SotN #39: Is Wall Street Going Bankless? | David Grider of Fundstrat

Transcript

wall street is wall street going bankless what do they know about crypto ethereum d5 bitcoin we brought an expert on to tell us david grinder who is uh gritter excuse me who is from fun strat to tell us all of the details around this uh if this is your first state of the nation we do these every tuesday we live stream them on youtube and then you can catch it on the podcast um david i'm really excited about this topic how you doing today man sorry i lost my audio dude this is such an important conversation because uh at the end of the day all legitimate assets end up on wall street and this is the progress that we are seeing bitcoin

run through this is the progress that we are seeing ethereum run through and uh at the end of the day like if we want this to be the world the worldwide asset class that we that we think it deserves to be it is the logical conclusion is that it ends up on wall street because that's the the center of capital of the whole entire world um and so this is this is a fun story to to follow and i'm excited to ask david about how this is going to work out yeah they've come a lot farther than they were over the last 10 years or so but it still feels like they are in the early innings of understanding this and david is definitely key in in helping them educate them before we get to that david we've got to talk about what's new right before we

started this episode something huge just dropped in ethereum in d5 writ large that is the uniswap v3 launch this has been much anticipated by all of us so what are we doing david we're we're gonna do a walk through of uniswap v3 with the details that we have the blog post is pretty extensive and there's a lot of uh interpretation and guesswork that i think is going to be left for the readers of that of that blog post so we're going to go through that with the bankless community to figure out what actually is uniswap v3 so that is going to go live at 1pm pacific 4pm eastern time uh so join us back on the youtube as we learn what the

hell unit swap v3 is guys i think that's going to be an alpha leak and of course we will dm hayden adams you never know maybe we'll send the zoom link he might show up you never know to explain some of this uh but if not we will proceed without him because this is a definitely a major launch event for the d5 ecosystem and we need to figure out what it means for us also david we dropped an epic episode on monday on ether the asset and ethereum the economy with justin drake that was a fantastic episode ultrasound money it is ultrasound money weak as well tell us about that episode and why it's ultrasound money week yeah so this is i think going to be over the long term uh

can ultimately connected to wall street and the reason why ultrasound money uh meme is so powerful is because it it's the ultrasound money meme stuck before the podcast was even released which i think is awesome that's how you know a meme is going to work and what memes are are ways for interpretation and and learning about something in a very small bite size package and so you know bitcoin has really been spearheading this like sound money narrative in the times of money printer go burr but justin drake came onto the podcast and talked about like well what happens instead of just replicating like what he called stone age economics which is like replicating gold 2.0 what happens if we do sci-fi economics what

happens if we maximize and optimize both the cryptography and the economics side of cryptoeconomics and what the what that product is is ultrasound money in ether the asset at least that is what that's what the long-term vision is and so i'm excited for that podcast to go out and start with the bankless podcast and as we have seen with other previous content i expect that to eventually make its ways to the ears of of wall street right and see like well you know because there's always this this cognitive dissonance of people professional investors investing in bitcoin because like is that really the what the cryptocurrency world has to offer is that really the best thing that is going to come out of crypto as bitcoin uh and that podcast suggests that perhaps not perhaps there's

something more that the world of crypto economics has to offer perhaps that thing is ultra sound money absolutely i don't think the world has heard the um the case for why ether is sound money they've heard the case for why ethereum they've maybe heard tidbits of the case for for why defy but they have not heard the case for why ethy asset they think of it as something else so hopefully you know we at bankless operate at kind of that narrative layer so we get it direct from the researchers we sort of parse this into an understanding of the economics and of the asset itself and then ultimately the hope is that kind of filters up to to the higher levels and and makes it way makes its way

to a global understanding of what these systems are and what this asset is david before we get into our episode with with david on wall street let's talk about the state of the nation i'm going to ask you the question i always do which is what is the state of the nation today the state of the nation is maturing we are maturing especially on the day where v a uniswap v3 comes out which i think is going to be the last perhaps version of unit swap so uniswap is coming out in this max mature form uh you know ether the asset is both getting eip1559 and proof of stake expedited at a faster rate and meanwhile how we understand and explains the explaining these things is also getting better and

improving so overall we are maturing as an ecosystem and i think this is going to be the main through line that we have are about to have with our conversation with david from funstrat is that again wall street only pays attention to mature assets and wall street is paying attention therefore we are maturing as an industry and as a as an asset class absolutely well said all right we are going to get to our episode on wall street and crypto with david grider he is a digital asset strategy at fundstrap but before we do we want to thank the sponsors who made this episode possible gemini is the world's most trusted cryptocurrency exchange i've been a customer of gemiini since i first got

into crypto in 2017 and it's been my main exchange of choice to make my crypto buys and sells gemini is available in all 50 states and in over 50 countries worldwide and on gemini there are markets for over 30 various different crypto assets including many of the hot defy tokens and it's one of the few exchanges that has liquid dye markets gemini just launched their earn program where you can earn up to 7.4 interest on 26 various crypto assets if you're tired of paying fees in defy or you don't want to worry about defy exploits but you still want to earn interest on your crypto assets gemini earn is the product for you another product i'm stoked to get my hands on is the gemini crypto back credit card which gives you three percent cash back on all

of your purchases but paid to you in your preferred crypto asset when i get my gemini credit card i'm going to make sure that i get my cash back in east so whenever i buy something i get a little bit of eth bonus back to me at the same time you can open up a free account in under three minutes at gemiini.com go bank list and if you trade more than a hundred dollars within the first 30 days after sign up you'll be gifted a free 15 bitcoin bonus check them out at gemiini.com go bankless ave is a borrowing and lending protocol on ethereum and just recently released ave version 2 which has a ton of cool new features that makes using ave even more powerful with ave you can leverage the full power of d5 money legos yield and

composability all in one application on ave there are a ton of assets that you can deposit in order to gain yield and all of those same assets can also be borrowed from the protocol if you have deposited collateral here you can see me getting a 200 usdc loan against my portfolio of a number of different defy tokens and eth i'll choose a variable interest rate because it's a lower rate than the stable interest rate option but i could choose the stable interest rate option if i wanted to lock that interest rate in permanently one of ave's v2 features is the ability to swap collateral without having to withdraw your assets trade them on unit swap and then deposit them back into ave ave does all of this for you all in one seamless

transaction so you don't have to repay loans in order to change the collateral you have backing them check out the power of ave at ave dot com that's aave.com all right guys welcome back we have david grider he is digital asset strategy a researcher at fun strat funstrat if you've not heard of this firm they are an independent research boutique so they advise high net worth individuals wealth advisors people in traditional finance uh he does a great job educating what we might call what we crypto natives might call finance natives you've probably seen tom lee from funstrat he's a managing partner on cnbc this is really our bridge to

wall street and david it's it's great to have you on bank list how are you doing today i'm great thanks a lot for having me well before we begin we should just echo of course like all bankless shows none of this is financial advice do your own research of course but we are here to talk about crypto we're here to talk about d5 we're here to talk about ethereum and wall street particularly what wall street understands about it and we're thinking about this conversation david in two parts the first part is really what does wall street make of crypto writ large the asset class and then secondly i think we want to zone in on what wall street actually thinks of ether the asset and you've written some great reports on both of

those subjects so i know you'll be able to uh to cover it extensively but let's start with with that basic question at the 20 000 foot view what does wall street make of crypto like what do they think of crypto right now it felt like in 2016 you know crypto was this this weird sort of scam you know crypto anarchist a very small niche community but that's all changed this cycle i i get the impression where are we today yeah i think you know really starting um you know towards the end of last year and into this year i think it's come on the majority of wall street's radar as okay this thing is real we need to figure it out and um you know that trillion dollar um

asset class kind of revisiting um that moment was really a tipping point for for crypto because it became so large that you know if you compare it to i mean other sub-asset classes like you know different bond segments and different uh you know areas of the the credit or emerging markets right like it's it's a very large segment and it's it's in terms of investment assets it's kind of flown under wall street trader and they couldn't ignore it anymore uh before that i would say you know um largely ignored which is why i think you know the question is you know what does wall street think about crypto is is it's very dependent on um

different pockets right there's people who have been who have been following it who have been early you know i talked to some pms who who are you know traditional um portfolio managers very wealthy fund managers right they have their family money they've been following crypto investing in it in their money money for some time but and they they're up on it but it's everything across the range of the spectrum to you know other funds who you know they're just mutual funds they don't they don't get it they haven't got it but now it's it's time and they're trying to figure it out and i think it's what do they think of crypto some of them they don't know yet and it's uh you know this this thing this this thing is bitcoin okay this thing is kind of real we got to get get a handle on it

what are the rest of these things and how is that how's that going to fit into our portfolio david i want to ask about career risk with crypto uh because this has been uh something at least from the inside of the crypto world is is uh something that we've all all been paying attention to because if there's less and less career risk for investing in crypto that means this this is just more legitimate this is uh capital will flow easier and i think back in back in you know 2017 2018 2019 perhaps up until 2020 perhaps that that career risk element was still very very strong um maybe you could kind of give us the timeline over the last three years as the conversation of career risk and investing in crypto has has matured and

developed yeah i mean i think the thing to remember is wall street i heard this once early in my career going to wall street and being an investor is like one of the best jobs you can get you know you paid a lot of money um you know you you don't have to do too much but perform outperform the market by a few percent and um all you have to do is really just um don't blow it up and don't don't don't don't take too much risk and make right so um you know if we think back to right the 2017 wave and everyone's like the hurt is coming the herd is coming the institutions and they kind of never came at that time and i think one of the reasons was um you know the money that was coming in at the time was

you know it was a trickle-down effect from wall street but i think it's the private money from wall street right it wasn't the um actual managed assets and managed fund assets from wall street and it's like it was the personal money of people because you don't have career risk if you're you're putting your money in it and you see the upside and uh you know investing in the crypto economy but if you try to put your client's money in plus there's fun mandates and things that are constrained from it and it's new all the custody things um that stuff was just unheard of and impossible back then uh but you know we think we you know we've slowly seen of course um some of the endowments come in over the years right from 2018 and 19 you know i think on the liquid public market side um

if i think about careerists for for some hedge fund managers right and setting aside the kind of crypto fund crypto native group um the traditional sense of folks you know you know you know you could see those people play the futures and play the options and you know speculate maybe on the the price you know when the cme came out but when you when you saw paul tudor and and you saw some of these you know stan drucker miller um in 2020 you know kind of on the hedge fund side uh be willing to actually you know place kind of uh macro bets on uh the longevity of or at least the on the trade of owning bitcoin for for that time and that that period um i think that opened up for for a lot of fun managers who really have been

following those guys for years right this this is a time we can kind of start to look at this thing or at least it's not going to be such a careerist moment um and i think now that the banks have kind of gotten on board too right you know i think that that's that's starting to um change in a number of different ways across not just the hedge fund spectrum right because there's a lot of different places to invest capital right there's also the rias and the wealth managers all right so you know now you see also that group with like morgan stanley getting a platform getting a place to to put capital to work right in the crypto ecosystem through what was just announced there um that's that's something now that's kind of reducing the career risk to investing in crypto and making it more accessible

so i think the uh the macro narrative here that you guys are painting to to wall street really uh comes across in the report that you just wrote in the beginning of this year and i'm going to show an image from that report maybe we could walk through some of it because this to me feels like the the lens almost like the narrative lens that um you guys are painting for for the rest of wall street and as i said i i see fun stratus really a bridge between digital assets and crypto and this new economy that's emerging and wall street like we do a good job i like to think bankless does a good job trying to explain this to crypto natives but what you guys do david is a great job explaining this entire asset class and movement to traditional wall street

folks so we want to go through maybe the lens through which you explain it and i love this image on the the report that you put out in you know 2021 and it's this image of like a family i don't i don't know but this looks to me like it's circa 1993 1994. they have like a a windows pc of some sort and it's a family like standing around a computer saying surf's up see you on the net right and this is like you know the beginning of cyberspace the beginning of the internet before we all knew it uh you know before we all used it every day and it was sort of this this niche thing let's talk about that comparison first because the report is titled

uh 2021 outlook what's the outlook for crypto it's going mainstream is wall street picking up on this comparison to the early internet the 1993 1994 internet and and seeing crypto yeah no i think i think it absolutely is i mean you know our focus is um like you said like there's a lot of folks who are very deep into crypto and we try to be very deep ourselves but what we also want to do is kind of be the bridge right where we can help you know our traditional investors think about how crypto's merging with the real world um and when it was so small and when it was just emerging and the use cases were you know you know more limited than they are today it hadn't really kind of merged with the with the global and

traditional economy and and we're seeing that really happen now right as similar to any of the you know emerging of any technology right just like when the internet came where it's going to disrupt just like the internet disrupted many traditional business models right so our focus really with a lot of our research is um helping investors also think about right you own you know these uh these types of companies in your portfolio right here's what crypto's coming up and here's what crypto's doing across all these sectors just like the internet came up and disrupted some immediate disrupted uh broadcasting disrupted you know the way we all communicate online create social media right and here's here's how that's that world is merging with our current

world and it touches every part of of almost the traditional economy so you know when i think about um when we're trying to convey the idea to people of uh you know crypto this novel foreign thing you know we really have to kind of help them come back to the period of when a new technology emerged emerged like the internet and you know how foreign it was then to you know get on dial up to get on these you know these websites you don't know who you're talking to in the chat rooms and and but what did it emerge to and what what the technology really brought us right and that's that's the same thing we want people to recognize is really happening here how does that metaphor land does that does that make sense for for people or do they still kind of need some

convincing after the internet metaphor no you know i think i think the internet metaphor really does work for people because they you know they have enough experience to be able to think back to you know the dot-com days right and to kind of the early kind of getting online days i mean even i can remember um you know i'm not i'm a millennial kind of mid millennial and i even i can remember um you know really kind of getting online the first time and some of the companies and stuff that were coming out doing interesting things so i think i think people people get that now and i think that um it's still like it's like the internet right then it's early but no one that there's so much new stuff happening so innovation like you get it's going to be

big and you know it's going to change everything but you don't exactly know how it works right and from from you know even experts in the space across all the things that are happening because there's so much innovation um but but you know it's important right and um you know and then i think there are some people who who maybe have gotten even bad narratives from the crypto community that have just been fed to them for for a while right and that i think that is possibly one of the reasons too that um it's taken so long has there just been some bad narratives what were some of the bad narratives dude well i think um you know i think a lot of the illegal stuff right that's been a bad that was

just a bad narrative and it's still even you still hear janet yellen saying it um you know and i talk about like money laundering and stuff like this yeah and then i think some of the other stuff around um you know whether it be like um you know i think i think wall street generally doesn't want to displace the dollar um i think that that from their vantage point is that you know it's very against their entrenched interests well said so wall street did not like the the whole crypto anarchist like this is dark net money like uh screwed the central bank screw the government sort of thing yeah i don't i don't think that that

i don't think that that pulled weight for a while right and then you know i think it's catching more now that there has just been such you know with kovitz such a massive um change in the monetary regime right um so so i think that was kind of a catalyst that that that kind of brought the digital gold that narrative stronger right but i think there's still people who still think you know even the currency narrative of crypto is all currencies we're right they're all just going to be currencies and they're not we all know that they're not right we all know that defy is not just it's not currencies we know ethereum is really a cloud network we know a lot of these things can look like you know digital companies and other many

digital assets but and i think the confusion around you know thinking there's a thousand currencies of everything um that happened for a while too right so and then and then i mean i still talked to you know i i was i was talking the other day to someone inside one of the very very very large macro funds and um you know they're they're they're kind of getting in on bitcoin right but but even still they're like i don't get why anything else they haven't even done they hadn't done the work on ethereum um so you know i think you know but but then it depends right some folks are even down they understand more but that's that's the answer your question so all right cool well

let's lay out the case that you guys make because i think you make it very well in your report and and the the first goes back to something that uh you said in in the intro when i ask you the questions like what does wall street make of crypto uh it feels like part of your answer was they know it's not dead and they know it somehow bounced back from you know 2017 2018 to over a trillion so they can't ignore it now i think the first point that you guys make really well in your report is that bitcoin has been the best performing asset 9 out of 11 of the past years right like so when you look at all of the different asset classes here's a slide that we're

showing gold various commodities oil stocks s p bonds treasuries everything up at the top here you see bitcoin and it has not just outperformed but like massively outperformed every single asset class um almost every year it had two bad years which was like a negative 56 a year and a negative 74 but its good years were real good positive 5 000 growth you know 126 growth over a thousand growth in in 2017. so can you talk about that when when when wall street hears that and sees the data of like hey you can't they they

don't they don't like ignoring gains right um so when you make the case and you say hey the last 11 years if you want to see what the best performing asset class was it's a cryptocurrency and it's called bitcoin what do they say and how does that resonate uh how does that land with them well i mean i think back to you know even one of the the prior things we're just talking about right um you know obviously the everyone wants to make money but then i think on the other side even today i still see like you know a few months ago i saw i think it was you know one very large bulge bracket bank who came out and said they were just showing the returns of bitcoin and they're saying is it you know the biggest bubble in history right and people see

you know the returns and for some reason they think you know high returns like this must mean it's a bubble it's going to crash because they're not used to that type of returns unless it's maybe tesla or something right we know that the the what that created on wall street in terms of the chaos but um and and without in traditional markets but but i think what's happening here is it's not fitting in their existing paradigm box um or at least it wasn't for some time and um because of the disruptive innovation so you know i think now that people have seen the returns for so many years and we're just at this size of scale if it's in you know if it's of the maturity of the asset class um i think people now understand that it's an investable segment for their portfolio do you think that um

do you think that the people expect bitcoin to not have those kind of same levels of returns because it is maturing as an asset or do you think that people are hoping that at this point in time like bitcoin has been the best performing asset classes in the last nine out of 11 years and therefore they're hoping for you know strong continuation over the next five years where do you think people's heads are with like the the next five years of bitcoin performance do you think it's gonna are are people expecting this to be equally as crazy or do you think people are getting in now because they think that it's finally going to start to behave like something that they are more comfortable with well it's definitely becoming more

integrated with the global traditional economy and traditional asset classes i mean we can see you know that you know when when certain assets you know perform a different way there's a lot of correlations now that we can see that the crypto's gotten so much bigger but i think you know you're seeing a lot of people getting in today because they do still expect a lot of upside from this asset class and you can have strong returns um in crypto if if the tech continues to disrupt again you know we think crypto is like the next wave of the internet um just like internet stocks you know have risen to create the fangs and and and all the the large um text you know winners that have made a lot of people a lot of money on wall street for a long time uh we think

there's still a lot of upside in crypto um you know i don't know that the yearly returns you know we can see that you know cycle over cycle you know bitcoin returns and it's just kind of a law of large numbers thing right you know they're they're slowing down but i think i think people are really getting in today because they do see um you know more upside and you know they're it's interactive to you know put in their portfolios at this point right it also seems like i mean uh the case that this is like the third market cycle this is the third time really this has happened right so you can kind of get them used to the rhythm of these three four year cycles these boom bust rhythms aren't just one time events this is part of the the

cyclical fractal nature of crypto and i love this chart here uh where you just show like uh it just says you know 2017 when we see crypto spiking up towards 1 trillion didn't quite hit that is it a fad nope because we just hit 1 trillion again and we are this is in january of uh 2021 that you guys published this report we are over a trillion now uh decently over a trillion so it just feels like it's the next uh reverberation of that cycle again but i i want to talk about this comparison you make because this is a really interesting lens through which maybe uh wall street can see crypto which is not just as a commodity asset but as an economy and

in in this slide you compared the the top largest nation-state economies on earth you've got the u.s you've got china you've got japan uh you know one two and three and then you compare that with crypto as an asset class and crypto actually places as the 16th largest global public economy can you talk about that framing does that resonate with wall street yeah so that's uh that's a comparison of the stock market capitalization versus crypto actually nowadays we're probably coming up on canada which is kind of interesting to think about um but i do think about crypto as really um the next wave of the internet in the

sense that it gives the internet its own it makes the internet its own emerging market economy right you know you hear koda's law with ethereum and what that enables and it kind of gives the cell sovereignty to the internet and gives you global internet communities right so in that sense you've kind of created countries in the cloud which is a narrative that i think is is kind of developing and i think what you know is happening is back to the to the boom bus cycles right and you know it's just a small economy a small digital economy very reflexive to capital flows before people saw that as um you know just pure speculation but but what i think it is it's just like you know as any small economy sure is right it grows and i think you know

crypto economy i think it has a potential to be as big as the internet economy um and potentially larger because the innovation it could unleash over over the long term so i think that now that we're at that size you know again it's it's it's like you can't you can't ignore it from an investability standpoint this is another slide that i think is hard to ignore and some data points that are hard to ignore as you guys are painting the picture of this whole crypto thing being as large and on a similar growth trajectory as the early internet so what we see here is the amount of of crypto users over time starting from about 2015 to 2020 and there's another chart on the amount of internet users over time and that chart spans across the top from 1992 to 1997.

and what you guys are reporting out here is there are uh close to it says passing over a hundred million worldwide users of crypto these are all people who are not necessarily using d5 in their everyday lives but i would assume at least have a crypto asset and that would count as as usage of crypto they're using crypto maybe to to store their value and the interesting thing here is it looks like it's a similar trajectory as the internet in terms of annualized growth but maybe even faster uh by by this comparison so you're sort of charting that out and i i love that people always ask well you know if this is the early internet what year is it and this data point says it's the year

1997 basically of the early internet so like right before the dot-com boom and before this internet thing went mainstream we're still in that sort of early speculative hype uh part of the cycle can you comment on this a little bit yeah i mean i think it really goes back to the cover page that we were talking about when you know people were getting online right and everyone's kind of just trying it right um crypto's kind of hard to use not everyone uses it it's not as intuitive storing and keeping your custody and your security but you know just like getting online with dial up and how effortlessly it is you know nowadays right because we're all so native with it and we've all you know billions of people most of the world have kind of joined the internet revolution um you

know i think this crypto uh internet revolution is is really in the early innings and i think you know back to you know the the days of it i mean i really do think you know we're seeing use cases emerge just like just like these early use cases that are really hitting society's kind of going mainstream moment you know as we said in the cover right whether it's whether it's things like defy or things like um nfts i think we're kind of crossing that chasm where you know the traditional mainstream society it's not just this these niche technologists right these people like us who have been following it for some time right but it's now it's now kind of hitting you know application level for everybody to use so um and again we have data that says that as the internet grow growth of users right the

growth of the the value tracks it as well this is kind of uh do you think for crypto as well a metcalfe's law sort of derivative uh yeah it's similar i mean yeah it's similar to that david i've got a question because we always uh in crypto we always use like the dot-com bubble kind of like this frame of reference and i remember back talking about uh in 2017 when i was first getting into crypto saying like oh yeah this this must be crypto's own like version of the dot-com bubble um but you know maybe that that comparison back in 2017 didn't didn't hold water maybe that was just my my anchor point back then but my question to you is do you think that this is going to turn into a speculative mania actually inside the stock market as in the stock market is

going to start playing the crypto game in the same way the stock market started playing the the dot-com game back in 2001. um we we see coinbase ready to to go public we've seen companies like gemini signal interest and and then we've seen a number of companies signal interest after that uh and then there are plenty of uh already public companies uh putting bitcoin on the balance sheet and then those companies share prices going up after that and then there's public companies like paypal putting uh bitgo or um custody providers on on with their acquisitions do you think that this could actually start to play with evaluations of stock market valuations and that this kind of turned

into its own kind of legacy market mania just because of how much excitement there could be in the crypto markets well i i don't think that you know look the fed said the other day they're not concerned about what's happening in the crypto markets for the broader economy and for the broader traditional markets and i i would agree with that because you know back to the other chart that we showed with the size of the stock markets i mean the u.s stock market is i don't know maybe it's 50 50 trillion right we're you know pushing on you know one and 1.75 right so that's uh much much smaller i mean this is just a it's just a pocket of global investable assets it's very small these days um you know is crypto was i mean i think crypto in 2017 was not was not the

dot-com moment because um you know if as we just showed right that that like was that a trillion rate of market cap then you know if we just think back to what the dot-com bubble peaked at uh if you take the technology index then it was 4.5 trillion market cap for the dot-com bubble back then right so if you even think about where we are today with kryptos growth uh you know in terms of market size we're still under that and then if you think about broadly like that was back in the 90s and 2000s how much bigger has all of the investable asset class base become since then so if four point if if if a dot com bubble is your frame of reference right and 4.5 trillion in

um 1998 right 2 000 right um and then you think about m2 growth you think about all assets class growth right like how much bigger if if there is a dot-com bubble right and i'm not betting you know i don't want to bet and speculate on one right it's possible but um you know what would that size be right um and at that point then it does kind of become maybe some risk but but not not today it's funny david how well that maps to like uh today is 1997 right because what this all means is we still have the speculative.com bubble essentially ahead of crypto and 2017 wasn't it maybe maybe this time around maybe this cycle we'll

see that i'm wondering if you if you see this cycle kind of growing into a not a stock market speculative like mania but a dot-com sized uh event where the assets and crypto run up to the you know maybe the tens of trillions of dollars well you know we um you know we don't want to put our clients in things that we think are just going to kind of be betting on a speculative frenzy right so that's kind of not our core focus but we do think you know even still at today's levels there's fundamental value and we don't think the market's in a bubble by any means right so you know is it really possible that um you know the macro could could happen and we could go to uh those levels absolutely i think i

think it's possible that those types of things could happen right um so i i definitely think we could crypto could see that right and i think but what's important is making sure kind of just like defy is right the usage and the application growth and the in the fundamentals track it right to make sure you know how sustainable that is absolutely well guys we are going to be back with david in just a minute we're going to talk about uh how crypto is disrupting banks we're going to talk about how wall street sees ethiosa and ethereum the network but before we do we want to tell you about the sponsors that made this episode possible if you are looking for a product that connects your fiat bank account with d5 tokens and products you need to download the dharma

mobile app dharma is a non-custodial smart contract wallet and comes with a bridge that connects you right into your bank account dharma is the fastest and most efficient wallet between your fiat and your bank account and any token on uniswap or even any vault in yearn with dharma you can get over 25 000 per week into the d fight universe and you can do it non-custodially if you or anyone you know is hot on defy and you're trying to get your money into a defy investment dharma is the place to go signing up and going through kyc is an absolute breeze it took me just under three minutes and after signing into my bank account via plaid i am now just one transaction away from any token that

uniswap has to offer go to www.dharma.io that's d-h-a-r-m-a-dot-io download the darba app and get yourself unbanked today if you want to live a bankless life you need to get a monolith defy visa card monolith is both a one-two punch of an ethereum smart contract wallet as well as an accompanying visa card that lets you spend the money that you have in your ethereum wallet wherever visa is accepted it's really a fantastic tool that lets you use ethereum for what it does best which is holding and managing your financial assets but also keeps you connected to the rest of the world's payment rails monolith also offers on-ramp services for getting your fiat

money into the world of defy so it's trivial to top up your monolith card if ever you need to and your deposited money goes straight into your non-custodial wallet so your money is never held by a centralized intermediary because your monolith wallet is native to ethereum monolith helps you transcend both the legacy and the crypto worlds because the money that you hold in your monolith wallet has the power of d5 behind it swapping assets on unit swap or earning yield in d5 is at your fingertips but with monolith so are the groceries at your grocery store or the coffee at your coffee shop go to monolith.xyz to sign up and get your monolith visa card today not exactly but here we go hey guys we

are back with a david and we're talking about what wall street makes of this whole crypto thing this whole crypto revolution and i actually want to get to this part of the conversation leo are many things in its own way

you know so i think actually when you think about defy and the applications um that are being invented there i think they're actually they find that more possibly threatening to um to their business models uh or innovative in some ways i think that even some of the things like bitcoin to some people they kind of get it right and um i think that you know from a fintech perspective i mean i've even seen you know i i'll just say i see a lot of sell side reports that come out um and some some of these things have been made public right with just a couple bullet points from two i've even seen bank of america who's been pretty critical on bitcoin and crypto in a recent report

uh be like you know defy has a lot of innovation potential and then wow you know yeah and and they were kind of you know giving some not so good takes on bitcoin right and i think that the same thing is being said kind of across um you know some of the other um you know kind of wall street firms so i think the view on d5 is actually more bullish and positive than on bitcoin this is crazy to me david because actually what you what you're saying here was echoed by a guest we had from from uh bitwise not the first time we've had this take yeah not the first time we've had this take and it's kind of met well so okay so matt basically he he made the point that um a lot of people who didn't understand bitcoin they get defy right right away

you know first we're talking about capital assets but but second and maybe like you know from a larger perspective they know that the current existing financial system and banking system sucks like they know it has rent-seeking behavior and needs to be fundamentally disrupted and they know that fintech just kind of scratched the surface on the level of disruption that's that's needed and this goes to one of the slides you kind of put together about this evolution of banking where we had this kind of banking 1.0 and fintech was sort of a 2.0 but defy is kind of a ground up we're replacing the entire infrastructure from the ground up revolution that hasn't happened yet and matt said that that people in finance

you know uh cpas cfas inherently understand this and even understand it better than the narrative of a bitcoin b becoming a new global money right that's like they dismissed that as bitcoin gold bug stuff but this they gravitate to you that's what is that what you're saying that's exactly what i'm saying that's exactly what i'm saying i think they see the kind of disruption potential um and you know i think with this right like if you think about back to what we're saying with trust-based systems right what was the point of having a bank um you know you had to walk into the bank you had to know the person in the local banking region where you're going to get a loan you said hello to them you know you went to church together they knew you were a credit worthy person the bank would give you a loan because you

were borrowing it from the person down the street right you created a global network of this and these payment rails and the tech has just not been um as innovative as you have with the digital society with technology and then you have fintech that's emerged and you know instead of walking to bank you can you know authenticate through your phone you can use you know biometric authentication right you can use different things like sofi and they have all these other data points that you didn't have in banking right but so that's that changed the trust layer again and that opened up access and increased uh increased access lowered cost right but you know the thing that underlied it all underlying it all right was this decentralized infrastructure layer of the trust-based systems right and with crypto

um and these open blockchain networks and you know the d5 applications right it's you know i think um you know when you decentralize that that aspect of of the trust-based system right it creates a lot of um you know especially non-custodial everything's on chain you know the contracts you know how liquidity works right it's it changes how the the the the you know the product can reach the market and expands right the user base and i think there's a lot of disruption potential for that i mean it's just you know a few guys writing lines of code and and you have protocols that are the size of you know mid-size community banks right now some of these borrowing lending platforms right

in terms of assets yeah absolutely they're getting large and it's it's we've we've often echoed the story of uniswap which we you know you talked about some big news today but it's like a team of 15 people basically and and uh they grew to volumes that surpassed uh coinbase in like less than two years which is crazy what i love about these types of reports too david is uh you guys aren't afraid to make predictions this is what's fun about uh wall street analyst reports i think sometimes people in crypto are somewhat reticent to make predictions but you guys are throwing out some numbers these are some numbers you put together at the beginning of january and i'd love for you to give them some context but this is the 2021 outlook bitcoin to 100k uh ether to 10.5 k so we're hitting that

eighth to 10k magic meme marker and the crypto market writ large 5 trillion we're going to get some some details maybe into into how you're coming up with those numbers for ether of the asset but can you give us just the high level where are you coming up with these numbers and this isn't the first time you've made price predictions on some of these assets how do you go about even coming up with price predictions for these assets yeah it's a great question just so for context um because we're a little past that right this was back when you know i think bitcoin was around 35 000 at the time i just hit 40 and pulled back and so you know we've come a good ways towards that um and um you know ethereum uh i guess we

all kind of know you can probably triangulate where it was back at that time and the crypto market was still back at a trillion so we're on a good pace um but yeah i mean the way the way we come up i've come about it at least is kind of fundamentally driven um there was a you know for bitcoin i look at it kind of like you know strange that are in a way digital real estate or um its own commodity i look at it versus as a book value multiple of kind of the total mining investment because you know you have to mine a lot to produce these things and i came up with this model you know i call it price to book for bitcoin kind of like you value a bank on a price to book multiple and my book value was just the total

mining investment um and this is something i came up with back in you know january of uh 2018 right and um yeah so that's how i look at that one right but i look at ethereum in a different way and we can talk about in a second because i think about it like a cloud computing stock network in a way a crypto network of a cloud stock so i look at now of course it's still mineable like bitcoin today i'm just looking at an eth kind of two lens and on the crypto market cap side um i think it does kind of come back to some of the the cycle factors that we were talking about i kind of think if we hit those two numbers um because that's you know 80 of the market you know the rest of the market kind of goes with it and um you know i'm

just thinking about kind of ratios you know broadly alts tend to outperform just because of capital flows and um you know thinking about what kind of dominance this could be right at that point but i do think about it kind of like as an economy level right so that's kind of how i got to get to that one as well so let's get to this kind of second part this whole conversation around uh ether and ethereum and the understanding it very much feels to me like we've said this before on bank list that um ether in terms of its narrative understanding is maybe a cycle behind bitcoin like now bitcoin is just adopted as yeah that's uh digital gold okay we understand that we get that narrative now and they put in the context of macro which we haven't uh dug into but

obviously that's a um that is definitely a catalyst for crypto but um can i ask you this basic question so it feels to me like a little bit the conversation is moving from just a conversation of when you say what is crypto and you know somebody says what's bitcoin so now it's maybe not just bitcoin it's bitcoin and ether like those two assets is the conversation moving in that direction or is ether still and ethereum still not really rising to the level of being something that's named that people understand i think the best way for every user uh or every like kind of probably listener to your

show to think about it is um imagine that the mass bucket of capital that's been entering in the mass you know segment of investors and users are you when you first got into crypto um for me that was back in 2015 with bitcoin and then you know ethereum after the dow hack right and you know think about what your learning curve was when it first came on your radar you first decided you're eventually going to listen to it look at it and you had to try to understand it where you started and when you kind of got to within your investment spectrum right and i think for most people it really is this process of okay bitcoin's the biggest it's the

largest is the first one it's the one most people talk about in the media you know uh but that's changing right um so you know if you figure that one out right and then um then we figure out the rest and you kind of move down the spectrum and you capitalize flows and invest on the spectrum so i think that same um that same awareness um knowledge and learning and then the investment capital flow curve applies right um to what's happening today right just at a bigger scale and that's the thing to keep in mind so i you know the way i'm seeing it now right most um most talk was about bitcoin for some time right bitcoins kind of now most people are starting to understand it and starting to get it um you know most

research reports and stuff on crypto that came out first for bitcoin but and the products like you know morgan stanley and the ets right were bitcoin right through those through those channels but now i'm seeing stuff like you know i think alliance bernstein one of the you know the software group there put out a pretty good report on ethereum um and um also on um you know some of the upgrades that have been happening and i think that that same exact learning cycle is going to happen and it's happening right now with wall street right and again everyone's kind of following this educational curve and i do think that you know there's a lot of crypto smart money and ethereum kind of like what's going on with you know the strong fundamentals

and ethereum um you know in terms of all the application usage all the ecosystem growth right and then um of course it outperformed you know last year bitcoin um and this year right it's had strong returns as well but you know we're kind of taking every cycle takes a a breather and a pause right and kind of wondering what's next um but but i think that i think that that's part of it right that's the it's the learning capital flow dynamic right and i think that people are gonna recognize the potential for disrupting i think in my view big tech with cloud platforms um on the blockchain computing side david i want to ask about how this whole defy thing impacts people's learning process about specifically ethereum because as we've said there seems to be

this resonance that you know more traditional investors have with the defy assets mainly because they are capital assets which fit into old older models that they're familiar with yet i would imagine as they start to you know do this evaluation on some of the most common defy assets that are out there such as you know uniswap and it's you know x number of billion dollars of volume or ave and compound and their x number of dollars of uh assets under management all these things fit into their models yet i would imagine that like oh the uniswap is an application what's that application built on it's built on ethereum oh uh ave compound oh it's also built on a theory maker doubt also built on ethereum like basically if we're talking d5 we're talking ethereum how does that fact that like these d5

things that they are learning about that fits into their legacy models and they all happen to be built on the same platform that's this ethereum thing how does that impact people's perceptions or trajectories about learning about ethereum versus versus bitcoin well i think you know i think it's the same as um you know developers right you know i think if you're a developer and you see a lot of tools on one platform right you're gonna probably you know you can get you know the the you know the api layers and you can get all the things you need to get to right you're going to probably learn about that platform and learn how to build on it um and i think you know i think people you know recognize right that you know to this point the ethereum economy is certainly the largest in terms of

applications right and i think that's one reason rio reflected why it is the second largest in terms of you know its market cap as well um you know so i think it definitely says a lot right there's a lot of product market fit with the d5 applications in what i call the ethereum cloud network that you know and um you know i mean people you know sometimes criticize the fees i think that's you know you know i saw something similar where someone said bitcoin you know bitcoin couldn't work because fees were too high and they were too volatile and then i just thought like do you say that when you get a surge charge with uber because it's because you have demand pricing or is that product market fit because you're willing to pay it um and you know that's that's the thing i think is interesting right so

yeah i mean i think i think showing that you know all these things are built on ethereum right and things are being built on other platforms as well and there's a lot of exciting stuff happening in crypto right we cover it we cover it all but again we are bullish on ethereum two amongst other things right and i think that definitely it's a sign to say hey you know this is a very good place to to look for um fundamental innovation happening that is kind of lasting through the cycles um in my view i want to get your sense david of wall street's level of understanding ethereum and and ether the asset sort of the the investment of ethereum um so like there's the base level understanding i think where you you think of

the asset as kind of a commodity to pay for gas in the network right and you can kind of value it based on what's the demand for this commodity going to be this commodity money within the network so that's like one level there's another level that dave and i have been talking about a lot which is eth as a uh store of value asset right so that's the ultra super ultra ultrasound money ultrasonic money um and so like that's um that's kind of the the similar case that you know of bitcoin which is bitcoin is digital gold well ether is kind of digital gold for an entire economy right there's that case but you're making a different case as well when you get to that 10k

evaluation which i think is really interesting you're making the the case for eth as a productive asset eth as a a capital asset as well and like both david and i would agree that like ethe is a triple point asset it can be all of these things when it's staked it can also be a productive asset and provide returns but here's the case that you're making and once again 2021 i think is the first time that i've seen those bridges to wall street which which you guys are an educational bridge to wall street being able to make this case for ether the asset and your case is based on the revenue that the asset and the ethereum network is uh generating so i'm going to read

some parts of your tweet and then maybe you could we talk about this a bit this is from uh march 9th ethereum has a market cap at that time of 210 billion eth generated 1.75 billion of revenue year-to-date for 2021. that's a 3x of its 600 million that it earned in 2020 at this pace eth 2021 revenue is set to grow fourteen hundred percent if you annualize that that means year-to-date revenue top-line revenue of nine billion the framing of this is so interesting because what you're arguing for is basically um ether to be viewed through the lens of a of a capital asset

and it's it's a capital asset that's going through an insane period of growth and that's i think where you're getting to when when you start talking about um comparing it to cloud compute type platforms right maybe you could walk us through the comparison david because i think it's super cool yeah so i'm kind of putting it through um you know kind of a post um you know you've implemented some of the changes to the protocol um that are kind of coming up right you know staking and kind of a burning um implementation lens right because you know obviously it is still minimal today but you know when you are um in finance always you have to think about it right on a forward-looking basis right what

can what is the what is the future what the company you know how can they do right so you know the thing that you know the reason that i don't think people were able to do this in the past and they can do it today is because um the numbers just weren't there um ethereum you know at you know any scale on a layer one today at least in terms of fees and revenue generated um you know it is it is it it's ethereum and bitcoin at that level um right and it's if you know you think back to you know wall street is investing more mature things right you're not investing in the start the small startup kind of early seed stuff which the tech stuff can grow for a lot of these other crypto platforms but you can look at it now on a traditional

lens and compare many you know these types of and some d5 protocols these days too right we can talk about but um in terms of the fees and stuff they're generating but if you think about what fees are to a crypto network if you start burning fees that's a reduction in the token supply right and if you think about company economics right people would say how is that revenue you know if if you think about what happens i give dollars to a company like salesforce and um it goes through the p l they have profit from that and they can buy back their shares right if you burn tokens that's the same thing right so that's the reason you can think about you you can can be you can be comparative to a degree with crypto

network economics and traditional company economics because i do think like crypto is kind of a two point like a theorem is really a 2.0 cloud stock um is the case i've made before and you know that's that's the reason we kind of frame it in that sense yeah so let's talk about that framing or that comparison you know i gotta admit sometimes when i hear the kind of the the cloud stock uh metaphor i i get a bit of ptsd from this whole idea that people thought in 2017 that ethereum was like a decentralized aws right that it was like the internet computer and that like we were going to store everything in this internet computer like graphics and everything and the reality is it's

it's a it's an internet computer uh it's a it's a world computer in in terms of its you know permissionlessness and in terms of its kind of his span but it only has the power of like your computer your your consumer grade laptop right so this is not going to store all of the world's images it's not going to be a world computer if you're looking for the second coming of aws but i think i start to understand you as you describe it as a kind of a um a country in the cloud right because it is a property management system in the cloud it's like a country in the cloud and it does have this capital asset element whereas david has described it before too with eip 1559 it's doing essentially a share buyback and it's

taking those shares and it's it's burning them it's removing that scarcity but i want to get into that that detail here if you compare the kind of rate of growth that we're seeing which is right now 1400 year-over-year growth in terms of the top level revenue ethereum is generating you compare that to other cloud stocks let's say these are fast moving you know tech companies that are growing fairly fast you get like sales force which is 195 billion market cap and it's on a revenue of 21 billion and it's only growing at 25 year-over-year growth right is this kind of the comparison that you're making and what are the

metrics that that fall out of this does this indicate that um ether the asset just from a top-line revenue perspective is undervalued overvalued fairly valued relative to these sort of cloud stocks yeah i mean i think you know um i think that you know there's kind of a lot to unpack in here right like i think the cloud is kind of an arbitrary thing right cloud is also a lot of computers that are traditionally on you know one layer right and like you know people just took it somewhere but i think the narrative of framing ether and crypto is kind of a cloud in a new wave of the internet i think that i think that resonates for for our clients because if you think about the narratives of things right back to

narratives for investing in crypto for a while crypto and cloud investing in the cloud wasn't cool and then eventually it became the thing right and everyone was like i'm moving to the cloud and where's the cloud really it was just some data centers just but they weren't in your place right right and where's the data stores so um it's kind of the same thing here right and um you know i think about the the you know you're compa so we are saying like it's a next wave of the internet right so it's the next layer of internet applications by adding the the trust layer on top right even if you are storing it wherever you're storing it right so and if you think about the growth layer that these things enabled right um it's it's it's been very rapid growth of the cloud it's made a lot of money for a

lot of investors and but you know i mean for them if you're growing 25 50 a year that's fast very fast and that's why you deserve a very high growth multiple and people are willing to pay up for that um you know if we look at crypto and we look at just ethereum that 1400 is is is like eye popping right but you could say it's an anomaly right because you know um but it's been volatile but really it's been growing that fast since 2015 so if you take what's called a compound annual growth rate it's been up and down there's been much better years and much worse years but on average since 2015 ethereum fee revenue has been growing that fast 15 000 or 1500 right so you know i think that's important for

folks to see like the sustainable trajectory of what's been happening with the trend of this this crypto you know i still call i also call it kind of crypto cloud platforms right in a way right for for our audience and people who think about it that way because you know this new wave of the internet just like we went from you know central you know you know centralized and traditional you know pc you know other forms then went to the cloud right um i think this new wave is really kind of taking over of crypto computing right and um so if we think about if you're going to invest in the next wave of computing in the next wave of you know you know internet cloud tech right um i think that this is probably a good place to be from uh from an industry standpoint right

um so i mean there's big growth multiples being paid for things like the traditional cloud 1.0 companies and that's fast growth and ethereum and crypto networks are growing much faster uh you know the economics aren't exactly the same so we'll see how it shakes out but i think that there's something to be said about the potential here certainly david how is that message landing with wall street when you talk about it as kind of a ether as a capital asset as this being similar to a cloud how close is wall street to understanding this maybe in like bitcoin terms right so are we at like their 2016 level of understanding for for eth um or and then how do we how do we continue to bridge that gap

well i think there's you know again when i speak about wall street's really i'm speaking you know there's very broad terms right because there's a lot of really sophisticated people on wall street who know a lot and there's some people who kind of know very little some people who know who haven't you know spent the time at all right um but i think the people who there's there's a segment of people right who have um really just looked at bitcoin they don't and they haven't gotten to ethereum to understand the nuances of how this works but i think that the folks that i've been talking to that are listening and getting to know ethereum i think that the the model resonates with them a lot because when they they view it through that lens of of you know kind of the potential for economics to be kind of more similar to

something that's within their bucket and their paradigm and for framing i think that that's that resonates um and especially i mean the usage and the traction of the fees i mean that's that says a lot itself too right and this is back to your d5 thing right with um everyone building there right so so it's an indicator just like financial statements are right so david there's a conversation that we have on bank list that we think will permeate out into the rest of the world so i want to get your opinion on it and this comes in stark contrast to the very very low rates that bonds are returning for for the in the investors like bond yields are at all-time lows uh and uh famously uh ray dalio just put out a piece where he's he's saying well

at these price levels bonds to me just make they're they're overbought and they're they're they're just not it doesn't make any sense to him and you know it's something that me and ryan have been trying to pioneer on the bankless podcast bankless ecosystem is that you know ether is like exactly what you are saying with like this internet cloud platform ether offers this internet bond this internet native bond does that does that narrative or mental model fit into what you were talking about with your clients and investors at funstrap um i think i think you know i think very i think closely but you know i would make a nuance to it right and it's kind of you're kind of coming kind of agreeing and kind of making a slight nuance uh if you think about a company's capital stack right you can have a lot

of different types of assets from you know fixed debt to um like preferred shares that can do things like pick and accrue interest right so you know and so you can have like convertible preferred debt and you can have traditional equity um for me the closest analogy to like staking ether is kind of like owning like a preferred convertible preferred shares because you know you have i think ether itself because of the way that the economics we believe will flow right in the future once kind of these upgrades if they come through as we think they will right you can have you know revenue come in you can have some portion of that be a net

reduction to the supply all right and the way i think about crypto company network right crypto i think about platform you know companies platforms networks right crypto company network right uh as this evolution is the p l's you know um you know wherever the revenue exceeds the the inflation rate you have a profit and that profit is your net reduction in supply right that's your net hard money right in a sense or just share buyback or like or dividend or you can do the same thing with staking right and that's like traditional company economics that's like kind of owning a cloud network equity like a crypto equity right in a way but if you're staking it you know you kind of got a little dividend and it's kind of like

being an employee in a way right you're providing compute to the network and you're getting paid the salary and that's like your expense on that side to the network um so that's kind of how i would kind of bridge the gap to thinking about personally those things yeah that makes sense i i love these conversations because it's it's very clear um all of us are trying to understand these new assets and like fit some existing paradigms into them to help to help the world really understand it and there are different ways to do that uh for sure but i think you've hit on something in identifying ether as a a productive capital asset that is very much tied to the growth of the ethereum economy and block space revenue which is

really cool and again this is one of the the first times i've seen um like wall street education making that case and i think you said it well david you're able to make that case now because it's true because eip1559 is coming down the pike be ha because we have proof of stake because those returns are going to come back to eth holders let's conclude with this and this has been a fantastic conversation david we've really enjoyed your time and definitely learned a lot here let's conclude with this what is something because our audience is mainly crypto natives what is something that crypto natives should know about wall street and people on tradition in traditional finance

and and what they're doing in crypto what's something that crypto natives should learn and should know about wall street you know i think i think there's a lot of people on wall street who personally maybe they're not the guys who are actually able to make you know the changes to the investment mandates into the investment is but you know personally kind of probably interested in crypto themselves personally you know who will read our our research and you know maybe they'll have their pas and they're interested in it i think that's um so i mean i think a lot of people on your podcast maybe are people on on wall street who are smart people and um they could be crossing the chasm right because you know i look at you guys i think you guys have a great show um i think you appeal to a great

audience both crypto and traditional folks so um so i i maybe that answers the question i think it does it echoes something we talk about a lot which is the base layer of all of this is people and of course what is wall street composed of its people people understanding the narrative the most bullish thing for ether for crypto is to be understood david thank you so much for helping the world understand a little slice of crypto here thanks a lot for having me guys risks and disclaimers of course none of this was financial advice bitcoin is risky eth is risky so is defy you could lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad

you're with us on the bankless journey thanks a lot to bankless hq right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence we recommend joining our daily newsletter podcast and community as a bankless premium subscriber to get the most out of your bank list experience you'll get access to our market analysis our alpha leaks and exclusive content and even the bankless token for airdrops raffles and unlocks if you're interested in crypto the bankless community is where you want to be click the link in the description to become a bankless premium subscriber today also don't forget to subscribe to the channel for in-depth interviews with

industry leaders ask me anythings and weekly roll ups where we summarize the week in crypto and other fantastic content thanks everyone for watching and being on the journey as we build out the bankless nation