Why Maker may be undervalued: revenue and upcoming catalysts

Transcript

maker right now is currently generating 25 to3 35 million every single month out of any application in crypto it is generating the most GM good morning welcome to milk Road radio where we help you navigate the crypto Market one Satoshi at a time it's Wednesday June 12th I'm Jay Hamilton and today we're joined by Kyle reidhead we're going to break down the bull case for why we believe maker is the most undervalued valued asset in crypto right now Kai great to have you back on the show thanks so much excited to be here excited to talk about maker excited to hear you talk about it because this morning you put out a tweet and you said I quote I'll buy as much

maker as you have right now at $2,200 sell me all you want then go off it's seems like you're quite bullish on maker you want to explain why you put this tweet out yeah a little bullish on maker for sure and the more I learn about it the more bullish I get this tweet comes from the famous tweet from s bankman freed back in 20121 I think it was salana was at $3 and um he put up this exact I literally just copy pasted his tweet but he put out this same tweet and basically he was at a point where he was like okay I'm so bullish on salana this thing's so obvious to me but it's so undervalued and interestingly when he put out that tweet Sal's at three bucks

which was around the same valuation as what maker is right now which is to two or 2.5 billion FTV that's what Sol was when he put that quote it's weird for for maker da because maker is worth 2200 so it sounds a lot more expensive but actually in terms of valuations they were the same but basically I'm kind of at the same point with maker I think and that's why the title is episode or what you just asked was is this the most undervalued asset in crypto and and I think it is I continue to try to find something else I just the more I look into what Maker's doing its fundamentals now and then the Catalyst that it has coming I just I can't be more bullish on this thing and I just don't understand its valuation right now it's unbelievably undervalued in my opinion

and um super bullish I'm gonna buy more right after this call by the [Laughter] way I love it okay so before we jump into the bull case and explain why their fdv is so low in comparison to their incredible revenues and break that all down let's just take a step back for those who don't know no maker Dow or even for those who do no maker Dow can you give a simple explanation of what this project does yeah maker is one of the first apps ever built on a blockchain just to start there it was built on ethereum back in like 20 maybe 17 it was like one of the first like real use cases that came out in the previous bare Market of this one so back

in like 2018 2019 was actually live and being used so it is one of the first and it has probably the most fundamentals but basically what maker is it is a complex protocol but to keep it simple it is a bank for the ethereum economy Banks serve a very important role in all economies in the sense that they give users access to dollars right or fiat currency in whatever depending on which economy you're in and so if you think about a bank you can go and you can get dollars through mortgages through credit cards through line of credits whatever let's say in the US or in Canada or in Europe whatever the same is true for maker although they don't have it in the form of mortgages and things like that the main difference between maker and a traditional bank is that a Traditional Bank gives you dollars without any

collateral they just figure out who are you what jobs do you have how much money do you make how much assets do you have and then they sort of look at you and a human makes a decision on like should I give you money or should I not and what rate will I give you at whereas what maker has done is it is built on a blockchain and it is fully automated fully transparent and permissionless and so anyone in the world can go and basically get a loan and get dollars and they can do it without having to say who they are without having to prove their income now the other sort of big difference here is that I guess two things one the rules of maker is set in stone there's no human to make that decision and so the way Maker Works is

you have to put up collateral in order to get a loan and so you have to put up your eth or your wrapped Bitcoin or your Stak eth or whatever they decide to take and you have to over collateralize so I have to put up you know whatever it is $150 to get $100 you know and that's very different than the traditional World which is I don't have to put up anything and they'll just give me money that is the idea of basically printing money that is what banks do in the traditional world and so banks have a lot more risk because they can take out sketchy loans and give dollars to people who don't actually have the money maker can't do that and so the safety of maker and the way you get a loan a maker is actually a lot lower risk than something

like a Traditional Bank in the real world but ultimately it is just a bank for the ethereum economy whereas you think of like JP Morgan or Bank of America or whatever is just a bank for the US econom right so somebody's holding an investment like State East they don't want to sell that they want to keep that but they'd like to get some leverage on that while they can go and use that as collateral to get some die obviously there's some downside to over collateralized loans in that yeah not everybody can access them now let's clarify a few things so maker is the protocol that is the bank that is where you go and you give your collateral and then it gives you dollars it's dollars that it gives you is in the form of d d is their stable coin everyone's heard of stable coin like usdc usdt it is that

the difference is that usdc and usdt are backed one to one by $1 in a bank account in the US somewhere die is different it's a decentralized stable coin it's not backed by a US dollar it's backed by eth or Bitcoin or staked eth Etc still fully backed the same as usdt and usdc it's just by it's backed by decentralized assets versus versus like a US dollar or treasury whatever so that's one key thing there is some I guess like setbacks or cons to having over collateralized loans not everyone can get access to them you have to have money to get money right whereas someone without money can go to a bank in the traditional world and get money so obviously puts a like a bottleneck on the amount of people that can use this but you mentioned leverage that is the

idea here all banks are basically leveraging money and so but when you think of Leverage you usually think of people like you know going 10x on some shitcoin and trying to make a ton of money that is one way you can use maker the other way is just like a lot of people that hold assets and have millions of dollars let's say or hundreds of thousands of dollars in eth or in Bitcoin they don't want to sell it right because they have to pay taxes on that and they still want exposure that asset so instead you can just go deposit in maker you can get dollars out from that and then you can go buy a home or buy a car or pay for coffee or whatever you want without creating a taxable event on your assets and without losing exposure to the assets so it's not just

about leverage for speculation it's actually just a way to utilize your assets and get some dollars in a safe way so you can go use it for other things okay so why did you put this tweet out today what caught your eye what stats did you see what chart I know you saw something man that made you think made the light bulb go off and say signal signal what was it so there's a lot of reasons here right now there is we'll start with the fundamentals because there's like fundamentally I think maker is probably one of the most sound applications in crypto and then there's also a bunch of short-term catalysts which we'll talk about maybe near the end of if we get to that first is on the fundamental side and here's the thing fundamentals don't really matter in crypto so so much which is

probably why it's so undervalued and also undervalued is just an opinion of mine it doesn't mean it actually is right who's to say what the value is worth but one thing I would say is maker right now is currently generating 25 to 35 million do every single month okay that is it is the most out of any application in crypto it is generating the most it is generating more than most l2s and most l1s I think the onlyc not applications the only protocol is making more Revenue right now than maker is is ethereum maybe Tron and I think one other but I'm not sure exactly which chain that is so the thing is just dominating in terms of the amount of money it's making by the way it makes its money by when you put your assets up

for collateral there's a an interest you have to pay just like you would when you get a credit card Etc I think it's sitting around like eight or n% right now so it makes that also if you get liquidated you don't pay back your loans it obviously gets that money and then swaps between its tokens it makes some money from there as well so it's got a bunch of Revenue generating things it's Genera the most in all of crypto basically and yet you have so many Assets in the space that are I mean Celestia for example which is the data aviler is valued at about 20 billion and yet it makes about 70 bucks a day maker is bringing in 35 million a day and yet it's valued at two billion it's absolutely insane and so the revenue side is one there was another really

cool chart that came out so first maker is generating 40% % of all profits that happen in ethereum that's pretty huge the other thing to understand is maker is a bank and let's just talk for a second how Banks work how do banks grow well Banks Provide Capital or dollars to economies when an economy Grows Right when it's GDP grows when it there's a bunch more uh Assets in that economy or there's more people in that economy there's more money to put into your bank there's more people to open up a bank account right and so if you think about the way economies work they go through cycal we've talked about business Cycles a lot in show we go through the business cycle which is we have expansions in economies and then contractions expansions and contractions and so in 2020 2021 was the first big expansion

for ethereum and maker went huge during that time okay then we contracted and the economy went through a recession let's call ethereum did over the last few years we're back in an expansion mode right ethereum has just gone from an a, asset to 3500 that's a two that's a 3.5x right in a matter of about a year so there's 3.5x more Capital that can now go into into maker right also we've double tripled in users when you account for ethereum plus l2s Etc over the last year right and we're still early stages here and so I think that as we continue to expand the economy again this is of ethereum and not only that not just the ethereum economy but remember there are

new let's call it economic states that are being built on top of ethereum in Terms of l2s optimism arbitrum base Etc which are also bringing in more capital and more users all of these are potential for maker right all of this is more users and more capital for people to put this in maker and get dollars and so to me when we're in this early stage of a expansion in the economy banks are just there's no doubt in my mind that a bank is going to do better as a result of that it's going to generate more revenue and going to accumulate more capital and one other thing is as there's more use cases in that economy like staked eth for example which is Lio or igen layer with restak all of that creates more collateral to then be put in maker and take loans out against one

final note on fundamentally why I think this is a big deal actually two things one stable coins are quite obvious at this point that they are the big use case in crypto and I've talked a lot about maker being a a bank it's also has its own stable coin called D and so as stable coin adoption um grows D will likely just grow along with that and then the second thing is as you go into bull markets or when uh economies expand what do people do they take out more leverage always it's the one thing that is always true with humans no matter what you do in finance Whenever there is um a spec of time people are going to do more leverage which means that as we expand we're going to have more users we're gonna have more leverage and

there's more and more interest and utility for stable coins maker is the perfect setup for all of those things Okay so we've got somewhat of a sleeping defi giant here it's got it incredible revenues its fully diluted value is trading at like a seven times their revenues which is way lower than any other C the same Apple and Google it makes no sense when other crypto projects are trading at like 100 to 1,000 times yeah we've got them dominating eth you said 40% of all defi in E goes to profits go to maker so everything's lining up from a fundamental side but as you said before fundamentals aren't necessarily what

moves price so what is it that's catching your attention now maybe from more the pental side what do you think is going to come in the future that makes you so excited about it right now so to understand that let me just first start on like the problem of maker which is as you said it's the Sleepy old defi dinosaur those listening right now if you haven't been around since 2018 2019 you probably haven't really heard of maker maybe you have but you just don't care about it and part of that is because it's not new shiny thing like Celestia is part of it is their branding is terrible why is the stable coin called die that is a brutal name why is it not usdm right United States dollar maker

like usdc and usdt if I come in just think of ux if I come in and I want to get a dollar and I'm looking on coin gecko or wherever in the crypto world and I see usdc I'm like oh okay that's probably a dollar if I see die I'm like I don't know what the hell that thing is and then it's not even branded along with its company of maker which it's token that would represent any growth of die Etc is called mkr so like most people if you haven't been around you don't know what the heck that is and then you also have the price of maker is I said at the beginning it's $2,200 who the heck wants to buy a token that sounds very expensive whereas when s bakman freed mentioned how he wanted to buy all the Soul at $3 you're like oh

I'd buy something at $3 or I want to buy a mean coin at like 10 cents right and so while it doesn't actually matter because it's all about the valuation retail and most people it's just the way that they think and so maker has a branding problem more than anything I would say and so I think there's a few things that there's a few things that are coming actually there's one more thing it's not just branding the other thing was last cycle a bunch of defi protocols had and even this cycle had incentive programs they just gave people money to use their product maker didn't do that it was one of the only ones that just said ah we're not going to play around with this we're not going to do that and so what they did is they just waited they waited and they

decided to see what works what doesn't work and so they still have never had an incentive program whereas every other application you see in crypto has and yet maker has done this well and has Genera this much revenue and this leads us to the catalysts that are coming up so there's a few catalysts here one is What's called the endgame so basically maker is doing what's probably going to be one of the biggest I guess transitions for any protocol in all of crypto ever outside of maybe ethereum going from proof of work to proof of stake but basically they're changing the whole dynamics of their their protocol and they're going to have these what's called subd Dows which are going to start to be able to make faster decisions it's going to be more decentralized going to be a better product etc etc what this really means

is a few things one there's a Rebrand coming with this where maker token and die will be rebranded we don't know what that is but this is happening in the next couple months I assume they're going to do a good job in this at least I hope they do they're going to do basically like what you would hear as a stock split right Tesla's done this many times every company's done this where you basically just like dilute the shares and then the price of the stock goes down they are doing a 24,000 to1 basically like stock split let's call it so maker mkr is going to go down to like under a dollar and that's going to be super helpful for retail and then they're going to finally have incentive mechanism starting which is happening this summer so any day now there are a bunch of these like subd I'm not going

to get into all the details of this because it's quite confusing but basically maker is a protocol and then apps build on top of it right so spark is one of them probably the biggest one they are launching a token they're already doing a Seasons like a points program right now and their token is coming it's likely going to be valued at a few billion dollars there's about six seven other subd that are also doing incentive programs to get people to use maker to Mint die hold on to that stable coin or use that stablecoin in throughout Defi and that's going to bring a bunch of capital a bunch of users and so a few things are gonna happen a bunch of these tokens are going to launch in terms of these subd Dows which creates the wealth effect you know likely people are going to take that put

it into maker and and mint more die probably and it just gets eyeballs on the the ecosystem so there's a lot of I guess like shortterm things that I think are are going to be a pretty big game changer outside of just we are in a bull cycle I think stable coins are finally reaching their inflection point and maker is not the biggest I think D has a market cap of about six billion whereas like I mean usdc is like 30 or 40 billion and tether is I don't even know 100 billion or close to it so like it's definitely behind in that regard but it is leading in the decentralized stable coin side of things so for those who are worried about the third party centralized risk of things like tether and circle you have maker over here which as D which is used all throughout

the ethereum ecosystem that is about to have all this attention on it in my opinion I think as long as this endgame works and so I think that that six six billion can go to 10 to 20 billion pretty quickly here in the next few months and if that happens the value of maker has to go up because the more die that's in circulation the more Revenue that maker generates and what maker does is they buy back maker with any of their access profits so what they do is any revenues they make that 35 million they give that out to people holding die so there's a an incentive to hold die I think it's 8% right now you can get just by holding it you don't have to do anything else you don't get that when you hold usdc or usdt but then also any

extra they have they basically burn maker so they have value acurel back to their token from real revenues there's basically no other applications in the entire space that does this so look it's a complex thing to understand a lot of retail doesn't really get they don't get Banks they don't get financial products defi is not necessarily sexy to a lot of people big revenues is and I think once they Rebrand and people start to see once retail starts to get excited about this because it's a cheaper token and it makes a lot more sense to people and they kind of fix a lot of these things and there's incentive programs all the things like that blast is doing Etc and salana just recently launched a bunch of tokens that brings so much attention and then people start to go holy this

thing is actually a beast it is printing money it has value C it has all the things and I think that is leading to what's going to be just the perfect setup for maker short term too you just teased my next question very well which is my final question for you today and that is okay so I believe in the ethereum economy I believe the ethereum economy needs a bank and why wouldn't I invest in the bank that is already super profitable and proven their track record and also is about to create a bunch of hype with this endgame marketing promo that they're doing and the The Branding all this stuff you got me sold Kai what do I do wait I got one more thing before you ask me that I got one more thing that I forgot to add I guess I sort of

mentioned it but I think I need to double tap on it because I think it's really important which is right now die only exists on ethereum it doesn't exist on layer twos and where is all the attention and all the users right now it's moved to layer twos they are the biggest thing right now at least in the ethereum ecosystem everyone's building apps there everyone is moving on there payments are going to be on there not on ethereum anymore and yet D still only exists there they are about to at at some point in the next few months as well launch what's will be like a bridge kind of like what's the circle cctp or something like that it's like a bridge but much easier where basically you can mint and move links cctp right yeah yeah Circle also has them but I can't remember the name of it but anyway

regardless of what this means is di will be put onto all the different l2s whether that's Bas optimism arbit this is going to happen in the next few months and I think that opens up a massive window an opportunity because it'll just give access cheap access to die which no one else has really had right a lot of users are kind of priced out on ethereum and you can't really do much with your stuff on ethereum because again too expensive all the apps now have moved l2s and I think when they unlock that along with the rebranding and everything else the opportunity there is massive wow you got Catalyst after Catalyst coming out us here Kai this is incredible okay so simple question I'm sitting here I'm listening to the show shout out to our listeners thanks for listening as always and I either don't own any maker or die or

maybe I do own some but I want to increase my allocation what's your investment thesis here in terms of timing and is it just buying maker token or what are the opportunities to capitalize yeah so in our Pro portfolio and actually personally as well our highest share of any token outside of the majors is maker and so I think the easiest thing you can do is just hold maker I got a sort of what I think and also some other big funds in the space have been sort of estimating is maker could go to a $40 billion valuation pretty easily this cycle it's currently 2.2 or 2.3 that's that's a 20x almost a 20x it's almost a 20x in a asset that has been around since 2017 that's that's

actually insane and so I'm not gonna say that's easy to do but for example salana went from a two around two billion fdv when it was $3 when San bank and freed said that to over 100 billion last cycle or close to 100 billion so it's happened and I think maker could be that obviously a lot of things have to go right for secur it's not like it's a guarantee by any means but for me the easiest thing is you can just hold maker if you're holding Stables I don't know why you wouldn't hold die you might as well hold die because you get 8% just by holding it you don't have to do anything it literally sits in your wallet and so to hold usdc or usdt just makes zero cents in my mind I also think you have less risk holding die than you would

with the counterparty risk of having dollars in a bank not that I think that's a big deal either but yeah you can just do that now there is a bunch of incentive programs coming so there is the ability to like Farm These subow tokens I haven't looked into it enough I don't know exactly the Playbook of what to do there so I'm not saying do any of that I think the easiest thing though is just hold maker right now I just even it's had a nice pullback over the last month or two and that is just an absolute gift this is an absolute gift of an episode Kyle that's that's what's the gift today the gift that might make us all a 20x no promises not investment advice do your own research but you'd certainly lined up a good one for us today Kai we want to know do you hold

maker our listeners answer today's poll question in Spotify on YouTube either yes you hold maker no you don't hold maker or third option you're running to buy it right now for the first time Kai as always thanks for joining us today thank you Sarah take care all right here's what you missed in news today first up the financial magazine Baron wrote an article about which stock Fe could be next added to the S&P 500 and guess what it's coin coinbase made it on the list if you are curious to know why we are so bullish on coin we recently released an episode on it last week go back and check that out also in news today enan Lair is got a new competitor

on the Block but it's not a new competitor it's Lio Lio which is the staking Beast is launching raking vaults in partnership with Melo finance and symbiotic they're aiming to boost State eth usage now these vaults let users deposit stake East and earn extra y yield with more flexibility and customization than other liquid reaking options and finally in the news Unis swaps Labs is making a push into onchain gaming by acquiring crypto the game this strategic move shows Unis swaps commitment to offering Innovative and fun experiences for their users the deal which includes a mix of cash tokens and

Equity highlights Unis swap lab's strong belief in crypto the game's potential now with their full support the crypto the game team is expected to make season 3 a major success cementing Unis swap Labs as a key player in the exciting world of crypto gaming thanks so much for joining us today have a wicked awesome day and we'll see you again tomorrow thank you for listening to milk Road radio the easiest path to get smarter about crypto if you like this episode share it and hit subscribe or follow so you don't miss out on the next one there's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game then we'll leave a link to milk

Road Pro as well your number one resource to help you invest successfully in crypto one final note this podcast is for educational purposes only nothing we say is financial advice crypto is risky so you should never invest more than you're willing to lose thank you friends and we'll see you in the next one