Bankless - Bear Market War Stories with DCinvestor & Eric Conner

Episode Date: June 29, 2022

On this episode of Bankless, we welcome back DCinvestor and Eric Conner to share their multicycle bear market war stories. But that’s not all! They also unpack why they keep on deciding to stay every cycle, what’s different about this cycle vs. previous cycles, the role leverage and macro conditions have played, and their hard-hitting, gigabrain advice for first-time cyclers and multicyclers alike. Survive and advance, anon. We’re going to make it. ------ 📣 NOTIONAL | Real DeFi Yield https://bankless.cc/Notional  ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/  🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/  ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALED ETHEREUM https://bankless.cc/Arbitrum  ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across  🏦 ROCKET POOL | STAKE YOUR ETH https://bankless.cc/RocketPool  👻 AAVE V3 | LEND & BORROW CRYPTO https://bankless.cc/aave  ⚡️ LIDO | LIQUID ETH STAKING https://bankless.cc/lido  🔐 LEDGER | NANO S PLUS WALLET https://bankless.cc/Ledger  ------ Topics Covered: 0:00 Intro 4:03 Being a Multicycle Vet 11:31 Market Phases 19:12 Credit to Staying 26:03 High Conviction High Loss 32:37 Regulator Fear 41:31 Lessons From This Cycle 49:00 Leverage 56:34 Macro Conditions 1:30:50 The Merge vs. Macro 1:09:00 Advice for Newcomers ------ Resources: DCinvestor https://twitter.com/iamDCinvestor  Eric Conner https://twitter.com/econoar  Devil Take the Hindmost: A History of Financial Speculation https://www.amazon.com/Devil-Take-Hindmost-Financial-Speculation/dp/0452281806  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is David Hoffman, without my co-host, Ron Trott Adams, because he's away at the beach for a well-needed vacation. But either way, bankless is here to help you become more bankless. And so, today we have on the show Eric Connor and DC Investor, and these are people that have been through multiple market cycles. They've got the battle scars to prove it. They've got the gray hairs of wisdom that we so desperately need. during these highly chaotic and uncertain times in the crypto world.

And so we go through some very simple but deep questions as to something I think we can all get behind, which are things like, what lessons have we learned throughout the market cycles? What lessons did we learn through this market cycle? How has the personality and like investing strategy changed as a result? Like what has the market cycles done to these humans as the markets chewed them around, yet they are still here and fighting and will always live another day, even though they've seen at all. And also, of course, we get into the conversation of macro. Is the merge more powerful than macro? And what are they thinking right now in this present moment in crypto? And of course,

what are the patterns that we all see every single market cycle? What are the patterns that resemble of this current market cycle, the past current market cycles and what we can expect going forward when this whole macro thing turns around? And of course, we finish off with some advice for newcomers as well. I hope you guys enjoy Eric's and D.C.'s wisdom. They are people that I lean on during times of strife that I've had in my first market cycle, and they have helped me keep my head on my shoulders and just perpetually exude wisdom. So Bankless Nation, I hope you enjoy this fantastic conversation with Eric Connor and DC Investor right after we get to some of these fantastic sponsors that make the show possible.

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Welcome Bankless Nation to the Cope Room. I've got two veterans, market cycle veterans, who have seen multiple cycles throughout their life, both inside of crypto and outside of crypto. You guys have heard them on bankless before. We're joined by Eric Connor. He's been through the cycles. He first found out about Bitcoin while working at a bank and has been around an Ethereum since the pre-sale itself and has stuck around throughout the cycles ever since then. Eric, welcome back to the show. Thanks, sir. And of course, you guys know and love him, DC Investor, the guy with the coolest NFT, portfolio, at least is cooler than yours. He has also been through the market cycles, both inside

of crypto and outside of crypto, and he's got the gray hairs to prove it. D.C. Once again, welcome back to the show. Getting more gray hairs by the day. Thanks, David. Great hair, gang. That's what we're here for. Well, whether or not you guys got your gray hairs from the crypto markets itself, I think this is a time in the cycle where we could really learn from the people that have come before us. And so previously, I have looked to you guys for just wisdom of Because when we go through the market cycles, sometimes as newbies, we don't really know what to expect. And so we have to go and talk to the people who have been through the cycles before, just to make sure that we're not losing our minds. We're not going crazy.

It's not going to zero. And other people have felt the emotions that we are currently feeling as first cyclers, although I will say I'm a second cycler. And so with that context for the show, my first question for you guys is, how has being a multi-cycle veteran, like, changed your disposition? change your personality, your mentality. How have you changed as going through the manias and then the lows and then the manias again and then the lows again? How have you like ridden out these waves and how has it changed you as a person? Eric, I'll start with you.

Yeah, you know what's funny is like I haven't even looked at the price of Ethan in the last like 72 hours, to be honest? And I feel like that has once you know like a bear market's happening, you know the bull market's next. And like, I remember looking back in, like, 2013. It's the first time I got in, like, crypto. And then, like, we had this crazy top where everyone was buying, like, feather coin and all this stuff. And, like, like, like, Bitcoin went from 50 to two. Like, people act like this is a new thing.

It's not a new thing. And what's really interesting is, like, Bitcoin and Eith, so far, at least. It could get worse, who knows, but, like, have less of a down swing. So, like, as just a Bitcoin and Eith investor my entire life, pretty much as, like, you know, 98% of my portfolio. This is kind of nothing and you just get used to it. It's like, okay, here comes to the bear market. Everyone's going to freak out on Twitter. And now I just shitposts on Twitter and just like it's, you know, and people get mad at me now. It's like, hey, think about the newbies. It's like, no. Like, I'm teaching the newbies through shit posting on Twitter. It's like,

hey, guys, you know, we've been here before. We go through cycles. And I kind of find solace in every cycle getting less and less bearish. Like, you know, I think Bitcoin's down 70% from the top. He'd hit like 75, something around those ranges. But we recently lost cycle, right, hit 90. So I think, I mean, to answer your question, sum it a lot for me personally, I just kind of like start tuning out charts

and step away a little bit, take vacations with family, realize everything's going to be okay, right? Everyone starts questioning their investment thesis, and I think that's the biggest mistake. you could make, right? Like, I mean, we had the bowl podcast probably, what, 18 months ago or something on here, and, like, we were all pretty bullish, but I think the general consensus is, like, sell some on the way up, buy some on the way down, and know that crypto's not going anywhere,

right? I mean, I think that's the most important thing you can kind of take from all these cycles. D.C., how have the market cycles impacted you, and how has your personality been affected by the wisdom that you have gained throughout the cycles? Well, let's start out first by talking about what does a cycle mean to begin with? And I think a lot of newer investors and market participants don't necessarily get the concept of a cycle. They don't necessarily want to accept the concept of cycles. But the reality is that human behavior and especially human greed kind of lends itself towards cyclical behavior. And this has been proven in lots of different markets, lots of different kinds of financial and non-financial behavior. But especially whenever you have any

technology with real fundamental value that is significant, people tend to front run that value. And is this true of crypto? We've seen it in growth stocks and in other asset classes as well. Whenever there's an asset that has fundamental value, the market tends to pile into it. And that as they all pile in, more people want to get in because the number is going up. And it kind of creates this reflexivity that causes the number to go up. often that number overshoots its target on the way up and also sometimes on the way down. And I think everyone needs to kind of understand that market behavior because you're a part of that

game whenever you invest in any kind of fundamentally valuable technology. As far as how the cyclists have changed me over time, I'll tell you what, when I got into Bitcoin in 2013, I bought the top of Bitcoin. I had been investing in the stock market for years, but I had heard about Bitcoin much earlier than 2013, but I was like, you know what, I got to buy some of this because I saw it was going up hit $1,000. I was like, this is really interesting. And I bought, I was like, I told myself, I'm definitely going to hold it, no matter what. I'm going to hold it long term. Well, I bought it for $1,000. In 2014, it started to go down. And then in 2015, it went down more. I decided I wanted to buy

a condo in D.C. So I ended up selling that Bitcoin for like between $300 and $500. And then I saw it go back up to tremendous heights later on. And that really taught me a lesson. It was like, you know what, I need to learn how this technology works. I have to understand what made it special, what made it accrue value in the first place. And I need to stay engaged the next time one of these cycles happens. And that means I'm not going to sell my assets at the wrong time. I'm not going to buy in for the wrong reasons. And I'm going to position myself to survive across these cycles as they occur and manage my risk so I can continue to participate because that's the thing. You've got to be able to stay in the game, right? If you end up selling out at the bottom of a bear market,

you're kind of done. I mean, you can always buy back in later, and I've seen people do that. We can talk about some of those stories. But it's just kind of like you have an opportunity to participate in one of these world-changing technologies early. You've kind of got to stay committed and position yourself to be able to stay committed. Speaking of having conviction in the assets that we buy, Eric, you named some very OG coins that I think a lot of new cyclers might not be familiar with, things like feather coin. And in the same era, there were things like peer coin and name coin. And just some ridiculous sounding coins, some ridiculous sounding names that in the world of

2022, we would be like, feather coin, like, whatever the hell feather coin is, it's not going to be part of the future of finance. However, back in the era of 2013, I'm sure people were like, the feather coin blockchain is going to change everything. Name coin, which is like a blockchain plus ENS. so very early, like, naming type system. I'm sure back then people were like, oh, this is going to change the future. This is going to change everything.

And then that was a cycle. I'm sure there was a fallout and a crash and a hangover as a result of that. And while it is obvious nowadays that something like Feathercoin is not going to be the future of finance, I'll remind a lot of people out of the 2021 cycle that they probably bought a JPEG that they thought was going to be the future. And so, Eric, can you talk about just like how the general sentiment always kind of falls into this trap of just like, whatever is in the time of the market is the thing that is going to change the future. And then, like, there's this inevitable, like, sobriety period. Can you talk about these phases?

Yeah, no, I think this is a really good topic because I think one of the things we saw in this cycle were, I guess I'll just name names, but, like, Avalanche Salana, people are like, oh, this is, like, new, like, people are reinventing Ethereum. Like, this is what happens every cycle. Like, Feathercoin, light coin were reinventions of Bitcoin in 2012, 2013. Like Feathercoin pitch itself, I think, is like an upgraded, customizable Bitcoin. Lightcoin always kind of pitch itself like Charlie, like, you know, basically exit scan at the top of like the light coin. But like pitch it as like a faster Bitcoin, right?

But we all know now like that's not, I mean, block size is important. And like that that was kind of a scammy pitch, right? But we kind of saw that this cycle with Solana and Avalanche, in my opinion, where it's like writing the coattails of Ethereum. and saying, hey, you know, we've got something better. We've seen this all before, right? So I think what's, like, really important in these cycles is to keep your head on straight when it comes to this hype of, you know, I mean, Bitcoin, I give it shit.

And, like, you know, I think long term, it's pretty doomed. But for now, I would still tell most people, hey, buy ETH, like 80%, maybe buy, like, a little Bitcoin, just to, like, whatever, have some in your portfolio. All these alts that, like, ride on the coattails, like I said, of Ethereum's the new one, right? Like, hey, we're a faster, better Ethereum. It's unbelievable the hype and the funds jump in and Twitter's all about it.

And, like, everyone, I'm still amazed. I've seen tweets in the last few days. No one thought Salana could have went back to $20. Like, what? I mean, this is one of the most obvious things ever to be that Salana was going to crash 95%. Right? It's just unbelievable how people think this is new. But in reality, this happens every single cycle.

And kind of a funny story, but I'm vacationing right now. And my wife and I were driving home. You know, we had a half hour drive home earlier. We were laughing about, because we were talking about being on this podcast and stuff, and we were laughing about being the retail nobs in 2013. Like, we were buying light coin and feather coin and stuff like at the top. Because at the time, like BTCC, which I don't even know if people remember this, there's some shady Russian like exchange.

Like when had gone from 20 to 50 around the top, like Thanksgiving of 2013 and we were buying like the top on all these things and they crashed like 95% the next day. We're like, oh, this could be the next Bitcoin. This is not a new thing. So it's funny how not only do price cycles repeat, but narratives repeat and people jumping behind what they think is smart money, but in reality is dumb big money. It's just all the same. D.C. Any comment on that before I ask my next question? My point of view on it is a lot of people, and there's something I learned from my management consulting days, the concept of like a value proposition. And I'll define a value proposition is what is the unique value? A product or blockchain offers the market that cannot be

found anywhere else. And when you frame the question that way, there's not a lot of unique value in the space. There's a lot of follower value. There's a lot of duplicative value. Now, I won't be quite as harsh as Eric to say that, you know, I can't say with surety that these other chains are not providing any unique value. But I think it's an open question across the board in crypto, to include Ethereum still, I mean, in some domains, where is that unique value? And I don't think many investors are asking themselves that question. As Eric said, a lot of people just follow whatever they think the smart money is doing. But guess what? The smart money is selling at the top and they're not coming back. I mean, we've seen this cycle a few times with some of these other coins. And unfortunately,

there's a tendency where there are some VCs, or I'll use the term VCs in quotes here, because a lot of different firms are calling themselves VCs these days, but they will pump a coin one cycle and then they're gone the next and they will act during that cycle like it's the most important thing. I can't point to any one token that that might happen to this cycle, but we saw it happen in the past with stuff like Eos, which was the first, they called themselves the first Ethereum killer. That's where the term came from. So I think that people need to be a lot more vigilant and think about where is that long-term value. And it requires patience. It requires years of patients in many cases to establish that durable value. And most people just aren't that patient.

It's a good point. I think one thing to think about there, too, is VCs totally, quote-unquote VCs missed out on Eath. They missed out on Eath in 2014 in the pre-sale. They were sleeping on it. Most Eith buyers were actually like Bitcoin OGs. And they also missed out on buying the dip and pretty much put money into like Cosmos, Eos and others before everything kind of took off in 18. And then of course they weren't buying ETH, one of its number two market cab. And they're that's a smart thing for people to understand and realize when they see these quote-unquote VC influencers on Twitter. Like, ETH has to be one of the most missed out on assets of all time when it comes to big money.

Just to balance out the conversation a little bit more, I will say that the alt flavors of chains that demand where like as soon as a blockchain proves itself, it'll be. generate a bajillion alt flavors of that same blockchain. I saw that with Bitcoin and the proof of work for Confere Launch era, and we're seeing that a bunch of the theorem. I will say as that progresses forward, we have seen a significant improvement in quality, even if it is like an alt flavor of the original chain, like the quality of the alternative flavor does get better and trend to be better over and over time. And while these dynamics of VCs forking something just to have an investable alternative will always probably stick around, at least I will say

the quality of these forks do attract new use cases, new developers, new attention, at least during the bull markets. But I think since we are in a bear market with the conversation here is, well, what happens when everything contracts and how many people in that community and around that ecosystem is really going to be here for the long term? One question I have for you guys is what would you credit to the reason why you are still here? Is it something in your personality? Is it like a lesson that you learned early on? What is one of the reasons why, of all people, Many, many people come into crypto and they get washed out, but you guys have come into crypto and you guys have stuck around. What quality or what do you credit through that reason why you guys are still here?

And DC, I'll start with you this time. I'll start first with crypto is not my first investing experience. And so, you know, I had invested in the stock market for years since I was in college. And I made mistakes in some of those stock cycles. You know, I mean, like I didn't really understand herd and market behavior as well. And I got caught up in like 3D printing and how that was. was going to change the world. And I bought some of the stocks that went up a lot and I watched it crash. And I eventually learned my lesson in terms of how those things work. But basically,

investing in the stock market and other assets taught me to think very long term. And especially for a technology like crypto, I think also like my experience in growing up with the consumer internet, which I've now I've talked about on bankless before, I actually recently published an article on my substack about, you know, the early internet and where it was like to grow up during that period. And I kind of refer to this period that we live in today as the dial-up era of cryptocurrency, where there's a lot of harsh criticism. A lot of that criticism is also deserved. However, it would also be myopic to not believe that we're going to eventually progress past some of these teething challenges that we have today, just like we progressed past the challenges

of dial-up internet. But in terms of other things that I credit for still being here, I mean, look, I stayed engaged through the bear markets. And I didn't do that in the 2013 bear market. I realized that was a huge mistake. Eric did. And, Eric learned about Ethereum got involved in the Ethereum pre-sale. If I had stayed involved, I probably would have followed a similar path, but I didn't do that. So there's a huge opportunity cost to just stepping out during a bare market and missing what's actually happening. And I think finally and most importantly, perhaps, is not over-leveraging at the wrong times. And when I say not over-leveraging, I mean, that means borrowing money to invest in cryptocurrency, which I don't recommend for most

participants at all. But it can also just mean like over-investing in general. You have to have a position that you can hold. And if it's like your entire net worth and you have no other liquid assets, then you're not going to feel secure. And you're going to be tempted to sell at the wrong times. I've seen people do it. I've done it myself. You don't want to be the guy that sells the bottom. It's painful. Eric, same question to you. What about your experience, your history or your disposition has allowed you to stick around throughout the cycles? Yeah, it's funny. Like the first day I, like, invested in Ethereum or like even thought about its potential. I've said this so many times on podcasts, whatever, people have been probably tired

to me saying it, but it's a multi-decade play. Like, you're not going to build the next financial system overnight, right? So I think one of the problems of cycles people just get antsy. Like, I get it. People want to get rich overnight. Like, I totally get it. But in reality, most people that get rich, however you want to define that, right? Like monetarily, personally, whatever, mentally, they stick to something for a while. Like, not many people will just become rich overnight. So I think that... that to me, I knew Ethereum had a huge uphill battle. Like, when I first ran across it, it's because, you know,

I had some friends that lost money in Mount Cox, and I saw my talk pitch it. And I'm like, hey, this could be a cool thing. Like, people get control of the financial system. And this goes all the back to, I graduated college right as the financial crisis in 2008, 2009 was happening. And, you know, what's funny is I ended up going to work in finance. But at the same time, like, you kind of saw, like,

all these systems start to fail. And, you know, as you kind of grow up in that, you're looking for alternate solutions or alternate systems. And this idea just has fascinated me since then. And I knew that you aren't going to, like, become a leader in an industry that's been around for 150, 200 years, like finance has or banks have overnight, right? Like, you're up against government. You're up against regulators. You're up against currencies. Like, this is not going to happen in two cycles.

And I think that's one thing people lose track of, right? And I really think, though, like, why am I still around? I think this gets lost a lot in, like, defy and NFTs and stuff. I like the power of the composability and the ability for anybody in the world at any point in time to not only use Ethereum, but to build on Ethereum. And, you know, plug their new code, their new Lego into Defi or into NFTs and say, hey, look, I launched this. Maybe it fails. Maybe they exit pool. Maybe they rug.

Maybe they make a billion dollars. But you know what? Someone in India or South America or Russia, I don't care where they are. Like the power in that is incredible. And I think we're used to these closed off systems where people are selling your data or, you know, no one's allowed to plug in because this API holder is the one that connects your bank account to your VEMO or whatever. That's always been to me why I stick around. And I'm just never going to lose that vision.

and I don't think Ethereum and its community is ever going to lose its vision. So I'm just going to stick with it. I don't care if I'm 90 years old and we're at $100. I'm going to say I'm not going to be here. You know, I'll just add on to that, Eric, because I think you made some great points. But I think in particular, that last point is really valuable for people to think about. The thing that I think that's made us both successful in crypto is that we've looked for those organic communities where people are building on these permissionless systems. And it can't be contrived.

It has to be real builders and community members who want to come and participate in something. And it can't just 100% be motivated by money. There has to be a higher purpose. But when you see that, man, I mean, go all in, frankly. I mean, because if it's real, it's going to grow and it's just going to compound on itself. And that's exactly what we've seen in the Ethereum ecosystem so far. Yeah. I'll say like that made me think I was going to say this, but you just made me think about it is like kind of,

smartest people I know are just in this space. Like I've never, not in way the smartest, but the friendliest. It just, I don't know, just a good vibe. It feels right. Like, it's hard to just pass up on that and be like, oh, these people must be on to something wrong. There's just no way that's possible. Eric, you said something about like money Legos and permissionless building.

And I think in 2017 as a community, we definitely tapped into that permissionless building thing. But that money Legos, the defy Legos part, we didn't really come up with that as an understanding until something like 2018. in 2019 when we had actual apps to plug into each other. Because in 2017, 2016, they were all siloed apps. And even Vitalik, actually, I remember him saying that he didn't really realize the power of composability in these things until it had actually happened. And so this is like a, this is a bear market lesson, right? This is something that we learn after the mania of the 2017

ICO movement, where we realize that like, no, it's not ICOs that are the new paradigm. It's composability between these applications that are the new paradigm. And like that's a lot. So, lesson that I learned very, very quickly because I was the person that got burned by ICOs, right? That was my first cycle. That was my like bull market mania set a lesson. I thought that ICOs and tokens were going to just solve human coordination. We're going to bootstrap this ecosystem by like leading with a token first and it's like hype, hype, hype, mania, mania, mania, super convicted on it because it was my first cycle and like not only was it my first foray into like money and finance. Like your boy came from social work. Like, I worked at a mental health agency. So, like, coming into Ethereum in 2017 with,

like, all these tokens, like, I didn't really have any sort of, like, foundation to ground myself in. So the question to you guys is, was there, like, something that you had a ton of conviction on that you wholeheartedly believed that you lost a lot of money on? Like, have you guys ever had an experience like this? Eric, I'll start with you. Yeah. I mean, I think I definitely resonate a bit. I mean, losing a lot of money, the only time I've really lost a lot of money in the crypto space when I intern. And I was like, oh, I'm going to just leverage this thing. I know what I'm doing. And I just lost, like, I mean, I probably wouldn't be doing this podcast. I'd be living on an island. And I would have so much Bitcoin, it wouldn't even matter. Right. But I mean, I was,

David, I love you. So I would still do the podcast. But, you know, I lost way too much Bitcoin on leverage, right? And because I was at the time, yeah, I worked in finance. Yeah, I had traded stocks in the past. But I didn't understand market cycles. Like, people are like, oh, this is the best idea I've ever heard in my entire life. Like, I'm just going to go all in. It can only go up, right? And that just doesn't happen. So, you know, people need to understand that stuff goes up and down. You know, as far as, like, conviction I had, I think it would resonate a bit with you with tokens early on. I think where a token started to miss the boat. Let's think like the DFI example. Yeah, I bought some DFI tokens. Probably lost a little money here and there. But they just said,

we're just going to launch a token and assume it's like equity in the company. And that's just not right. I've actually been very disappointed in a lot of defy tokens and not giving a little bit more value to their token. Uniswap, I don't even know what's going on with Uniswold governance. They can barely get anything through and they haven't enabled fees back to token holders and all this stuff. I think, you know, I had better hopes for that.

I would say as far as, you know, AVEA, Uniswap. but I'm not like naming names in the bad way, but like these are great apps that are doing cool things, and we somehow can't like find a real way to give value back to token holders and appreciate the token a little bit. And I think uni's gone from like $1 to $50 back to three, which I get it.

Like that's the market cycle. But at the same time, if you look at like the uni governance process, like not much is going on, right? So I think we can do a little better than, hey, we have a token and our apps are really cool. So I think I've been a little disappointed to this point about that, because to me, it's not that different than the 17 ICO phase.

I mean, most of those went down 95 percent and all these tokens have two. And maybe I've got a little burned on that, opium-wise and investment-wise. We can definitely do better. But I know DC has definitely views on this because I've seen tweets about it, and I know the whole community does. So, yeah, I'm curious to see what he thinks. Yeah, I mean, so to answer the question first, you know, my biggest losses have probably just been from being too greedy at the wrong times. So, you know, seeing a

trend and then just kind of chasing in with even more money and then timing it wrong and I lose money. So not too different from what Eric described, just being over leveraged or over exposed at the wrong times. But in general, I try to get into assets that I believe in early before a lot of people understand the value. At least that's what I try to do. And I tried to do that with, you know, Ethereum as early as I got in. I wasn't at pre-sale, but I came after that in late 2016, early 2017 with Defi and with NFTs. But I think, you know, to speak to Eric's point about DeFi token design in particular, I also have been kind of disappointed because I think that a lot of these DeFi 1.0 protocols, as they're called, they're like stalwart protocols. I mean, they're still

ticking. I mean, a lot of these DeFi 2.0 and these other like exotic, algorithmically driven and stable coins have just totally collapsed and blown it. But like uniswap, compound, AVE, they are just chugging along. They are working exactly as they're intended to. Maker is another one. But the tokens aren't necessarily reflecting that value. And I think that it is a wake-up call to governance of those protocols to say, hey, we have to think about how to return value back to our token holders.

We need to think about that feedback loop. At least Maker has one in theory through the token burning. but a lot of these really don't have that yet. So I'm not willing to count them out yet, but I do think the market price has reflected that reality. I also believe in some of these protocols for the long term. I think they have kind of changed the market. They have durable value.

So I'm crossing my fingers that through, and some of these have already been through one cycle like Avey, I'm hopeful that we're going to see some changes on the horizon as we move in through the spare cycle. Do we think that it's a regulator fear? I mean, I know that, like, technically we can vote on stuff and whatever, but there are still leaders, let's be honest. And like, do we think it's some regulator fear? I can't quite understand why this hasn't been improved.

I'll share some thoughts on that. I think that regulator fear is part of it, and you don't want the central, they're not central, but, you know, the people who lead the labs that have developed these products, if you will, they don't want to be seen as pushing some of these fee proposals through. That's number one. Number two, I do think that there's a fear that implementing fee income is going to lead to a competitor than stealing. I mean, most of the successful growth businesses in the stock market even have not shown a profit for years, sometimes decades. So I think there's some of that thinking that's at play here.

I also think that the path for value creation to the token doesn't have to be through the existing product lines either. It could be creating new products. I mean, like I just look at something like Uniswap. Let's take that as an example. There's a ton of potential there. Like if they, I'm just saying hypothetically, if they developed a layer two exchange, which is as fast as a centralized exchange, that could lead to a ton more trading volume at lower fees. And the game for Uniswap, I think, is to continue to gain and grow its market share, which really, I mean, well, it started off as basically 100%, but it did pretty well in terms of defending its market share. A lot of people are like Uniswap, is dead and they've just kind of surprised the market. Now the question is how to activate that value and the token. I do think it can be figured out, but I do think there's a fear from a regulatory perspective. I think this really, really illustrates the difference between this current cycle that we just went through and the cycles of old, the last cycle, because when I'm gathering from you guys,

and I would totally agree, like, yo, Uniswap's not going anywhere. And the tokens that people held in 2017 and then held down to the bottom in 2018, like they went to zero and they stayed there. I mean, almost no token actually goes to zero. So when we say it goes to zero, it's more of a metaphor than anything. Like, Omisei Go, for example, it was a token that was very, very popular, total consensus in 2017 and effectively has gone to zero. Substratum, that was a token that I helped, decentralized, I don't even know actually at this point, went to zero, right? And now we have tokens like Ave and Uniswap and other DFI-related tokens. and no one thinks that they're going to zero.

And the first cycle may be like, well, okay, yeah, we're just naive. It's going to happen again like last time. But the difference is, is like, we're talking about market share. Like you guys just talked about how, you know, Uniswap didn't lose market share to a competitor. And we're talking about, like, what has failed us with being able to have value capture in the token. So when we talk about, like, things that are different this cycle, yo, this time it is actually different. Like, the tokens do have fundamental quality. And my answer to this question, Eric, I know you didn't ask me, but I don't,

I'll answer it, is definitely one part regulatory because the people that guide governance can't make that decision to Uniswap can't just turn on the fee switch. Like maybe the token holders like, Hayden, when are you going to turn on the fees? Hayden, please turn on the fees. And Hayden's not going to turn on the fees because of exactly what you're talking about, which is regulatory. But underneath that, the bigger quorum, the bigger thing that I think is really holding back token value capture is coordination, is Dow coordination. And so like DAO's right now are still learning how to do this, how to Dow. And so I think for learning lessons from previous cycles, most tokens, 99.9% of tokens in 2017 went to zero. And most defy tokens from the 2020 to 2021 era

are not going to go to zero. And they're actually going to figure out how to come back from the bear market by meaningful value capture. And it's probably actually going to be the bear market itself that triggers these DAOs to put the fire under their butt and actually figure out how to have this token capture value. Because guess what? a lot of salaries are paid from the value of this token. What do you think about that take? Eric, I'll start with you. Yeah, no, I mean, I definitely agree.

I think kind of going back to your point about 2018 and stuff, I think what most people don't realize about like this bear market, which, by the way, I'm not going to be like, yes, it's a bear market, but it's more a downturn. Like, a bear market will be if we're having this conversation in 20, 23, and we've been sitting at, you know, 1100 for a while. I'm not convinced that this thing isn't just going to turn back up, which I know it's funny to say on this podcast, because I know I've been painted as the bear when I got $2,500 as the top. But I think we could see accelerated cycles, and it loops back to your point of in 2018, there was like nothing.

I mean, like, Cryptokitties and Cryptopunks were out there on the NFT side. And, like, Ave was called Lind. I don't even know most people know this. It wasn't even called Avey. And Uniswap was just like kind of launching, and there were a few defy apps. But as far as like an Ethereum user, you were just kind of like stacking your ETH and your wallet and you were not doing much, right? And at the same time, we were literally as a community.

I mean, all three of us were there were debating how to fund the future of Ethereum because we thought the EF was going to go bankrupt and they were laying off employees. And we weren't sure like how Gets was going to get funded. So I think, you know, if this is your first. cycle. Trust me, it's been way worse. Like, the price at 1100 and still billions of dollars flowing into this ecosystem, it's not a problem. I don't think you can really destroy Ethereum at this point. Like, maybe you go down to like 10 bucks for 10 years. I don't even know. Like, I think it's basically destroy proof or foolproof at this point. But yeah, I mean, there's so much out there,

and I know I tweeted this like yesterday or something. Everyone in my feed is like, oh, we need to have a two-year bear market. I think times are just going to be different in these cycles. I think crypto has like a hyper acceleration of greed and fear, which drive markets. And I think we saw a hyper acceleration on the way down. I don't know if this was funds blowing up or whatever, but it was a hyper acceleration of fear. But I think this market is not like it was in 2018. We have use cases. The merge is coming. Layer 2 is coming. And maybe, you know, Anthony and I talk about this all the time on our podcast. Maybe that doesn't matter short term, but zoomed out, it actually does matter. And I don't know. This doesn't feel like 2018 to me. I think we're

going to wash everyone out quickly and the tide pulled out and the tide might pull back in. Don't call me not financial advice. I don't know where we're going. But I'm actually kind of bullish. I'm not going to lie. I kind of ban. This is supposed to be the bear market podcast, Eric. No, it's the bear market war stories podcast. Okay, bear market war stories. Well, I think in that case, I will echo Eric's sentiment that during the last cycle, and even the one prior to that was when Mount Gox blew up and there was a ton of concern. A lot of people, including myself, who did not understand the technology while at the time back in 2014, didn't understand that Mount Gox was not the end of Bitcoin. Like in my head, I was like, oh, man, is this like some technological or existential flaw in Bitcoin?

I didn't understand. And similarly, I think you have a lot of people having those kinds of fears right now with some of the stuff that we're seeing. And I'm going to use defy in quotes. And actually, I'm not going to call it defy at all because a lot of these like algorithmic stable coins and some of these off-chain funds doing kind of shady things. A lot of that stuff is blowing up. And I think what people kind of fail to see is this is the system kind of rationalizing itself. And this will eventually kind of flush through, okay, because it's not like a Fiat-based system where centralized custodians can make up all of this money or do bailouts. And so we are seeing, I think, Erica's right. We're seeing an acceleration of some of this downside price discovery. Now, I don't have a really strong point of view on how long this is going to last,

but I would say be prepared for any scenario. And that's how I'm positioning myself is like if things go back up because the Fed loosens up, that will be great. And I think we do have to talk out the macro backdrop a little bit because I don't know if you want to hit that in a different question, David, or if you want me to talk a little bit about my thoughts on that now. I got one more question. Then we're going to get to a macro. And so just to tie things off when we talk about cycles is every single cycle seems to bring its own lesson. Like I talked about my lessons in 2017 is like getting super bullish on vaporware tokens and kind of fading ether. Granted, before the ultrasound money thesis, but like every single cycle seems to bring its new lesson.

And so I'm wondering what have you guys learned out of this cycle? What did this cycle teach you? What, as a community, as an industry, what did we learn from this cycle that was unique to this cycle and that we couldn't have learned previously? until DCL, I can throw that one back to you. Yeah, I mean, my point of view is this is the cycle where I feel like crypto was de-risked because a lot of us were able to actually see with our own eyes and use these apps. The potential for world change through these apps, I think, is real.

I mean, the stuff that we were able to do with defy during this cycle, I think, is incredible. And I know that the three of us were, you know, chatting a long time ago. And I remember when Uniswap launched and I remember using Uniswap for the first time and I had an oh shit moment. I was like, wow, I just did a decentralized trade with no counterparty, no custodian, and it just worked on chain. That was like a game changer. And so that was a huge growth vector for crypto this cycle. The other thing that we can't ignore is the attraction that NFTs brought to the space of a lot of different users. So we went from just being a bunch of crypto and finance nerds to now bringing in our

artists and culture. And I don't think you can overstate how important that is for the future of this space. This was the first endogenous economy to crypto in my point of view. These are people who are creating digital works on the blockchain. They're selling them on Ethereum through various NFT marketplaces. And there are artists who have earned a living from this. Some of these people will go down as digital art legends in like five, ten, a hundred, years and we are seeing this metaverse economy open before our eyes. So I think this ties into Eric said none of that was here in 2017, 2018. These are all like twinkles in our eye, wondering if these things would play out. But I think we saw it happen. We saw the power of composability and we

saw the users come. Yeah. I mean, I definitely, so my first thing was basically going to echo your point around NFTs where it's, you never know what's like next. Like people thought, oh, defies it. Like Ethereum and Defy and maybe like identity and all of a sudden, boom, NFT just absolutely blew up. Blew up beyond any of these. Yeah. I mean, beyond any, yeah,

we all kind of like new like punks are cool, crypto kitties are cool. Some of this stuff is cool. But I mean a thousand times more than our imagination ever believed, right? So I think that also ties back to the point we were telling earlier though, where it's like this is access and building access for anybody in the world. And I think people really underestimate how much capital and how much building can really happen when you have a network

that can take anybody in the world to go in. But anybody, right? Like, I'll use Venmo or PayPal's basic example. Like, it's pretty closed off. I mean, no one can build on it. Very few people can actually transact when you consider the entire world, right? All of a sudden, you bring in all these people, developers, users, capital, anybody can tap into this. Things can explode way faster than you think. And I couldn't even comprehend to this day how much NFTs blew up. I just, I mean, it's amazing. So I think that's the biggest thing I learned from this cycle is not to underestimate what the use cases could really be. I think also one of my bigger takeaways has been we've gotten to a size now where we're threatening to government, to regulators, to people.

And I never, like, I knew we would get here, but I was kind of surprised at how fast we got here where it's like, oh, wow. We built an alternate financial system and people are threatened by this. So I was a little taken aback of how fast it happened and, you know, people being concerned with the SEC and regulations and, you know, lawsuits in other countries and whatnot. And I think, you know, I don't want to tell people to like be careful with what they're building or like what they're putting out there. But I do think there's a target on builders and users' backs all of a sudden because this is a threatening thing. And, you know, I'll go back to the multi-decade play meme that I always say, like,

the multi-decade play, the reason is it's going to take a while to usurp these traditional systems and incumbents, right? And I'm hoping that as we go on, people, we can elect into like, you know, Congress or government in the U.S. or pro-cryptone stuff. But I think we saw that it's going to be an uphill battle. I don't think there's just, at least in the U.S., obviously I'm speaking from U.S. I live here, I was a little shocked at how negative some of the reaction was this cycle. So maybe it'll get better. I don't know. But yeah, those are the two things I kind of took away from this cycle.

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and 2017, but they weren't really as robust as they are now. And we had no concept of on-chain defy leverage, which was super transparent. And I think you can really see that in the way that the charts behave differently this cycle. For example, in May of 2021, when we had that big May crash, Tuesday, May 11th, the total crypto market cap of all crypto assets were $2.5 trillion. And then just 12 days later, on May 23rd, it had lost a trillion dollars, $1.4 trillion, down from $2.5 trillion just like 12 days earlier. And that was May. And so if we just zoom back out to the all-time high charts for total crypto market cap, the total crypto market cap peaked at basically $3 trillion. And now here we are down below $1 trillion. And it's as a result of three Eros capital, the

crypto's largest VC fund blew up. And now we have insolvent Celsius was on leverage. And now we have just contagion from leverage everywhere. Like leverage, it was like a brand new thing that happened in the cycle that I think we could definitely point as one of the sources as to how fast this cycle seems to have moved. I want to pick your guys' brain on if you do think that this cycle seems to have went faster than previous, but also just like the run-up in crypto, like the total crypto market cap was $400 billion in October of 2020. And then it was $2.5 trillion in May of 2021. Like, that's insane. And so like, I just want to pick your guys' brain as to like, to what degree did leverage really play a key-centered role of this particular cycle? Eric, I'll throw it back to you.

Yeah, I mean, I'll start with saying, like, unless you really have good risk management, don't touch leverage. I mean, you know, I've been there. And I remember when Maker CDPs launch, and I had a bunch of good friends in crypto that, like, oh, I can borrow against my eth. I'll buy more Eath. And then, you know, ETH was crashing at the time. And it's just, I don't necessarily, so leverage, by the way, is like a traditional finance, like funds. and firms are leveraged to the tits on the traditional side too. So I don't think it necessarily like cause the boom or bust. But I do think when we do bust, people look for excuses, right?

Like, why did we bust? And, you know, there's capitals out there. They blew up or rumors that there's not much info around it. But I don't think like it kind of goes hand in hand. There's never like one reason, right, that we go well. way up or way down. I think maybe some of these firms are leveraging and like on a breakout, they start leveraging up and we break through and, you know, then all of a sudden retail buys in and we go up higher

and higher and maybe they get greedy and then on the way down, it's kind of the same thing. So I don't necessarily think like it's why we went to 5,000 East and what was 60 or 70,000 Bitcoin or whatever it was. It's just a factor of the markets. But it has been around in Ethereum land for a while. And I think it's funny, right? Like, I have this weird view of where some people should be allowed to access certain financial tools in DFI versus CFi. And I think leverage is one where I kind of, I don't know, it's so easy to just like deposit your Ethan to Dify and like leverage long on it and not really realize what's happening there.

And I remember back in 1819 and some people got like blown up. up and they didn't even really realize what they were doing. Whereas if you're on like TD or E-trade or something, you try to leverage, like you have to sign like 16 different documents and like have a certain amount of money in your account and really prove you know what you're doing. And I'm not saying like I want regulators to come into defy per se, but I think we could do a little bit better as a community going forward to like warn against this. It's just so accessible. and I feel bad for people that just kind of like get sucked into it. Do you see any thoughts?

Yeah, my point of view is leverage in crypto isn't really, it's not totally new. It's been around for a while. And we saw this with like other exchanges in the past. And, you know, Bitmex was a pretty famous exchange where people were leverage longing and shorting and people lost a lot of money. And they saw this back in, especially in 2020 when, you know, the liquidation cascade, at almost like tanked Bitcoin to who knows what price if Arthur didn't pull the plug or if Bitmex didn't go offline or whatever. But the bottom line is leverage isn't necessarily new.

I think what is new, one, we have more on-chain leverage, but the on-chain stuff doesn't necessarily scare me as much. And Eric's brought up some valid points about consumer access to the services and making sure consumers are educated. However, through this liquidity crunch and macro, we've also seen traders on Robin Hood and a lot of other platforms get liquidated because a lot of people, they'll sign the forums, but they don't know what they're necessarily getting into even after signing those forms. Right. They're just like, give me that $10,000 extra dollars. I'll sign whatever. Exactly. They don't care. And they're just like, it's free money, numbers going up. I want to get as much exposure to the market as possible. But I think also what hurt us this time is all of the opaque off-chain activity, which was being executed by some of these large funds.

And essentially, what has reportedly happened with RER's capital, which I don't think they're the largest fund. by any means. Not anymore. Yeah, not anymore. And I wouldn't also call them a VC really. They're a prop trading firm who was kind of playing a role of a hedge fund and of a VC at times, but they were trading their own money. Reportedly what has happened with their assets is they were borrowing against some of

their liquid saff positions. And they were pledging that collateral to multiple parties. And because those assets are not on chain, there was no automated way to liquidate that collateral when the value fell below whatever. thresholds were required for them to have access to their loans. And so there's a huge mess that needs to be unwound there. There could be some contagion or collateral damage from there. But I think fundamentally, we can't ignore some of the macro picture and liquidity tightening and how that's reduced at least for a time, a bid for risk assets, which I think crypto is

still viewed as a risk asset to most investors. So when risk assets, I think, come back into play, or at least when the selling has completed, I think crypto, there's going to still be well positioned because there still is that fundamental value that we talked about earlier. Yeah, let's go ahead and just lean right into that. One of the unique things about this time right now in crypto's history is the macro conditions. Most investors have never been through a situation investing where there's like a war that's increasing oil prices and food prices causing inflation. But also more importantly, very few people have invested during times of high interest rates. And this is true for not just crypto, but for the S&P 500.

like a lot of newer investors who unless they're like older like gen x or older and maybe even gen x is too young but like high interest rates we haven't seen those for most people's lives and definitely for all of crypto's history we saw like maybe like something like one or one and a half percent at some point in time in like 2018 but it was so such a short amount of time and so i think to me this explains why this drawdown happened so fast if this is indeed the bottom 2018 took about a year to bottom and 2022 took about two-thirds of one year, even a little bit less than that, about 60% of one year. Let's talk about that. Like, leaning into high interest rates in crypto, how is that new and how is that going to

throw people for a tizzy when it comes to investing in this thing? And how should we reorient ourselves as we go forward? DCL lean into you for that one. Sure. I'll start us off. I think that one of the big factors that's different this time. And for the first time in 40 years is we have inflation in the U.S. economy at pretty significant numbers.

There's a lot of different reasons for that. It's not solely just a result of having printed too much money, but that's part of it, perhaps, through all of the moves to introduce economic stimulus into the economy during the COVID period, during the lockdowns. And when people were at home, the U.S. government printed a lot of money. There's also been supply chain shortages as a result of that. There's also been some of the energy challenges that we're facing as a result of the war in Ukraine. And so there's a lot of different factors at play.

But bottom line is there's inflation in the system. The Fed has a mandate to deal with that inflation. One of the policy tools that they have at their disposal is raising interest rates. And they're raising those rates. And I think that's probably, you know, I'm not a macroeconomic expert, but I pay a lot of attention to this stuff as an investor with capital at risk. And it's hard to ignore that environment. And what happens effectively when they're raising rates is borrowing money becomes more expensive. And as a result, liquid. starts to tighten. And so fewer people are borrowing money. You know, there's not as much money to be lent out as a result of that. And there's just less money sloshing around. And so people start to pull back on that risk curve, if you will. And crypto, I think the reality is it's still at one of the farthest ends of that risk curve. And there are different assets within crypto that are even at farther ends of that risk curve. But crypto's far out there. Stocks are out there as well. And stocks are also taking a beating as a result. But that shedding of risk,

is natural. It's part of an economic cycle, which a lot of people who maybe have not been in financial markets for that long, look, we used to do this like every eight to ten years. The Fed can extend that cycle sometimes, but there is a natural credit cycle where basically they keep rates low for a while. People take on irresponsible kinds of debt and, you know, you start to see some of this risky economic activity happen. And so rates get raised and it kind of calls it back. And I think we stave that off with some of the COVID stimulus because we didn't want to induce a recession or an economic pullback at that point. So we staved it off. But now we've got to kind of pay or due. So this is just the reality that we have to deal with. This is the environment that crypto exists in now.

And I don't know exactly what it means, but I do think for a time at least, there's just going to be less appetite for risk. And I think that's okay. I think crypto will survive that, to be honest. I think a lot of over-leverage participants are going to get blown out. They need to get blown out. They took on too much risk. They're invested in stuff that doesn't have value. once that board is clear, we're going to be set up to kind of continue the ascent of crypto in my point of view. Yeah. I think like one of the more important things is crypto people are just spoiled by their gains

at this point. I mean, I think for the COVID bottom of NASDAQ, they're up 2X and east up, what, 15x, even at prices right now. So we just kind of get like, we're almost like leverage stocks, right? So I completely agree with you, D.C. You still have to think of crypto as a risk on asset. So if we are entering a recession, high rate era, which I do think the Fed now is going to push rates up high enough to call inflation and push us into a recession, you know, how bad that recession is, how fast they go back to lowering rates. I'm not really sure.

But, you know, crypto is a risk on asset. It will get hurt in that scenario, right? Now, at some point, I still believe that crypto, you're never going to be a totally, like, like 100% diversified asset, right? Every market's going to kind of move together because to your point, people are pulling money out, you know, things aren't great in the economy. Of course, they're going to sell off crypto. I do think we could start to once again decorrelate. So like for the first four or five years of Bitcoin and Eath, we weren't that correlated to the stock market. If you look at the correlation, it's, you know, generally if you really zoom out, it kind of goes the same, but we

weren't too tight. Recently, it's like almost a one-to-one correlation, you know, if you take out like the extreme moves. And crypto started to go down more recently. I think we're going to start to decorrelate a little bit more as things start to calm down. You know, there's really no predicting this stuff per se. But I think one thing I've realized recently is once you get into like these bare markets, people act like the worst is ahead of you when in reality the worst is probably behind you. So most alts are down like 92 to 95%. East down is 75%. Bitcoin's down pretty much the same. The NASDAQ is down, I think 38% from peak, which is a lot for a major stock index. I think once you start to, not to say it can't get worse, but most likely the worst is

behind us. Maybe we enter a little bit of a recession, inflation comes down, like housing gets hit a little bit. Is the NASDAQ going to crash 60, 70% from top? I don't know. I kind of doubt it. I think one of the conversations people should be having in this bear market is where are people putting cash? I mean, the U.S. dollar is gaining, but inflation's still 8, 10% a year. Stocks are down, cryptos down, housing's maybe a little bit down from the top. Eventually people get antsy and need to invest in something. I don't know. It's a hard thing to, but at some point, You can't just go down forever in every market. There's a conversation that's going around about the merge versus macro and which one is more powerful.

Eric, do you have an opinion on which one is more powerful, merge versus macro? Merge. No doubt about it. So I think one thing people totally get wrong in crypto. And if you've been around a while, you get it. Things are not priced in. They're just not. I mean, we saw that, I think, with E2 phase zero.

we saw that with EIP 1559 and people not just like price necessarily but narrative people don't think these things are going to happen until they go in and I think people will be shocked pun intended because the supply shocks would be way different at how much I know this is a bear market podcast I sound bullish which is funny because on the bull market podcast I sound bearish so who knows but I don't think people really but isn't that appropriate though because if we're in a bear market, and like you said, if there's a decent chance that most of the bearishness, the bare expressiveness has been expressed. Right. And so I think there's a case to be made that like if prices are down 90%, that's when you get bullish because that's just rational.

Yeah, exactly. This is when you should start getting bullish. And to me, I mean, 1-559 plus the merge as far, it makes ETH one of the most unique assets on the entire planet. I mean, you have a secure blockchain paying validators at a very low net issuance rate. And you're taking 1559, which is burning fees out. I mean, look, what I just said to most people is word salad. But again, like this is going to take a while for people to realize. And I think once, you know, MEVs lie for stakers, transaction fees are lie for stakers. We shoot up to whatever, 10, 15 percent for a little bit. And people are like, hey, if I stake my eighth, I have this. it's going to come down as people flood in and whatnot. But it's just, I think the merge is

bullish. I was a little disappointed seeing Bloomberg today put out an article where it's like East's about to, you know, reduce its environmental impact by 99.9 percent, but miners are going to be put out of a job. Like, that just proves to me how far away we are from the narrative we all know is going to come. But that just makes me bullish, man. I'm not going to lie. People just don't quite understand yet what we're building here. Yeah, and my take on it is it's hard not to be bullish about the merge, especially over an intermediate time frame. I mean, I'm super bullish by the fundamentals that this is going to bring, because I think the narrative, I just suspect in the next cycle, is that Heath is going to become this financialized asset that becomes attractive

as an asset to hold to a lot of other participants, and it generates this income based on demand for its block space. On top of that, all the things that Eric talked about from the supply shock and the reduced amount that was going to be sold because miners are out of the picture and basically the reward that's paid to stakers can be a lot lower than what is paid to miners. So there's a lot of virtue there. As far as where it fits within the macro cycle, I'm going to stay a little bit more neutral on that and I'll say, Eric, I'm definitely with you on the long term and the midterm. In the immediate term, if macro, I just don't know what's going to happen in the macro picture, right? I think that if macro really tanks, let's just say, in the back half of this

year, and maybe we are past the worst, like Eric said. But if we aren't, I think it's going to be hard for crypto necessarily to catch a bid. And these fundamentals will get buried for a time. Okay. I say for a time because this is one of those things, it's going to be like, yeah, P-1559 or even like the Bitcoin halvenings in terms of the supply shock that comes, even if you don't see the effect immediately, it's going to be this fundamental that whenever the cycle shifts, which we all know it will shift eventually, it is going to be like fireworks. So I'm really excited about switching to proof of stake, not just for that reason, but for a lot of other reasons. And I don't think the market has properly assessed that it is going to happen. We all know it's

going to happen because we're like super immersed in this stuff. I mean, it's just like Eric, David, remember when nobody believed the IP 1559 would happen. I mean, like, people just don't want to, or that beacon chain would launch. And by the way, the launch of beacon chain was probably the hardest part of the launch of ETH2 because that was the launch of the bonded validator network. So the money is already staked to secure ETH2 and a lot of it. I mean, that was a huge accomplishment. And I think if you ask most ETH2 developers, they'd say that was probably the hardest part of what they had to do.

Yeah, my mental model for the merge, it's like a tide that doesn't stop rising. So yeah, like tides, they oscillate in and out. And so, yeah, macro could get worse and maybe gets really bad. but like the tide still comes at the end of the day. Like it's a tide that always catches up. It's like a zombie. It's always on your heels. It's always catching up to you.

You always got to be on the run. That was a weird analogy. So as we wrap up here, I just want to pick your guys' brains as like some advice for newcomers. So there's a lot of people came into crypto. And one thing I am bullish on in this particular bear market is that the crypto industry actually retains people much better than it did in all previous bear markets. Like we have more things to do. We have better content and better education, I will say. And we have just more just camaraderie and community in this space. And so for a lot of newcomers who got perhaps

disillusioned by how fast some of these things would come and how this future isn't actually here in 2022 or 2023, but it's actually going to take us, you know, 2026, 7, 8, and beyond to really get to the vision that we had in the bowl market. What advice you have for these for cyclers? For the newcomers that are down bad, Eric, what advice can you give them to make them feel a little bit better. So I'll just be blunt and honest, first and foremost, don't expect gains that people got by being in early. So don't expect that in a year or two years, you're going to gain 2,000 X, like 100,000 X, whatever. It's just, it's not going to happen again. Like as the market caps gets bigger and bigger, you know, it's almost impossible, right? Like, you were at a trillion dollar

market cap or whatever. You're not going to get another 2,000 X on top of that overnight. So I would take first and foremost, like, real in your expectations. If you're here and you're invested and you believe in things, I think that's what matters most. So don't be here if you're just like, your neighbor told you to buy crypto and you think it's going to go up, right? Like, find something that you believe in. I don't care if it's buying your favorite NFT, like, because NFTs are cool. And I think Ethereum offers a lot to art. Maybe you think the merge is cool. Like, find something in this community that you actually believe in because I think even when you have a big downturn, you actually believe in the technology. I know that's a meme, but it's like it's actually true.

Like you're going to, you know, hold on, I think if that goes down. And I think the biggest, and I think one of the worst things we are as a community not very good at when stuff's going well or bad is on the way up, take a little profit on the way down, buy a little bit. Like you don't need to always be 100% ease. You can take, take 50% percent. profit on the way up at some point and you're probably going to be okay like when people are super greedy sell little when people are super fearful sell it all and stick the rest of it and keep it forever right like it doesn't need to be an all or nothing endeavor and i think that's the number one thing people don't quite get it's like oh i have to be 100% either not it's not true you can be a little bit cash in

and on both ways, you know. So I think that's the best advice I can possibly give. And I think what you're perhaps saying as well is that it might also be the profit maximalist approach to that strategy where like a lot of people, they come in late and everyone comes into crypto and they think they're late. It's like part of this industry. It's just like the right of passage. You come in and you feel FOMO. And so what do you do to answer that thomo, you maximally expose yourself, you put every last dime into your bullish crypto asset. But I think what you're saying is that if you go in like 75% in but keep 25% in cash, I don't know, pick your balance. That actually ends up being like the profit maximum approach

because that 25% cash allows you to buy the dips if they happen. And then also that commitment to not being 100% exposed makes hitting that sell button easier, perhaps when you should be hitting that sell button. And so if I'm interpreting this correctly, committing to a non-100% crypto-exposed position is perhaps a way to keep your head on your shoulders and be rational and actually perhaps make more money in the long term with that strategy. Would you say that's a correct type, Eric?

Yeah, absolutely. No, I think that's a good summary. And, you know, David, you and I talked about on the podcast we did, you know, just the one-on-one thing we talked about. And it's like, don't go all in. Don't, Ethereum sucks you in from not only an investment perspective,

but a mental job, friends, people, you just now, like, art, everything just sucks you in. Don't get that sucked in. I mean, I know a lot of us live and breathe this stuff, but like, keep some funds on the side to buy dips. And when everyone's freaking out and saying we're going to 100K, sell a little bit, it doesn't matter if you sold, you know, 40% below top or whatever. At least you kind of set stuff aside. And I also say, like, take a mental break. I know a lot of people listening to this probably, are just 100% all in, constantly on crypto. Step away from a little bit, unsubscribe from Brankless for a few months. And, you know.

Don't do that. Don't do that. I don't think David was just going to react to that. Just step up. Resubscribe when you come back. But no, all kidding aside, just like take a breath, sell a little bit, re-buy at the bottom, resubscribe, all that stuff. You said it's okay if you sell the top.

like 40% below the top. 40% below the top is $2,900 right now for ether price. And so if you had sold at those numbers, you'd be feeling pretty good right now. So it's okay to miss by 40%, especially when these cycles are so rampant. DC, what thoughts have come to mind? I mean, just my experience being in a variety of financial markets over my life,

the more you feel like you need the market to do something for you, the more likely it is to do the exact opposite. And I hate to put it that way, but that's just true. And I think this goes back to Eric's point, which is really about risk management. And I see way too many people with this mindset of being all in or all out. And I would never be all in or all out in crypto. And even in my layer zero conversation with you, David, I talked about how I had my risk hedge through other assets that I had accumulated over the course of my life. And I wasn't just going D-Gen long, all-in. Now, I put a lot of money in, but I also did it at a time when valuations were low. And so I think you've got a first and foremost position. yourself to survive and to be able to stay in the game. And I think what you see on Twitter and different forms of social media is you see products of survivorship bias. These are all people who kind of followed some of that advice. You don't see the hundreds or thousands of people who washed themselves out, who leveraged at the wrong time, who took on too much risk and they

lost everything. So you've got to manage that risk. You've got to manage your expectations too. And I think part of that is understanding where we are in this technology development arc. And I think you see a lot of comparisons, flawed comparisons in my point of view, to like Silicon Valley type products and that sort of thing, because they're centrally developed and they can iterate very quickly. Look, we are developing decentralized networks here, at least the real products in my point of view, like Ethereum, Bitcoin, and some others. And you can't move these things at light speed. It takes time to iterate. And especially in the case of Ethereum, you have to reach social consensus. There are multiple clients that have to get on board.

And that's why everyone's like, why is it taking so long? Ethereum will never upgrade to proof of stake. It's like, look, this isn't as simple as adding a new feature to Gmail or even adding a new feature to Solana or some other blockchain, which is more centralized. Ethereum's process is a lot more different. But that is also what gives it long-term value. And so I think if you want to be patient, you want to learn how to be patient about this, study the history of the consumer internet and how that evolved. And there were a lot of periods where it was just kind of stagnant. And then we'd have a new iteration and we would make a quantum leap as a result of that. And all of a sudden we had new functionality that we're playing with. I think for this upcoming market cycle that's going to be probably layer twos on Ethereum and some other things that I can't foresee right now. It's going to unlock new potential for what this technology can do. And I think fundamentally you've got to learn about the technology and what differentiates some of these chains in my point of view. And you've got to really ask yourself, where is that unique value? you that's going to survive across cycles. Are you invested in the next name coin or are you invested

in the next Ethereum? Is there going to be a next Ethereum? I mean, I think you've got to really have some of those honest conversations with yourself and you've got to manage your position appropriately. This goes back to what Eric said at the beginning. I mean, whenever anyone new comes to me, it's like, what should I buy them? Like, buy some Ethereum and maybe some Bitcoin and then just spend time learning about the space and make sure that those are the core of your portfolio. If you want to take swing bets on other stuff fine, but you've got to learn. how it actually works. I think my final point of advice is stay engaged through the bear. I mean, respecting Eric's advice to kind of be bored or to take a break, a mental health break, I think that's

very valuable. But also don't check out, okay, because you will miss the next uniswap. You'll miss the next defy. You'll miss the next NFTs. The people who did really well in those markets, all of them were very involved through the entire bear. If you think you can just show back up in two years and tap into all that, I think it's going to be pretty difficult. Certainly, yeah. The people that got the Unoswap AirDrop were here before the token, obviously. That's how it works. And so, like, growing your footprint during the bear market and just growing your skills. Just to exactly what you were saying, D.C., no one knew that it was going to be defy that was going to take off. And no one knew that it was going to be NFTs. But the people that did figure it out, figured it out first,

patiently were waiting around in the bear market because they knew something would come. They didn't know what. But they were the ones that heard it first because that's what they do in the bare market, they just stick around and hang on to it. And then I think one last comment I want to add on Eric's comment about leverage. People think that these markets are rational. Like I had a cursory glance, like, oh yeah, like we can do some DCF flows and blah, blah, blah. And like, they're not even close to doing that in crypto land. But even in stock markets, like, people think that these things are based off of numbers and to some degree they are, but they're mostly based off of emotions. And especially the crypto markets, because crypto markets are so

hard to evaluate. Like, how the hell do you evaluate Bitcoin? Like 21 million hard how do you evaluate that? You evaluate it with your gut. Like just how do you feel about it? And therefore, like when you're on leverage, these markets, when they call it a depression because people are literally depressed or they call it the euphoric part of the market cycle because people are literally euphoric. So if you're on leverage and you're also like going crazy, that's why it's because like you're experiencing like you're not just leveraged up on your financial assets. You're leveraging up on your emotions too. And so like there's no way that you can keep yourself sane in these market cycles while you're also leverage. You will literally drive yourself crazy. You will lose all of your sleep.

And you won't learn to think like a normal human being who thinks like normal human beings think in multiple year long time frames. Like they have a plan for themselves. And when you're on leverage, like no one holds leverage for years. That's ridiculous. And so as you are playing in the markets, understand that like your emotional gut responses are very strong guiding force that you can't really get away from because you know what's making you feel it is you and you're stuck with you and also the decisions that you make throughout these market cycles so that's my last comment i'll give you guys if you guys want any further comments to add on or anything else you want to close out with i'll echo two things dc said i'll my first and foremost opinion is survive in

advance that's all that matters don't get blown up if you keep most of your crypto and advance, you're going to be here and you're going to make money, I promise you. And, you know, and it's just hard seeing people get, like, so blown out by influencers on Twitter and stuff, like on the ups and downs. Like, just stick to your convictions, you know, stick to people that you trust. Social media does play a crappy influence in all of this. And I think I'll say, go read, devil take the hindmost. Like, the crypto is not the first market, right? Yeah. I think, David, you've read it, right? That's so good.

Crypto is not the first market to capitalize on greed and fear, right? So, you know, stick to something you're convicted with. Know that things are going to go up and down and don't get taken by influencers and, like, hype or doubt. Like, sure, maybe they'll, like, convince you to buy a little bit, but please do not take, like, over leverage at the top when these people are saying things. And I think, like, super cycle? Most people will.

Yeah. And the next super cycle, please don't do that. So all I would say is, look, just advance. I've made stupid mistakes. I've been around since 2013. I've been called on margin positions. I've made stupid investments. I've taken stupid token buys.

But at the end of the day, I try to just keep a core eth position, not on leverage. And look, I'm here and I'm doing fine. So just try to do that. And I think you'll survive. Do you see any last comments? Yeah, my final advice is teach yourself not. to FOMO into stuff. So like when the hype is at an all-time high, take a step back, let the market do what it

needs to. If the value is still real and it's still there, you'll have an opportunity to enter. And I think the flip side of that is, look, if you want to know how a lot of people in crypto really ended up making it, they were involved in the bear market they bought during the bear when no one else wanted to buy. I mean, I know the three of us on this podcast right now were buying Ether. at $90, $100 during the last cycle. Most people could not get rid of it fast enough at that point.

Okay. And if we see another depression of that scale, depression phase, there could be an opportunity that presents like that. Okay, my final final point is don't try to like time the bottom perfectly if you're trying to buy it like that. It's much more effective just to dollar cost average after it's already sold off a lot. And I'll tell you guys what I tell my friends and family right now, look, if you have cash and if you have an income and you're trying to gain exposure to this market, now is a great time to

start entering positions. And yes, it could decline a significant amount from here still. However, is it going to be lower than this point in five years? I think probably not. I think it could be potentially much higher in the right kinds of assets. So you've really got to position yourself for the long game and you've really got to position yourself to be able to take advantage of these opportunities while they exist. Yeah, I think that's a very important point. Don't try to at a time, bottoms and tops. Like, it's a fool's errand. As long as you're within that range and, like, we're down 80% or whatever and, like, stuff looks bad. Starting the dollar cost averaging, it's probably not the worst idea, right? Maybe you don't call the exact pico bottom or

pico top, but, you know, you're probably doing yourself a service by, you know, I totally echo your sentiment here by, you know, buying in now or somewhere between here and zero and then selling all the way between 10k and infinity. Amazing, guys. Well, I feel very relaxed after listening to you guys, and I hope the listeners have gleaned some perspective and are able to just calm down a little bit while the markets are very, very chaotic.

So Eric, D.C., thank you for sharing some of your wisdom with a lot of people who I know are finding very, very valuable at this present moment. So thank you for coming on. Yeah, it's fun. Yeah, thanks, David. Cheers, guys. Bankless listeners, you know what to do.

If you enjoy this content, you got to like and subscribe, because bankless will bring you everything from, the chain smokers to talking about block production to the wisdom of multi-cyclers like Eric and D.C. So thank you for sticking around through this bear market war stories episodes. Risk and disclaimers, of course, you can lose what you put in. Crypto is risky, but we are headed west. This is the frontier. It's not for everyone, of course, but we are glad that you are with us on the bankless journey. And unlike what Eric Connor said, don't unsubscribe to bankless during the bear market, because we're going to continue to delivering you good stories and podcasts along the way.

So thanks a lot. Cheers, guys.