include a link in the show notes so you can get on that i think it's good until this friday alright david i think that's what we

have as far as announcements uh why don't we get to the opening question that i ask you every week what is the state of the nation right now david hoffman the state of the nation is triumphant not only did we get to the number of ether needed to depo deposit it into the smart contract to get the phase zero beacon chain up and rolling but we absolutely crushed that number like the the the acceleration curve of ether deposits just like went through the roof at the last possible uh moment but then it just like shot way beyond it i think we're at something like 625 000 eth in the deposit contract which is just like even if it didn't get to that point like it was still going to be okay

but the fact that like there's just this massive vote of confidence from the ethereum community saying like yes let's get this ball rolling we are ready to get this kick started let's bootstrap this network we are all here together uh this is a there there's no debate there's there's there's only one consensus uh and we really as a as a community we really seem to be moving as a complete a holistic unit and so that is something to be absolutely triumphant about and also at the same time the prices are refr uh reflecting this triumphal triumphantness whatever triumph this triumph triumph yeah uh and so everything just feels really proud and things are being reflected as such all right so ethereans are feeling

really good but before nick carter uh thinks that this is a bait and switch we're just gonna talk about ethan the whole time i think the bitcoin community is feeling super triumphant too wouldn't you say i mean like all-time high already exceeded in market cap bitcoin is quite clearly reaching institutional uh mind share the wall street journal had bitcoin price once again on the front page this like uh illustrative boomer newspaper it's coming back and uh this time bitcoin does not seem like a tool for for scammers and um you know and people trying to escape um government controls this time it's it's mainstream the bitcoin community to me has never have has never like seemed

more triumphant than than it is now what's your take on that yeah i would agree that that would make sense but i think if we also wanted to peel back the layers specifically into the bitcoin versus ethereum dynamics which some bitcoin maximalists spend a lot of time thinking about uh bitcoin dominance is falling and so bitcoin as the dominant crypto store value asset is actually not currently something to be triumphant about it is something to be triumphant about the total market cap and how the legacy world values bitcoin and which are all the right reasons to be proud about bitcoin but if you're a bitcoin maximalist who thinks that all other tokens are going to zero you are not a happy camper right now all right well you just got a little bearish on bitcoin for that moment but now we will introduce nick carter it's a

pleasure to have him on nick is the general partner at castle islands ventures he is a co-founder of coin metrics which is a fantastic crypto analytics firm that i use almost on a daily basis he also hosts the podcast on the brink nick it is fantastic to have you today can you come in talk to us a little bit about why this time it's different with with bitcoin and the the numbers showing all-time highs um this time is different i that might be a dangerous thing to say but uh thank you for having me on fifth time this is the fifth time i think it's the fourth i think it's the fourth fourth are you sure two podcasts and then this is the second state of the

nation yeah five five would be too many uh but i'm addicted to creating content what can i say it's all it's all i can do these days well you are you are moving right up um you know i know you got your start on bank list here carter but you are moving up to was it uh last week was it bloomberg bloomberg yeah okay and you know who who knows what might be in the future cnbc you know tv the the the news networks need like a slightly younger generation of bitcoiners to go and say sensible things about bitcoin you know you can't just they can't just have novo

on every time that's that's a great disrespect no disrespect to novo but that's kind of one of the things that's different about this bull market is like we have a new cohort of pundits and i'm bullish on the new cohort of pundits that are being brought on to speak about bitcoin especially especially if it's you nick thank you gentlemen thank you um i do think it's important to like let's get slightly more diverse array of opinions around bitcoin and crypto out there um i don't know if mine are actually that unique necessarily but uh it was a it was great well you do it you do ignore great job you do a great job nick like distilling all of those ideas i think and like coalescing and collecting them and explaining them um

but like before you go into an interview with somebody like bloomberg do you have the voice of of maximalists in your head at all from the community who are like snake you can't say this this is off limits or are you just totally open book and you just kind of speak your mind because it seemed like after the bloomberg conversation there was a little bit of a kerfuffle i guess on twitter about something that you said can you talk about that the buzzing of the cyber hornets is buzzing in my brain i mean obviously i know if i'm gonna say something that offends the orthodox bitcoiners i mean i i think i said it uh when joe asked me about the having i was like this is

gonna piss people off and uh what did you totally did well he was what did he say he he like goaded me into saying uh the having was priced and which he's right about uh by the way um so you know the having itself was obviously not a direct catalyst for bitcoin say it again you know it's it's just so it's so naive and like it's it's such an intellectually impoverished opinion to have that like bitcoin supply schedule defines the trajectory of the bitcoin price because it's so so reductive it reduces this amazing rich multifaceted

phenomenon to a single variable which is effectively fixed right um so it's weak it's just very weak like and people wrongly you know took that as me saying you know i'm not positive on the bitcoin price like buddy i'm as long bitcoin as anybody okay uh for you know in in multiple different ways you're wearing the shirt right that's a shirt i have a bitcoin hat so like you know like i'm i'm long bitcoin intellectually like the actual asset itself etc so i'm very positive on it just not because of some like inane supply related metric but for in my opinion what are better reasons and here's the thing like i

think being pro bitcoin because of stock to flow or like having that's a very brittle thesis like if that's invalidated then your whole world view is shattered right so you actually want to be long bitcoin for reasons to make sense so that you can be a good hodler you know like so you don't just give up in a year or two if it doesn't hit like your arbitrary price thresholds i know i'm not going to give up and i think that's why or perhaps um one of the motivations behind the article that we wanted to get you on to discuss the nine metrics that are at all-time highs for bitcoin which to me are nine reasons to be bullish bitcoin that are just not related to like the happening right they're they're outside demand rather than intrinsic scarcity yeah yeah they're they're

mostly demand side metrics or they might have something to do with uh financial infrastructure or or even macro but yeah so this was the reason i wrote this article is to somewhat demystify you know our current rally um you know and like cast a little bit of light on market structure um you know some of these things people don't pay that much attention to so i wanted to say look there's like good real credible reasons why the bull you know has returned by the way before we get into the article nick i just want to like finish off that discussion about bloomberg so like um you got some flack by a contingent of the bitcoin community for breaking orthodox on something that i

didn't even know was orthodox in bitcoin culture but like what does that feel like it shouldn't be does it does it piss you off or is there still an element where you're like well you know bitcoin culture does need people with very strong opinions uh in order to sort of forcify its social defense structure are you just like this pisses me off and then like i'm angry about it i mean i i didn't catch your discussion with melchim so i don't know exactly what she said but i think i understand the metaphor of like there being this like hardcore right you know cotter of like really you know like strong willed holders that are the guardians of you know

the the views uh and the social contract and then you know percolates out from there but um with stock to flow in particular i just think it's a like a faulty opinion to hold so it's just like in my opinion not a valid model uh so it would be a big shame if that was somehow interwoven into you know the orthodox bitcoin doctrine because you know bitcoinism in my opinion should be more about like you know the political objectives of the system and not about some you know contrived about some you know contrived mathematical models stipulating that um so it would be a big big shame if that was somehow interleaved into the

most orthodox kind of set of core views all right well so let's talk about um some of the views that probably almost all bitcoiners could share and certainly we've seen this massive uh price run up like you you'd start the article by saying it's entirely plausible we could regain 20k level again which um i mean it's it's quite a stunning ascent from what was the low on bitcoin we were like three two did we get did we get below three thousand at all or it was three thousand two hundred just above three 3k on bitmex i think yeah wow and that was uh year and a half ago something like that i mean yeah i was oh the low in in 2019 yeah yeah really not long ago but i mean as

recently as march we were wicking down to the 3 500 range all right so crazy to think about so this like kind of marks the the the beginning of the bull market i think for bitcoin so can you talk about some of these charts and like let's go through the data here and uh tell us what's different or what's unique about this bull run or how we should view this bull run i don't know where you want to start but um let's start with the first one um addresses of 10 addresses that hold 10 worth of bitcoin or more yeah it's one of my favorite charts uh any of these metrics of dispersion and the point is there's just more bitcoiners today than there were in 2017 and

there's a number of ways to get ac you know to apprehend this data you could use survey-based approach which uh the cambridge study is pretty good i think and they look at holders on exchanges and this is just kind of more of a directional approach it's not really telling you with any precision how many bitcoiners there are that would be the wrong way to interpret this but it just tells us directionally look bitcoins getting more distributed to smaller addresses and of course there's a number of different ways to get at this data i could cut this data you know 20 different ways but to me this is just the purest uh single expression of this dispersion there's just more people that have heard about and own

crypto today as opposed to three years ago so we have a more stable base so this this number basically has to go up and to the right for bitcoin to be successful right like we have to say 100 and so like and this the fact that we are conceiving it continue to do that and especially do that really really strongly in the 2020s is just overall bullish yeah and uh i would encourage you to look at this data for ethereum too i'm sure you have um a theorem is showing that same dispersion which guess what that's not the case for every uh of every blockchain uh both of the the major forks of bitcoin showed concentration and to me concentration spells do right because it basically

means like a lot of people sold their coins on exchanges and whales bought up the coins so you see the address the utxo set actually shrink and to me that is a sign of morbidity right i always want to because we're talking about brand new monetary systems you want to be distributing that to the entire world's population so if it starts shrinking you've failed you're in the first inning you've already failed so this is particularly important a particularly important metric for those crypto networks that are trying to become money or global money in any real sense undeniably undeniably and i've seen more attention on the dispersion metrics recently but in my view they're absolutely critical i think everybody

should be looking at them totally agree all right let's move on to the second topic of open interest in the cme bitcoin futures why is this a important metric to pay attention to nick this is actually probably the most important metric in the entire article wow yeah so the the rally these days is characterized by participants that really in some cases can only participate in this market specifically the cme is a market where if you're you know a large hedge fund or an asset manager or you know institution as they say you have likely already sort of done that counterparty risk analysis there's no additional work that you need to do to

get comfortable with this market trading on this market that's obviously not the case for any of these newer crypto exchanges where you have to do your diligence you know um and you have to you know ascertain their their trustworthiness uh the cme is you know deeply intertwined and to sort of establish financial plumbing so the cash sold futures product is really critical and the more open interest we see that's indicative of a very certain type of market participant that in some cases is only able to trade on this specific market uh so i gave the example of rentec that's where you know probably the most successful and lucrative hedge fund

uh in history uh this was the one market that they uh specifically said they would be able to take their positions on a lot of these guys a lot of these hedge fund guys when they come out and say they're taking bitcoin exposure they're talking about the cme product uh and a lot of bitcoiners will listen we'll hear that and say well that's you know that's fake bitcoin and it doesn't affect the spot price but my response to that would be that the market makers that are trading on those exchanges are hedging their trades with swap bitcoin so i do believe that it does affect the spot price of bitcoin it you know there's like all these conspiracies a

lot of gold bugs like to say you know paper paper gold you know is totally decoupled or even suppresses the price of spot gold um a lot of bitcoin is subscribed to that view as well but i do think this is tremendously positive more liquidity more open interest on this product a few people complained to me that open interest is a bad metric uh but but whichever one you use to to look at it whether it's contracts or open interest the number looks good it's it's more liquid than it's ever been so what's interesting is we've had a few other developments this year with like bitmex being sort of shuttered where it seems like regulators are really trying to clean up the space has been almost a theme we also had as you mentioned renaissance technologies and cme we also

had um the block uh blackrock cio manage eight trillion or so in assets said something crazy positive about bitcoin that you would have never heard in 2017 do you remember 2017 and jamie diamond was uh big news right poison was that when that got out yes like around that time it was like you know folks like charlie munger and warren buffett and jamie diamond but now this this time around it seems like the tables have turned and maybe it's partially because these institutions well now they could become uh bitcoin bag holders too right they could buy in they didn't have a way to buy in before but now with the cme they do

this product you guys remember this product launched on december 16th 2017. literally the precise top of the last market and some people attribute it to the collapse of that market which is kind of plausible like you you finally as a certain set of institutions have the ability to instrumentalize the short against bitcoin which they couldn't do before totally plausible or december 17 i guess they launched um so yeah this is really important as you say like if you listen to some of the reasoning behind that bitmex uh indictment they also talk about this notion of unfairness the fact that there's offshore derivatives exchanges

which can operate with less constraints or no constraints and they can sort of outmaneuver these onshore exchanges which are regulated and the regulators and the enforcement arms that sort of you know work on behalf of the u.s state they want to uphold the validity of the u.s regulated capital market and so one of the reasons they enforce is to maintain fairness and say you know you can't just go offshore and compete with our american regulated uh exchanges um and so i think that's actually part of the reason it's that they they want to inculcate this vibrant

uh you know local ecology of uh of marketplaces and that's part of the reason why they go after the offshore exchanges for better for worse is to protect and maintain the competitiveness of the cmes and the sibos of the world and the backs of the world and so on so because there's more volume happening on cme which is a is a u.s friendly uh institution what does that mean for the prospects of a bitcoin etf very very positive extremely positive that's probably the number one thing that the sec called out is they are interested in more and more bitcoin volume taking place at markets that are kind of u.s regulated with surveillance sharing agreements

where the market structure is apprehensible to regulators and it's not very cypherpunk of me to say uh obviously but that's the specific thing that the sec called out right that's what they asked for wouldn't it be interesting if the uh cme launch marked the top of the 2017 bull run and a bitcoin etf marks the top of this 2020. to 2021 bull run or just continues it yeah i mean oh yeah the the the first gold etf um i think gld that launched in 2004 that had a billion dollars of inflows in the first three training days and then we're gonna smash that record yeah with bitcoin i agree smash that

record yeah right you gotta keep your bullish hat on right okay okay okay can you tell can you tell that i'm a little bullish and like fired up right now new paradigm there are no pullbacks right david that's exactly right it's straight up all right realize capitalization that's another metric that you've i think popularized nick can you talk about it yeah so realize cap it basically just measures the value of each individual coin at the time it last traded or settled on chain so it's kind of a liquidity adjusted market cap you can also see it as the aggregate cost basis of all holders that's way way above the 2017 highs

to me this is a more pure market relevant measure of capitalization than market cap is uh what it shows to me is that look you know bitcoin cost like people are storing more wealth in bitcoin than ever their cost basis is higher than ever people are buying bitcoin at higher thresholds than ever in 20 in late 2017 we wicked up to these crazy levels and that was that we weren't there for very long there wasn't a lot of economic activity that happened at those levels this tells us that we've been you know having bitcoin commerce at these high levels for much longer and for a much more sustained period so we're way way above the all-time high here i've also heard this described as

it's it's almost kind of a measure of the average um bitcoiner basically their cost basis so it's almost a measure of like the happiness of the average uh bitcoiner right so like this goes up and the average bitcoiner is really happy because they just made a but that it just means they made a bunch of gains right so and then what's the average bitcoin are going to do um tell her friends about bitcoin and how awesome it is and how much money they made and then that creates this feedback loop right is that another way to look at it yeah there's the flip side of that though i mean if price outpaces the realized price or if market cap outpaces realize cap too much you know and you can look obviously look at the ratio it's a great reliable kind of top picker

then people it's an indication that people are going to take profit most likely right um if if the ratio gets too significant and so i love it uh for trading purposes uh wow to me it's one of the purest things that i've found in terms of ascertaining where you are in the market cycle and so where does this indicate that we are in the in the market cycle from your reading of it midway through rally but uh by no means at the extremes of uh 2017 i think the the ratio hit something like five or six in 2017 i think we're in the maybe the two range uh right now wow okay room for growth awesome yeah keeping the the bullish hat on let's let's keep that going uh moving on

to uh the next one let's uh what is this bitcoin options open interest well i'm personally going to need a definition for this one because this is outside of my area of expertise i mean this is like among the least consequential charts in the article but uh so we don't have to dwell on it necessarily but yeah options open interest is the nominal value of all the outstanding contracts uh and as you can see the it's mostly darabit that we're talking about here but really the point is here options give you more creative ways to express your opinion uh of their you know price direction and volatility characteristics of an asset and

that just basically didn't exist before you know it wasn't really an options market so does larger and larger open interest imply that more and more bitcoins need to be held by the parties that are participating in this um that's a really interesting question um i'm not an expert on options so i don't necessarily have a good answer for you okay um you mean like sort of as like a protocol sync yeah yeah exactly really the reason i included it was just that it shows that a miners for instance have more concrete ways to potentially hedge their exposure should they want to and i

happen to know miners that are using options to hedge their exposure and all of this was not available at all during 2017. basically didn't exist basically didn't exist in size uh and you know it just means that as a trader you can engage with bitcoin in a more creative way now this is a super cool one nick bitcoin price in the turkish lira why the turkish lira i love turks i got many turkish friends um but you know they're having a currency crisis and guess what the bitcoin market in turkey is booming it's booming there's a number of exchanges btc turk is the biggest one and of course bitcoin is well at an all-time high really the point here is doesn't

really matter which sovereign currency you look at it at you know in in which terms like it could be the turkish sierra could be the uh you know brazilian real uh could be the nigeria nigeria the argent any of these kind of weaker currencies bitcoin is already well past its all-time high and we have this dollar bias because we denominate our lives in dollars but that's actually not the case for most people worldwide they are forced to use these more inflationary currencies so let's just sit back and remember that these hard monies they look extra good when you denominate them in extremely soft monies like the dollar is one of the strongest sovereign

currencies but there's so many other currencies worldwide that are super inflationary and where are most people in like a turkey getting their bitcoin is it something like local bitcoin or are there um exchanges no they have full uh sophisticated order book uh exchanges in turkey so they're they're well provisioned from an exchange perspective it's also a country where there's like a cultural fendi for gold and i think one rubric or heuristic you could use would be it's kind of easier for the for individuals living those places who are used to storing valley outside of the state or the bank system to make their peace with a new thing like bitcoin speaking of turks that we all know and love melton is in the uh

chat saying that uh btc turk was the second ever bitcoin exchange so hi malcolm and thanks for the info shout out btc turk let's go so tell me to me that the turkish like you just said is just like this representative of uh other other currencies which there seems to be just the the metaphor that i've gotten from from uh bitcoiners is like bitcoin is the apex predator of currencies and so bitcoin is just working its way up the the line of weaker and weaker currencies and it's gobbling up each one right like the last one in line is just eats that one and it needs the next one and it's just working its way up to the to the final boss which is like the dollar right the dollar is the one like leading the charge so it is uh there's like this fiat herd of of wildebeest and bitcoin

is is picking off the focus ones as they go yeah totally correct totally correct and here's the twist on that bitcoin helps the dollar predate on the other currencies by the way you know like not just bitcoin but crypto infrastructure we've all seen this crypto infrastructure is proliferating dollars around the globe we're seeing these cr you know digital crypto dollarization whatever you want to call it aggressively predating on these weaker sovereign currencies my guess is that it's because of crypto infrastructure not even necessarily the existence of bitcoin i know that's heresy as well it's because of you know like public settlements infrastructure allowing

dollars to proliferate globally that kills off a lot of these weaker currencies all right nick do you have time for a quick side quest quick detour because this is this is on point there we go all right quick quick side quest right so circle partnered with um the uh bolivarian republic of venezuela this is jeremy and crew who basically circle has usdc and they are providing it this is almost like um like political action wouldn't you say like because they are arming the um a dissident government government in venezuela with usdc stablecoin in order to circumvent capital controls is that

what's going on here uh well yeah i mean so what happened was the maduro regime had some funds that were seized by i believe the treasury sees them and then you know in the eyes of the u.s establishment here juan guayido is the legitimate president of venezuela and maduro is actually a pretender to the throne even though he has de facto power and uh so that's that's the us's attitude to this whole thing and so they didn't see anything wrong with you know uh appropriating the venezuelan account that they could sort of get access to in the u.s banking system

because in their view guido was sort of the legitimate president and maduro is the pretender so um it's sort of in the eye of the beholder whether you consider this to be theft or sort of a rightful return of capital to where it should be but so what's happening is that you know the us said okay guy you can here's your budget you know these are um these are funds that kind of belong to your government and his move was to try and distribute them to a medical workers in venezuela directly using air tm which is kind of a fintech app which is dollar denominated i had ruben galindo on my podcast quick little plug if you want to learn about this in

detail um and uh so that's what's happening here so it certainly is you could maybe discuss it as slightly imperialistic or interventionist but honestly venezuela is undergoing this dollarization anyway in fact the maduro regime is in favor of the dollarization of venezuela because it's kind of a politive measure it's making the local population less angry with the regime the fact that they can dollarize so they decriminalize dollar ownership this year so you know there's as much of a pull as there is a push happening and it's interesting it's using crypto rails so this is usdc this is not um you know us foreign policy

intervention through the use of the swift system uh for example this is like the first time it's being done through a stable coin well there's a last mile delivery problem right because you know people there's no real market to spend usdc in venezuela right now um so they still face the challenge of getting usd liquidity into bolivars which still exist or into actual physical dollars really venezuela dollarized with physical dollars you know like remember those things yeah we used to use them before the pandemic uh so there's there's probably about two billion dollars worth of physical dollars circulating in venezuela that's how they initially dollarized

then it got more complicated they used zell a lot of zell but the problem is that zell is kind of powered by banks like wells fargo and there's no sanctions on venezuela the whole country but there are sanctions on members of the kind of regime the elites and if you have if you're unlucky enough to have sort of you know maybe your uncle went to the coffee shop that's run by the nephew of the minister of transport or something and then you know he sends you a birthday gift you might have become tainted by association in the in the transactional graph kind of like chain alice's taint that idea so because of that venezuelans are constantly getting de-platformed from zell from all these

fintech apps so you see there's an obvious case to be made for the usage of stable coins or fintechs that are built on stable coins really fascinating sandbox environment but yeah you do need to kind of close that loop a little bit and get local merchants to accept usdc if you want this to like fully work super fascinating also interesting because i i i feel like um there's something about that that was bullish crypto rails right but also like bullish non-sovereign currencies that are credibly neutral like a bitcoin or we would argue an ether and maybe some element of dye because um from like venezuela's

perspective from the um the anti-us regime right their funds were essentially confiscated and there's it's the same old problem of swift where they're being kind of locked out of the existing system right so us's ability to exert some sort of control over something like a usdc where they can they have a centralized apparatus where they can exert that kind of control um also makes space for the presence of a of a non-sovereign uncontrollable neutral currency like a bitcoin or an ether i recently wrote a op-ed and coined us saying um you know the us should embrace crypto dollars because the alternative

is the emergence of much less accountable forms of crypto dollars like die for instance yeah um and so they should embrace the somewhat you know fairly neutral kind of stable infrastructure um and surrender their control over the system that they exert with swift because the alternative is much worse for them it means that they have no control over the financial system if we go fully hashtag bankless yeah that would make sense if you're the us government hashtag bankless uh tweet it out okay bitcoin held by grayscale this is um we had mike michael sonnenshine on a couple weeks ago and then we

played the episode like two weeks later and we had to change the titles because at first we started like there's six billion in grayscale and by the time we actually shipped episode there's like over 10 billion in grayscale so this is blowing up right yeah and this chart's a little on maybe cheating to use this one because it only goes up by definition it cannot go down right right you know so melton pointed this out on her podcast i think what runs my gears uh gbdc is a black hole of bitcoins or you know the equivalent for ethereum as well you can't get them out you can only put them in so it's the most unbelievable phenomenon really ever i think

uh is it's that it's just sucking all this liquidity in and the only way it gets out is if you know they wind it up and there's an etf maybe and then they go into global settlement or something but really that is the prospect isn't even described in the documents as far as i understand it um so um yeah the grayscale is is absorbing so many bitcoins right now it's preposterous and some people say well that's because hedge funds are creating all the units of the trust to do this arbitrage play but the reason that the arbitrage play is profitable is because there are investors on these brokerages bidding up the financialized bitcoin product so that's the reason the arb works because

there's still that sustained bid pressure on the exchanges nick i remember hearing i think in one of your weekly recaps recently where you uh noticed how bitcoin tends to pump during business hours and how that was associated with grayscale can you talk about that connection because we just watched bitcoin pump from like 18 500 today sorry guys i i just lost you um i just lost the audio oh you can't hear us it sounds like he can't hear us he can't hear us that's weird we can talk amongst ourselves david yeah okay i'm back i'll come back sorry my phone's just flipped to my phone so i was uh i had been listening to one of your weekly recaps weekly roundups with matt walsh on on uh the on the brink

podcast and you talked about how bitcoin tends to pump during business hours which is actually exactly what we've seen this morning where bitcoin jumped from eighteen thousand and a half to like nineteen thousand and two hundred and you associated that with grayscale why why are you associating this with grayscale i might be wrong to do that honestly um you know maybe they are running their operations on the weekend or outside of business hours but my guess is that either grayscale or um any of these institutions that are intermediating bitcoin custody brokerage for you know this institutional clientele the nydigs of the worlds the fidelity

digital assets of the worlds i don't have precise knowledge of their operations but my guess is that those u.s based more institutional in nature organizations are more likely to be active during u.s trading hours and the seasonality bears this out i mean i looked it on sku yesterday you have strong return profile during weekdays and you've the absence of those returns on weekends and the strongest returns in the last few months have been u.s trading hours so in my view that's consistent with the existence of a bid during banking hours um when when those markets can really clear so so nick one thing that that

keeps on i think surfacing as we're going through these metrics is this departure from the 27 the difference between the 2017 bull market and the 2020 bull market that we've seen so far that you've described as in maybe the the first half right maybe the midway point maybe not even the midway point and that theme is um institutions like we're talking about the cme we are talking about this robust options activity we're talking about bitcoin holdings and grayscale trust i mean these are all institutions it feels like like none of that infrastructure was available in 2017 now it is we're seeing it all go up and to the right essentially

is it is the bull run that we've seen thus far a result of the institutions coming are here and uh has retail not yet arrived yet or is retail taking cut of this first who's leading this bull market is it different yeah i would just say the capacity is very very much enhanced and that just broadens the you know addressable set of entities that can get exposure to the asset class now you know we talk about institutions you know pension funds endowments um you know like it it it's kind of a squishy term a little bit uh we know anecdotally that um you know sovereign wealth funds we know that they have exposure to the crypto industry or a handful of them do

in certain ways some of them through the venture vehicle uh through you know some of those larger venture funds some of them through startup exposure um you know they're getting exposure in a variety of ways i would say honestly probably the biggest change though would just be the social acceptability of having a long position in bitcoin among high net worth individuals and family offices um you know people on wall street they obviously didn't want to be involved in a like a retail kind of clown show in 2017 which was ico driven and hype driven nobody wants to buy the top from retail investors right absolutely nobody wants to do that but this time around you know those people have had time to

think about it and devise an investment thesis there's macroeconomic tailwinds which are incredibly real this time around they weren't really present 2017. so it's just become much more acceptable to have a bitcoin position as you know this you know as a wall streeter or a billionaire you know or a dissident in russia and you're trying to offshore your wealth i mean all these people now the the just the general atmosphere around exposure to bitcoin and crypto has changed and obviously the plumbing is better so you can actually get that exposure if you want it now you don't have to mess around with the ledger or anything so

you know i think it's it's you know there's maybe a little bit more to it than just like the institutions are finally here you know it it just sort of depends but basically the industry can finally actually absorb capital uh from a variety of participants in a way that it just fundamentally could not do in 2017. wow that's a huge change all right um stable coin free float there's a few more we've got stable coin free float we've got um what else oh uh silver gate silver gates settlement network layer which is interesting and then what else do we have the growth of crypto native credits yeah which which are the most in what's the most interesting thing to talk about of those

three nick which would you like to dive into up to you they're all very different um i i had to kind of a conference take on the credit i know a lot of bitcoins don't like banking i was trying to say the credit if you look at where these lenders are lending to and you know we invest in lenders right so we pretty direct understanding of this market the the the consumers of this credit are arbitrage firms market making firms trading firms a lot of these firms make markets they're the reason that these pairs are tight you know the spreads are are thin and or you know that markets are liquid so the incredibly liquid and integrated

you know and like sort of no arbitrage markets that exist in in crypto exist partly because there's so much credit outstanding because the cost of capital has decreased in the industry so and that's a great feature right you want the markets to be incredibly liquid so we have the lenders to thank for that that was the point i was making here but this is huge right so this is like we we didn't have any of this again this is another thing we didn't have any of in 2017 there was no such thing as block five for retail genesis from a lending perspective was just getting started and to be clear guys what what nick is talking about is um crypto bitcoin in this case collateralized

loans basically where you can you know deposit your bitcoin and then you can take a loan against the value of that bitcoin and that market has just totally exploded and i think genesis is is certainly one of the the leaders of that so where do you see that i guess developing moving moving forward in this in this bull run nick i think we're going to see the largest deposit-taking institutions coinbase is the world all those exchanges realize that their destiny is to become a bank so right now they're banks in the sense of i will custody your gold coins for you and then give you back those same coins right

but in the near future they're going to become banks in the sense that they will give you the option to have an interest bearing account and they will put your assets to work for you and create credit uh the same way that commercial banks do and i can see you shaking your head because this isn't very bankless this is bank full you know which is is the wrong direction well i think i think you've got an interesting slant on that where you talk about how bitcoin specifically enables a much more auditable trail here but but like let's talk about banks for for for a minute in the next evolution right so first they're starting with these collateralized lens uh loans but at some point banking they love to make

fractional types of reserve products right that's how they yeah i mean the banking um the banking i'm referring to is is not lombard loans but specifically standard commercial banking um where with you know credit creation where so you think that's coming that's coming then undoubtedly undoubtedly there's there's nothing which really stands in its way um and of course you know exchanges will probably give their depositors the option to have the full reserve account so you'll sort of have the option full reserve not interest bearing fractional reserve interest bearing but there will be an explosion of credit you know simply because

if you actually look at the yields um in in the crypto industry the interest rates are kind of structurally high and so there's clearly an under provisioning of credit even though this chart is up and to the right there's not enough credit being created in the crypto industry there's a structural high demand for credit someone's going to satisfy that demand my guess is that one of the major exchanges starts to turn on interest bearing accounts kind of in the near future that would be interesting i do want to touch on the stable coin supply because that's uh highly relevant to both bitcoin and ethereum so i think right now there's roughly there's perhaps even at this point over 25 billion dollars in stable coins out

there and maybe i think we have like three or four billion in tether at the peak of 2017 and so not only is there less than that yeah not only is there just straight up more stable coins there's also more kinds and they're spread across the ecosystem well that's actually not totally true there's like three billion on tron and i think the rest is on ethereum uh so so nick when you see just a massive supply of stable coins out there what does that tell you about the nature of this particular bull run so the one thing as it pertains to bitcoin is that bitcoin was the uh it was the kind of quote currency for exchanges right and it was the default currency pair for all crypto exchanges

kind of long to all coin exchanges derivatives exchanges and that changed in the last year i think you guys have pointed out too these exchanges became largely tetherized tether became the default collateral it became the default pair that things were traded against and so what that will have done is that will have removed some of the structural kind of reservation demand for bitcoin so you know you think about crypto exchanges as being a sink that bitcoin you know falls into if it's the default asset that was eliminated largely and then tether became the default pair so despite that the bitcoin is now

trading back at its all-time highs means is trading more on the basis of being kind of pure macro asset as opposed to being you know like a a reserve currency for the crypto industry so that's a very positive thing in my views that you know bitcoin is largely eliminated from that reserve asset use case tether kind of replaced it usdc as well um and so it's impressive that it was able to sort of recover from that loss of a major use case um and then as for just the you know i think what this allows us to do is just reason more carefully about what we use these things for it's clearly stable coins are the default uh moe in the crypto industry they're what people use to

transact with and then ether and bitcoin people are using more as like the base collateral in these systems i think that really clarifies what they're for and you know we don't have to smash together all these different features and or try and use uh i mean you maybe you guys disagree with us but i don't think that we have to force a square peg into a round hole anymore and trying to believe in retail bitcoin is this like payments asset which is really not suited for um so the stable coins as a cohort have taken over that activity um the other interesting thing is that stable coins have a mutualistic relationship i think with i i know i i've wrote for you your newsletter that it might be parasitic but

my view currently is that it's highly mutualistic with stable coins and crypto native uh crypto native assets uh because the stable coins need something to trade against something that's liability free and if there's ever run on tether what did what are they going to sell it for they're going to sell it for the most liquid cryptocurrencies because you know those can't be confiscated if there's a worry that your stable coins can be freezed or confiscated frozen or complicated you'll just trade it in for the most liquid crypto pairs yeah though i think that take could be right on right because as you said there's always the concern or the fear that the uh birth of stable coins could lead to the demonetization of

something those crypto native assets like a bitcoin or an ether but but but really what it seems seems to be um happening is it's really totally killing the use case of 2017 i mean part of the 2017 ico fervor was these futility coins where any coin can be a currency and therefore have a monetary premium associated with it i think the the the success of stable coins completely slaughters that 2017 like that was the lazy fat protocol thesis if you will right like all we have to do is we'll create a protocol and then we'll create this medium of exchange and we've got our own currency and bam we've got evaluation to compare with ether or

bitcoin right well like no just use just use usdc in in d5 right you don't need that so it does it does i guess almost like act as a an apex predator in the crypto ecosystem in that it like eats these tokens that aren't a bitcoin or an ether and can't rise above and create this monetary premium it just eats all of those other imposters it makes them more honest you know these payment tokens if you're selling something as a payment token you're gonna be you know my challenge to you is are you gonna outperform a stable coin in terms of your your qualities and your transactional usage this puts a gigantic hole in the ripple story by the way knowing what

yeah gaping gaping chasm and the ripple story ripple is a bridge asset that never happened but guess what is a bridge currency stable coins a hundred thousand percent right all right last question for you nick why is ripple going up right now then ripple's really popular in uh you know in like japan and korea um oh god i don't i don't necessarily have a ton of color it could also be that people think um the next administration is going to be favorable towards ripple that's plausible ripple invested a ton of money and energy in lobbying for good outcomes in dc maybe what's being repriced right now is their prospects of getting uh avoiding the security monitor moniker and being called a commodity

so that is one theory that i have to explain the price action and it changes nothing about the overall fundamentals of the project yeah virtually no usage as a bridge currency yeah obviously just use stable coins instead yep that's exactly right nick thank you so much for putting the work into this article and then also coming on to share it with the bankless nation uh i'm particularly bullish but again looking at all this data uh it's nice to have the data to back up the bullishness my pleasure gentlemen thank you for having me back it's always fun thanks a lot we'll do number five pretty soon here nick guys hang with us we're gonna do a quick sponsor break and then dave

and i will be right back with you to talk about the eath side of the equation the bull market that's happening there stay tuned hey guys the next sponsor is ledger and ledger is running a 40 off black friday week sale so if you haven't gotten your ledger yet you are in luck for the week of the 23rd through the 30th you can get 40 off of all ledgers on the ledger website so if you are still using a hot wallet or you're just looking to get a backup maybe for a multi-sig or just for some more redundancy now is the time to go get that ledger there's a link in the show notes that can get you that 40 off black friday deal if you want to live a bankless life you need to get a hardware

wallet there is no alternative for storing your crypto in a self-sovereign fashion that's why i have four ledgers that i use to manage my different crypto assets using the ledger live account as well ledger live is like your home base for managing your ethereum defy and crypto accounts it does a really good job of aggregating all of your different ethereum wallets if you are the type of person that uses more than one but you can also add other cryptocurrencies like bitcoin or cosmos or whatever your preferred blockchain is and then it will display an aggregate portfolio of all your accounts at the main page one thing that ledger is doing a really good job of is enabling all the money verbs that me and ryan talk about with the bankless

skill cube enabled in the ledger live app so right now in the ledger live app you can buy sell lend swap and stake your crypto assets which is doing a really good job of fulfilling all of the money verbs in the bankless skill cube something that's new to ledger live is ledger swap where you can swap assets one for another directly inside the ledger live application ensuring trustlessness in your financial activity on ethereum and on bitcoin if you want to learn more about what you can do with a ledger go to the blog post the power of ledger live on the ledger website where they share some of the more advanced things that you can do with your ledger that you might not have known about there's a link in the show notes that will take you to the ledger shop where you can get your preferred

ledger hardware wallet i personally like the ledger nano x but i also have both they're both great options when you own a ledger you own your own assets in the way that they have been designed to be held by the user and the user alone so go get your ledger today to make sure that you are as self-sovereign as possible the bankless state in the nations are brought to you by wiring wiring is defy's first self-building community run project which i just get really really excited about iron is a system that seeks out yield in d5 and it does that in a number of different ways well a very aggressive way is with the vaults where you can deposit your preferred asset of choice and different defy experts will come in

and generate a strategy for what to do with your deposited token right and so it'll go find ways to get yield in that deposited token in d5 for those who want to just earn yield on their stable coins the urn system is for you where you can deposit your preferred stable coin and wiring will go and figure out which money market on d5 and d5 is producing the best interest rate whether it's dydx it's compound or ave it looks around d5 to see where the yield is coming from and it directs stable coins automatically so you don't have to check them out at why earn.finance to get started and also check out the stats page to see what other people are doing as well all right bankless nation welcome back it's not only bitcoin that is in full

beast mode full sense it's full send it's also ether that has gone full send as well david and i are here to talk about this david let's start with that number 524 2288 eth right what is the significance of that number that is the number of ether that we needed it to have gotten deposited into the deposit contract last night uh and uh we absolutely blew that number out of the water we were talking a while ago a couple weeks ago i guesstimated like 85 chance probability that we'd make it you said 95 chance the fact that we exceeded that number by like 25 more either than what was needed this probably makes me think that the

probability was even higher than 95 percent david i felt a little nervous i'm gonna be honest the uh the last uh probably maybe like three days before so because look when you put when you've got a reputation like we have david which is absolutely stellar and you put sparkly sparkly um like in disputed basically and you put percentages of 80 probability or like 95 probability right uh and you're wrong yeah it doesn't feel great right it's a scar and it looked like uh things weren't happening as quickly as we thought well you even when we had eric connor on it was funny because we had eric connor

on we're talking about like uh patriotic duty to steak and this sort of thing and uh eric connor like leads ether i think and even he was like well guys it only makes state it only makes sense for like from a pragmatic investor perspective if you're making the returns but the funny thing about it was um eric eric's tweet like two days ago was basically like oh change of plans i've gone into staking like i'm doing this for real forget yield farming's and he stepped up as well in a big way and i think many in the ethereum community did and this is just the ethereum community delivering that's what makes me more bullish than the actual numbers here it's like the community came together collectively to go accomplish something

and not only did it do it technically but it did it socially in getting this contract funded and now we have eth2 december 1st 2020 that is going to be the launch date for this new internet bond and it's super bullish yeah and you know what i think happened is like the deposits ticked up slowly right and if if it ticked up at the rate that it started to and if it continued that it was totally going to miss we weren't going to get there but as that happened the spots to fill became more scarce right because if you're not in the deposit contract by the time the deadline hits then you are gotta wait in line right so i think all of a sudden people like saw that first it started

going slowly and then it ticked up a little bit in speed still wasn't enough but then it just like burst because the fomo kicked in like fomo of being part of eth2 kicked in and then kicked in really really hard um so like i said in the in the intro to this uh to the show like just a massive vote of confidence to how strongly the community is rallying behind like the desires for eth2 like there's a lot of external fun coming like especially coming from like bitcoiners who are like dude does the ethereum community even want ethereum too like how do the ethereum developers even know that like ethereum 2.0 is interesting to the ethereum community which to me is just like a total disconnect from reality but if there's any debate about what the ethereum community wants

like look at the numbers like we want used to we want it we want it really we want you too absolutely all right so here's something else i think um that kind of combats the foot and is basically a a headwind going into the bull run for ethereum over the last i don't know three years this whole bear market the narrative has spread that eth2 will never ship it cannot ship eth is too slow every single ethereum killer uh so-called started with this premise that basically we can develop ethereum is a great idea but we can develop faster than ethereum we can do east 2 better and faster than ethereum can yes

you know hundreds of million dollars of like projects were based on this entire obvious entire premise like yeah billion dollar ico right that eth would would never ship would never be able to conquer near like polka dot like how many do we want to list all those they're still out there they're still out there so and then what happened it shipped it shipped and not only did it ship like i this is not the entire like eth2 vision the serenity vision but the hardest part like talk to you justin drake talked to danny ryan we've talked to talk to vitalik they will all tell you that this phase zero is the absolute hardest part to get right because this is the danny called it the heartbeat or like

the brain of the operation this is the consensus layer right here and this is the launch of staking so when you get that right i'm not saying you know the next phases just fall into place magically it'll still take some time but this was the big thing for the youth community to overcome and we've overcome now it hasn't launched yet so december 1st is another milestone here but uh we've we've got a date now and now the smart contracts are in charge that's what dictates what's going to happen next yeah the the eth2 will never ship like all of a sudden if you are still saying that like you have so much responsibility to prove that statement like right now the default position is that youth 2 is shipping right and the market is

starting to price that in right okay tell me about price david we're going to get there we can't talk about price yet because there's so many things to talk about as to why the price is doing the thing that it's doing right now one of them is just the removal of execution risk of ethereum 2.0 right like that's that's a huge thing so there's no way like people can can still be legitimately saying that eth2 will never ship uh unless you have some sort of crazy knowledge that the rest of us don't have yeah absolutely it's it's definitely going to start ship it's i mean it's it's already out there so they they can't say that like where do you want to start with this then david i want to start with this and so in 2017 the bull market had this underpinning of like

dude we're going to be able to stake ether like in six months right in 2018 yeah it's coming in 2018. uh is that what you thought that's what i thought i was stacking my ether in order to prepare for staking uh and so i was too yeah yeah right and then and then it never came right and then like the bull market kind of ended uh the icos are not a very good mechanism to capture value over the long term they're very fleeting if icos stop making people money then people are going to leave and that's exactly what happened and staking didn't come in order to absorb that capital soon enough right like staking is coming like exactly in like seven days like we missed that mark by roughly three years like whoops um but the whole underpinning of the bull market was by the prospect of staking eth and getting

a return and ether scarcity as a result of that and that that was happening towards the tail end of 2017 bull run like that was at the end of the bull run now staking is here really at the even before the bull run for 2020 is really getting started like to me the price action now is just a return to the norm a return to fair values bull markets always happen when we shoot above and beyond that but to me like staking is happening before retail rather than after retail but before people flood in not afters and so like the whole like genesis and development of ethereum too all of the energy and capital and attention that got devoted to ethereum killers back in 2017 and 2018 that's not going to exist that's

just going to exist on to ethereum that capital and energy is going to be directed towards ethereum about the excitement of ethereum 2.0 and instead of trying to fund your average ethereum killer it's much more likely that that capital gets deployed to trying to build some sort of crazy awesome application on ethereum that's just a much more likely outcome in my eyes and we're already seeing it absorb capital you know i tweeted this out let me uh let me share this with you david because this is uh super cool i think so um one way to look at how much capital staking has absorbed is to look at sort of um like we've called it the internet bond in the bond market and if you look at the domestic bond market of other nations and you like chart all of the nations and how much much in terms of

bonds they've issued uh ether right now at launch will be somewhere between el salvador and venezuela in size so if you plot it on kind of nations it is number 145 with a 314 million dollar bond market actually just just reran the numbers because the numbers in the deposit contract have gone up and ether price has gone up we are now at 390 million dollars in the cap of deposits you know what then we just passed st lucia and we're right behind the trade market today baby working our way up the line we're trailing uzbekistan okay so now we're at uh 143.

not too bad uh so this is what i mean of course the the non-sovereign bond market is absolutely massive we've estimated it like 57 trillion with a t inside and of course the big apex predator in the in the bond market is uh treasuries the old t-bills that's that's number one but this is another interesting way of looking at the capital absorption of it and david there's another thing that wasn't present in 2017 and that is this d5 d5 it was just a just a glimmer i mean like you saw a hint of it i i i always argue that the 2017 icos were a form of d5 right it was permissionless fundraising

a primitive and it was very primitive in that sense of the word to you because um like there there wasn't sufficient alignment between investors and uh stakeholders right um that was just the start of d5 now we have a robust d5 ecosystem so what will that do do you think as a headwind going to the bull market yeah and in stark contrast to the 2017 ico mania like i said the capital going into ethereum that was the thing that pumped ether to 1400 that capital was fleeting people didn't give a flying about what ethereum was or about bankless values or about self-sovereign money management they saw

ico's number go up and they wanted to play the game and when it became obvious that the game was like wrapping up and coming to a close and that people were making less money than they were making more money than people left right it was there was nothing sticky about ethereum right there's no reason to hold your capital there again maker dow wasn't uh created until december of 2017 and even in december of 2017 it had like a couple million dollars worth of eth in it defy as a term wasn't even coined until the middle of 2018 and then we kind of retroactively said that like okay well d5 kind of started with maker dow which means it started in basically the last two weeks of 2017 so we can call it started in 2018.

ethereum hasn't had a place to deposit capital and have it be sticky in any bull market ever right ever and so like the whole and like unit swap has never seen a bull market and uniswap has as an application on ethereum is one of the applications that locks up the most amount of value same thing with make or doubt like right now there is 2.75 billion in maker dell there's 1.7 billion in in compound 1.5 billion of a 1.3 billion in unit swap half a billion in balance or half a billion in synthetics 0.8 billion in in iron nexus is up there as well we had none of these things in 2017. now in in 2020 we have so many places for capital to come to ethereum and then stay there and get

sticky inside of an amm or inside of some sort of collateralized lending position that when i see a dollar coming into ethereum i see like oh maybe 20 cents leaving in four years rather in 2017 i see a dollar coming in i see a dollar going out people aren't going to exit once they enter they're going to be basically consistent right i mean even if you uh obviously there's going to be um a speculative type bubble in many d5 tokens that's totally obvious but even if you invest in those things and then exit because the market gets over exuberant out of control um are you gonna exit into fiat in your wells fargo account right or are you gonna exit to a stable coin

on crypto rails now that you know how to use all of this stuff and deposit it into some defy protocol and get like a three to four percent return versus your wells fargo account that's giving you nothing zero percent like the people in this bull run who come to d5 what you're saying to come to ethereum are actually going to stay after the dust settles because there's a reason to stay right like you you cross the bridge and there's a whole carnival here now you can like set up shop you can hang out like it's this is the frontier make a tent right so water's fine totally different than than 2017 and i think that's bullish too you know one thing else is is here in 2020 that wasn't here in the

2017 bull run bankless david it was bankless that's exactly right that's not what you're gonna say no that's exactly 100 what i was going to say there are two people that that people love to watch that shill all of these bye guys and tell people about how to live a bankless life and so they're going to come in and they'll be like i'm interested about ethereum what's this unit swap thing where do i go to learn about it they're going to find bank lists and they're going to learn about living a bankless life and they're going to be compelled by that argument and then they're going to keep their capital in ethereum to base on that narrative as a bankless community we are creating a narrative here and a shared experience here and david and i when you see us on these things or when we're talking just

the tip of the iceberg of the bankless community we have a bankless members in russia converting bankless content into russian and distributing that on like telegram we have uh bankless members in france spreading the message that way and they've created a whole kind of like david and i are just doing we are just one small part of this movement in trying to like propagate it but this movement didn't even exist in 2017 because d5 didn't exist in 2017 it was just associated with like icos and scam projects right and so we are planting a flag in the ground if you're watching this i hope like you are too to say we're not just speculating in this asset

class that's part of it of course there's going to be upside opportunities but we're setting up shop here like this is we're settling here this is our home like we are claiming this vast open white space and creating a new economy here um that's what i intend to do for the next decade man so absolutely i i actually think that's one of the the getting a narrative across during a bull market is really important like that's actually why we started promoting the whole moloch thing so like we had we had attention and we wanted to direct that attention towards the concept of like human coordination failure i love that quote that you say so much right which is basically uh don't let me butcher it but you said the most bullish thing for bitcoin and ether

is to be understood that's exactly right right and like that's the same is true of d phi and this this bankless movement and the theses that we have put out on the bankless program the protocol sync thesis the ether the triple point asset thesis um like the the concepts and ideas that we put out so far have been proven right and so so long as they continue to be proven right like i think that the bankless narrative will continue to be proven out and more people will be more people are compelled by theses that are proven right oh my god dude thank god that contract made it and we made it so so we weren't wrong our 95 percent prediction game that would have destroyed our entire reputation around this we've gone down to zero we would have gone and

ended bankless all right uh stable coins we already talked about that's uh you know it's interesting like nick carter wrote an article for bankless uh where he argued the case this is back in december of last year that stable coins might actually be parasitic to ether and now it seems like and he was laying out the case so he didn't to be fair to nick he didn't totally subscribe to it at that time but we just talked to him and he laid out the opposite case that stable coins are in fact bullish for ether which is super interesting now we have almost 20 billion 20 billion plus 20 billion worth of stable coins on ethereum one transaction away from purchasing ether all all stable coins on ethereum are one transaction away from

purchasing ether 20 billion pretty crazy pretty that's none of that existed in 2017. yeah um and as the global demand for dollars increases which it definitely is it's going to that's that need is going to be serviced by ethereum and so it's just got growing the tentacles yeah absolutely all right so uh there's also some additional alpha to be found in ethereum this is one of the points he raised to me when we were talking about this episode what do you mean by that david yeah so i had a friend text me a college friend non-crypto and so i'm starting to get texts right which is kind of how we know like retail starting to arrive and uh he he expressed that his uh being bummed about how he missed the boat on bitcoin right he missed the

party uh and i told him like well no you shouldn't think that because you haven't because the party's ahead of us however it doesn't matter that uh regardless retail people and people coming into this space after about hearing bitcoin ever you know for 12 years now up to 12 years now like they heard bitcoin back in 2013 they heard about it in 2015 2017 and they still haven't bought it so that cognitive dissonance about buying bitcoin now even though they've already known about this asset for like seven eight nine years and bitcoin is at this crazy high price tag of almost twenty thousand dollars there's going to be some cognitive dissonance there and this is always true about bull markets it's like people try and it's like well damn it i missed the boat on bitcoin i'm gonna buy this illiquid token that's

going to pump a hundred x so i can like get up to where i would have been if i had bought bitcoin back at a thousand dollars and those financial opportunities are defy tokens on ethereum yes i i totally agree that is bullish the asset class now but i do have a worry about that to you david which is xrp price has been pumping yeah and so your friend unless he takes time to understand why bitcoin and eth are as valuable as they are and understand a little bit about capital assets and the defy ecosystem the ways we sort of define like define things that education path then they could be like oh xrp is less than a dollar it seems like the next bitcoin and by the way this crypto

youtuber uh who has like 10 000 you know hundred thousand followers like like subscribers says that xrp is going to be the next big thing and then thousand dollars that's my worry for retail like guys if you're listening to this don't let your friends who text you fall down these paths because those roads lead to uh to a lot of pain and destruction yeah and and there's also you know i think ripple and other companies that benefit from these type of trades like are definitely culpable and like they're they're definitely leading they're definitely they're not doing it on purpose but like they could be doing a better educational effort in making sure that the people

that are purchasing their token are doing a more informed decision-making process which there's no i definitely think ripple's doing it on purpose oh yeah but totally however so ripple like we you expressed this concern that ripple just pumped and litecoin also just point i actually don't think that's retail i think that there are is traders positioning themselves because that's what they think retail will buy and i don't actually think we know what retail will buy this time around uh i think that's an unknown quantity rather than a known quantity i actually agree with you there i don't think we've seen retail enter i think most of this has been institutions and people that were already bullish uh crypto doubling down on it um sorry to interject the people that i

have had come in that are new are people that were around in 2017 and then fully exited and then those are the low hanging fruit coming back so that's that's maybe the people that are coming back that's who i'm getting the text messages from yeah right so like you kind of worry when you start to i mean it used to be when you start to hear from a taxi driver about an asset right then like the bubbles here that's what they used to say well for crypto sometimes it's getting text from a friend so far i've only gotten texts from people who joined crypto in 2017 and then became like dormant right and we're sleepy and now they're waking up right i haven't gotten texts from which i received a lot of these in 2017.

the guy that is friends with the guy i know who heard that i know something about crypto and has this question about an ic buying yeah yeah buying tron right when i get those texts that's when i start to be like okay right uh again that's just a heuristic but you know another thing i i i hear sometimes um this is more from the more like the the bitcoin only crowd but it's this um i'm not interested in eth until it's a globally adopted reserve asset everything's solved about scalability and defy runs the financial infrastructure for the world this goes to your point about you know that the text you received about some people they just

are in this crypto paralysis of oh my god should i buy or not it's like so volatile what if i like they try to time their buys rather than just taking action and jumping in right and like they'll hear something about some risk to eth2 for example maybe not being able to pull it off or maybe maybe there's there's lots of concerns about eth2 and they wait and they wait until all of not only the risk has been boiled out of the asset class but all of the upside has been boiled out of the asset class too so like my retort to that is like if you're waiting for ether and d5 to become the financial system for the world right and

for like central banks to buy into it and issue all of their like you're waiting you're essentially waiting until ethan's 50k in price right like all the opportunity has been boiled out of it so people also don't understand this kind of risk reward dynamic of you just got to take action sometimes if you believe in it i'm sure you have friends like that yeah yeah totally and i mean i was like this back in in 2017 where like uh i came in in the middle of middle to late 2017. so like late to the show right like i was the retail club being dumped on it was the right of passage and i'm past that point now um and so i would always i would see people that that i met who's like who bought omg which was like the 2017 token at like at

20 cents and then it pumped all the way to 20 and so what i would do is i would like backtrack and be like well if i had deployed my capital at these prices i would have gotten this rich right but you only ever get the full upside of the exposure if you purchase it immediately right you have to be owning it all the way through and that's why like i've i'm i was totally okay suffering through a goddamn three-year-long bear market where i saw my ether holdings fall down to 82 because i know that if i sell i'm gonna have to buy in later in order to access the upside so why would i even sell now you have to hold the asset for the entire life span of its cycle in order to access the full upside of its potential right like that's that's why

you bag hold during bear markets because you don't know when it starts to go up but you do want the full exposure of when it goes up and so when it finally does go up you finally feel validated that's kind of what i feel a little bit like right now when i when i watch the price of ether like bust through 500 and scream to 600 i feel a little bit like that like imagine if i had tried to time that like no i'm just i'm just gonna make sure i gain all of the exposure to it by just being a bag holder yeah absolutely and it's still we think probably early in the cycle but i mean to be honest it would have been way better for you to buy eth when it dropped below 100 right right just like in in march right so

that conviction is super important and it sort of separates the the tourists from the from from the believers and i think there have been a lot of people during the crypto winter and this has been a particularly grueling winter for ether right a lot of people left but a strong community stuck around and you know it's just it's fun to celebrate that um i think that you know there's some rewards there uh on that side of things david maybe we should end this with kind of um like super bowl case for ether i've got a few ideas on that sure um but where do you think like where do you think the market is taking us next we said before that this is 2016 right so it's a setup for

next year which is 2017. i i still think that's largely directionally correct um what's your take what what's the next step of this bull market here so if i if i want to put on my maximally bullish hat which i usually put on every single morning i i would i would claim that this cycle is going to be a longer cycle than last time the and that's what we've seen with bitcoin these cycles get longer and drawn out and so saying like oh we're in 2016 and next year's 2017 well we need to fit an extra year or maybe even two years in that time frame somewhere because these cycles are getting longer and there are just when you recapture the institutional side of the world institutions are by definitions

bureaucracies which have our big ships which have lots of money that pivot that ship really slowly uh and so i could imagine a very long slow drawn out bull market where capital just constantly just trickles into the space over and over and over two years right and so like i maybe maybe even longer right and so that's that's why i'm particularly particularly bullish on the the concept of ethereum 2.0 being in development in parallel to the ethereum one d5 chain because like that sentiment is that two year two to three year long phase of getting ethereum 2.0 out the door i think it's going to run in parallel with a two to three year long bull market so i think 2017 as a year could be two years long for us

and it's just a two year long just and this is something that i put out on the market monday yesterday and it's something i've been chewing a lot on my head in my head recently is like the bull markets of this industry and why we're able to just like put clear like bookends as to when bull markets happen and when they stop happening at least in hindsight the bull markets happen when the world around crypto turns its attention back to crypto and reprices the whole entire industry all in one go right yeah and so like it's it's a huge lagging effect like the last three years of crypto the the attention of the world has not been on crypto and so that's when prices bleed out and decline now the world is turning the

attention back to crypto saying oh there's a lot more here than the last time i was paying attention to crypto i'm going to price things accordingly and that's when ether price goes from 200 to 600 in like in like two and a half months right like it happens really fast and right now is when the purview the eyes of the world are turning towards crypto and repricing this entire industry and i think it's going to to be a two year long like repricing event i actually agree with you on that i do think we've used the uh the analogy of 2017 but it's probably the case that that 2017 is sort of an analogy that stretches maybe multiple years right um i guess i'll i'll i'll leave um with uh with these thoughts this was kind of my

take on what what things could look like in that two-year time horizon and looking at it from how much eath supply is actually locked right so we've been talking a lot about kind of the demand side and these things are certainly triggers but i also think what's coming in the next two years again not right away this is the first milestone of eth2 is a big change in the supply economics of ether as an asset so let's say you get 25 eth locked up by true believers who are in this for decades and they're here to stack away stack eth right and then you've got 20 locked in d5 well is that crazy at uh right now it's about six to seven

percent ethel eats supply uh locked in d5 right and at the beginning of 2017 it was zero so could that double that's not crazy um as the uh institutions uh sort of come and as d5 projects do well they might consider locking a portion of their capital into balance sheets these dowels are essentially a new type of um crypto capital formation tool they're like a corporation so that could take up say fifteen percent grayscale is already at two to three percent of all eth that's locked could that rise to five percent if you get three percent in staking and we're already at half a percent right now at

the very start well all of that you add that up and you've got already 70 of each supply pretty much locked and then what's going to happen david is in 2020 when the proof of work chain merges with the proof of stake chain which is about to be launched you get annual eth issuance take going from 4.5 to something near zero right this will be less than one percent possibly it could even graduate to the negative territory where we're actually burning more eath than we are issuing and minting so what happens when you get demand but no supply that's a supply side crisis and for a scarce asset like eth the only direction when that happens

is up that i think is like a two-year bull case or a three-year bull case for what could happen to eat the asset and if that's the case we're not going to be staying at 600 for very long it's uptake yeah this is the absolutely the right formula uh i would tweak these numbers a little bit i don't think it's actually i don't think you actually get to uh claim that there's never such thing as never sellers because there's literally a price for everything right and so like yeah i'm a never seller because i could never really reasonably see ether at like one million dollars per token but it's like well if you offer them one million dollars per ether they're probably gonna let me ask you this though david so um what happens though if your eth is going up in value right but also your ability to generate wealth

on top of that eath goes up in value too right so the ability to rather than sell your eat why don't you just take like a very small portion of your supply and take out a loan right on it a collateralized loan on it or why don't you just put some of that eve david into defy or into staking and then instead of selling you can earn a nice five to ten percent return off that youth and you don't have to sell this is kind of back to the like the neo taking the pill right like when when this is all fully matured you won't have to sell your ether you know because it becomes part of the fabric of the uh the economy and of the financial system so i agree with you there's a price for everything of course

but there might be there might be some number sellers out there at least a portion of your proceeds you might never sell because of this yeah i haven't considered defy has infrastructure to help support you not to have to sell your ether and be able to access liquidity from that different mechanisms that that's that's an interesting take that's an interesting take that's pretty cool yeah okay so maybe we can generate like a cohort of like never sellers who like they still get the value out of their ether but they do it from like loans rather than rather than selling um yeah one thing that you did not and you i think you really priced down the supply of ether in staking i think you you said like three to five percent i think that's going to be something like 10 to 15 percent um i think that's going to be a

lot higher than that yeah so uh these numbers play with these numbers as as you will these are all supply syncs i think for and then burn a ton with eip one five five nine which is nick it's going to be native right to eat two uh and uh we will see all right david i've gotten all the like my bullish feelings out on this podcast so i'm feeling like it's pretty complete anything else you want to say nope i think we should wrap this up this is uh as bullish episodes as they come all right guys uh risks and disclaimers of course we are bullish on these assets but this is not financial advice not at all ethan's risky so is crypto so is d5 you could lose what you're putting in

we're headed west though this is the frontier it's not for everyone but thanks for joining us on episode 24 of state of the nation we are triumphant this week