Bankless - VanEck’s 2024 Crypto Predictions with Matthew Sigel

Episode Date: December 12, 2023

In today’s episode, Matthew goes over VanEck’s 15 hottest 2024 crypto predictions report. Matthew Sigel is the Head of Digital Assets Research at VanEck and has been since 2021.  ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum  ⁠  👾GMX | V2 IS NOW LIVE  https://bankless.cc/GMX  🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo   🦄UNISWAP | ON-CHAIN MARKETPLACE ⁠https://bankless.cc/uniswap  ------ TIMESTAMPS 0:00 Intro 4:55 VanEck Predictions Origin 5:53 Recession & Spot BTC ETF 8:06 4th Bitcoin Halving  11:45 BTC All-Time High 14:15 Ethereum Flip Bitcoin?  18:38 Post-EIP-4844 L2 Capture 22:26 NFT Activity Rebound 24:33 Binance  28:05 Stablecoin Market Cap 32:16 DEX’s All-Time Highs 37:17 Bitcoin Yield? 40:49 Blockchain Gaming 43:20 Solana Outperforms ETH     47:15 DePin 53:05 Corporate Holding Upside 56:24 DeFi & KYC 1:03:31 Closing & Disclaimers ------ RESOURCES Matthew Sigel https://twitter.com/matthew_sigel   VanEck Predictions Report https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-vanecks-15-crypto-predictions-for-2024/#us-recession-arrival-and-debut-of-spot-bitcoin-etfs     VanEck Solana Report https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-vanecks-base-bear-bull-case-solana-valuation-by-2030/   ------ Not financial or tax advice. See our investment disclosures here: https://bankless.com/disclosures 

Bankless Nation is just about the end of 2023, and we are entering 2024. It's predictions time. We've got to make our New Year's predictions. We've got 15 of them today with Matt Siegel. He's the head of digital assets at Fana Eck. Fantastic predictions that span whether we're going to have a recession, talk about Bitcoin, whether we're going to get to all-time highs, Defy, Eith versus Solana, all of the things. David, were you surprised by any of these predictions?

Some of them are extremely precise. Not only did we get a Bitcoin all-time high, prediction, which is safe, but we got the day, the day of the Bitcoin all time by breaking, which is extremely specific. Some predictions for out of left field, some D-pin predictions, some predictions about accounting and how that's actually helpful for our bags. And if you are in the middle of the Salana versus Ethereum Narrative Awards, we've got some predictions here for you as well.

So whether you believe these predictions is up to you, they are all entertaining. None of them are financial advice. So let's go ahead and get into all of these predictions from Matthew Siegel. But first, a moment to talk about some of these fantastic sponsors that make this show possible, especially Cracken, our preferred exchange for crypto in 2023 and 2024, just around the corner. If you're not having an account with Cracken, consider clicking the links in the show notes to getting started with Cracken today. Cracken knows crypto. Cracken's been in the crypto game for over a decade.

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Active addresses on SELO have grown over 500% in the last six months. With the SELO layer 2, gas fees will stay low and you can even pay for gas using ERC-20 tokens. But SELO is a community-governed protocol. This means that SELO needs you to weigh in and make your voice heard. Join the conversation in the SELO Forum. Follow at Selloworg on Twitter and visit cello.org to shape the future of Ethereum. Bankless Nation, I hope you are ready for some predictions for 2024. What will the next year bring?

Well, we have the perfect person to tell us. Matt Siegel, he's the head of digital asset research at Van Eck. He's been there since 2021. Van Eck has been totally doubling down. I would say tripling down on crypto lately, particularly in the research that they've been presenting. We had Matt on the podcast a few months. ago. And now he's back again with some of these fantastic predictions. By the way, toward the end of this episode, I think Matt's got some really interesting news for us with

respect to the Bitcoin Spot ETF. Okay. So we'll save that as the cherry on top at the end of the episode. First, we're going to get to the predictions. Matt, welcome to Bankless. How you doing? Thanks for having me back, guys. Okay. So let's talk about these predictions. You got 15. Before we get into the first one, we're just going to go to the order and kind of grill you on each. So what's the genesis for these predictions? Have you guys done this in previous year? And like, how did you come up with these things? Yeah, we did it last year.

I'd say our track record is mixed on how it all turned out. But it's really helpful for an investor to kind of like lay out a roadmap of how things may develop and then adjust your positioning as the facts change. So Jan asked for predictions and here they are. But the little disclaimer is that we're really stepping into the realm of speculation here. But in this asset class, imagination is not a luxury, but a necessary locomotive. So, you know, I understand the skepticism that will surround these predictions. Send your complaints into the arena where I will find them.

Wait, where's the arena? Is that on Twitter? We're all good complaints go. Okay. In the YouTube comments, I guess. Yeah, get out of bankless. if you're upset at these. Okay, let's talk about the first one. This one was a little upsetting to me. I've got to be honest, Matt. So prediction one, the U.S. recession will finally arrive, but so will

the first spot Bitcoin ETF. Over 2.4 billion may flow into these ETFs in Q1, 2024 to support Bitcoin's price. It's not the second part of that that makes me nervous. It's the first part. So you guys think the U.S. recession will arrive sometime in 2024. Explain that one. Yeah, I mean, this may come off as kind of crying wolf as everyone's been calling for a recession for a year now. But when you look at the data, the economic momentum has been slowing for months. And that creates an economy that's more vulnerable to shocks. So leading indicators are now in recessionary territory. There's been 19 consecutive months of leading indicator declines.

That's close to a record. We've got commodities and shares of retailers, both struggling. Employment is softening. corporate bankruptcy filings are back to early COVID levels, and the yield curve is inverted, but steepening in recent weeks. So these are all very late cycle dynamics. You can see it with dimensions of soft landing in the media, which have spiked, as they often do before an official recession is called.

Crypto and Bitcoin have really only experienced one official U.S. recession, Q1 of 2020, during which Bitcoin fell 60 percent peak to troth. So, you know, we'll see how much that matters this time. It may be an irrelevant prediction, but, you know, we are prepared for volatility in the first half of the year. And that would line up with some of the price action that surrounded kind of pre-having Bitcoin in previous cycles as well. So, Matt, if we see that recession, are you predicting the first half or second half? Because, you know, we've got an election going on in the U.S. next year, too, which, you know, makes – there's definitely some political incentive to defer the recession as long as possible. I think the recession will be backdated to Q4.

They tend to last one to two quarters. So we're out of it and spending ad dollars on election ads in Q3 and Q4. That typically lines up with pretty positive markets. All right. Going into the next prediction in the list, uneventful fourth Bitcoin having. Of course, the Bitcoin having, not a prediction. We all know exactly where that's coming. But Matt, tell us about the specific nature of this Bitcoin having.

What are the predictions you're making around this Bitcoin having. So this is a pretty easy one. The prediction is that the having will proceed without a major fork or missed blocks in April 2024. And as the new coin issuance gets cut in half, we will see unprofitable on miners disconnect. They will seed market share to those with low cost power. And then after a period of digestion, the Bitcoin price should rally sharply. One difference about this cycle than previous cycles that we can, we'll be able to observe in the markets is that publicly traded Bitcoin miners. So these are the stocks that you can buy like riot and marathon like Phoenix that just went public in Abu Dhabi and is now the biggest Bitcoin miner by

market cap in the world. These listed miners currently control a record percentage of the hash rate. It's more than 25%. And they almost all went bankrupt last year. So they've emerged from bankruptcy with much better balance sheets. There's very little debt among these companies, and they should be set up for better performance next year. Is that why you're saying significant gains for those low-cost miners? Those are the miners you're talking about. And why does the happening benefit them? Because it seems like their revenue is getting cut. Are you just saying the market for minors are healthier at this point in your expecting? Yeah, the overall market for miners is healthier with stronger balance sheets, they should be able to deal with the having better than in previous

cycles. But I think the distinction that we're drawing here is that there's a couple of publicly traded miners, namely CleanSpark and Riot that have a cost base, which is well below other peers. And so the call is, if we do have kind of a trickier Q1, then it'll be those guys who have low electricity costs and better balance sheets that will outperform the field. And then after the assuming the Bitcoin price acts as expected, then the miners with trickier balance sheets, higher cost electricity may take the lead. The typical meme around the happening is that, well, we have half as much Bitcoin being issued and going to the market, therefore bullish.

But that's not a very sophisticated take because there's one more variable in that, which is, well, the miners actually decide when they're going to sell that Bitcoin. And I think over the last year, miners historically are known to be actually pretty good traders. if you like interpret them as like when they decide to sell and when they decide to hold. Is there anything you can add about this nature of Bitcoin coming onto the market that is like miners electing to take on debt in this present moment of the market cycle so that they can hold their Bitcoin to sell it at a higher price and later? Is there any indication or information you can share here?

The investors in the public markets don't want to see these miners take on debt because they all went bankrupt last cycle. So we have seen some large purchases. of A6. We saw one today. Riot announced a big deal. But their net cash, riot is. So it's not a debt problem. It's just that being net cash, having low-cost power is enabling riot to hit the pedal on the gas and buy some more machines to try to set up these market share gains that are possible in that post-having period when the higher cost operators may be forced to shut down and stop mining.

Okay, prediction number three, here we go. Bitcoin will make an all-time high, I'd like those words, in Q4, 2024. Pretty narrow time frame. Yeah, potentially spurred by political events and regulatory shifts following a U.S. presidential election. So we know we're getting a U.S. presidential election, at least I sincerely hope that's the case, potentially spurred by political events and regulatory shifts. So all-time high for Bitcoin by Q4 of 2020. for, and this is despite the recession prediction. Can you explain that one, Matt? Yeah. So I think we'll get to the more details around the ETF at the end here. And, you know, that should keep the price somewhat supported in Q1. So even if we get a recession,

I'm not calling for a dump. But the main call is that in the second half, Bitcoin will climb this presidential-sized wall of worry. The percentage of the global population that will be voting in legislative and presidential elections next year will hit an all-time high. We've got data going back to 1800. Next year, 45% of all humans on the earth will vote in elections. Again, that's an all-time high. With that typically comes high volatility and the prospect for significant change. So we see mounting evidence that voters and courts are rejecting the anti-growth agenda of the Green Lobby. So we expect a combative election, but Donald Trump to prevail with 290 electoral votes, regain the presidency.

That will, of course, raise optimism that the SEC's hostile regulatory approach will be dismantled. And maybe I'm being too cute with the timing, but I'm calling for an all-time high for Bitcoin. On November 9th, that will be exactly three years to the day from its last all-time high. And if you remember, Bitcoin's breakout in November 2020 also came exactly three years to the day from its November, 7 2017 top. And then the cherry on the top. Cherry on the top, if BTC reaches 100K by December, Satoshi Nakamoto, Time Magazine, Man of the Year.

Oh, right. All right. Is that three predictions there? So, Matt, you not only did you call a date, you also called Bitcoin High, and you also called Trump as the presidential winner. And then you called the magazine cover of time. That was like, that was at least three there, my friend. Like wish list, predictions.

You know, they start to blend a little bit when you're fully invested in this asset class. All right. All right. Let's keep this going. Ethereum's market position behind Bitcoin. You are predicting that Ethereum will not flip Bitcoin in 2024. Flipping is not on the menu next year, but still will outperform tech stocks. Unpack this one for us.

Sure. I remember being on a stage with you, David, a couple years ago. And we were asked. Yeah, that's right. And, you know, will Eath flip Bitcoin? Everyone on the stage raised their hand. And I said, no. I'm going to stick with it.

So that was a flex, David. No it won't ever or no it won't soon? Not next year. Not next year. Oh, sure. I can get behind that sadly. Matt, David, it's not wrong yet, okay? He's not wrong yet.

You know, my call is that there's more money in Tradify looking to get involved in crypto than there is in crypto that can be recycled. And in the current regulatory regime, Bitcoin's regulatory status is unique. its energy intensity is also unique. And it's the energy intensity that is attracting this interest from quasi-state entities in Latin America, in the Middle East, in Argentina. So we expect Argentina will join El Salvador, the UAE, Oman, and Bhutan as the fifth country to sponsor Bitcoin mining at the state level. We expect Argentina's state-owned energy giant YPF will mine digital assets using stranded methane and gas. And so similar to past cycles during a halving year, Bitcoin will lead the market and then

post-having, the value will flow into smaller tokens. So, ETH will start outperforming Bitcoin post-having. It may outperform for the year, but it's a high hurdle on a flippinging. And we also expect ETH will lose market share to other smart contract platforms with less uncertainty surrounding their scalability roadmap like Solana. Okay, hold on. This is not the same sounds that I've heard other. people predict, make predictions around the Bitcoin, ETF and Ethereum ETF.

Ethereum, ESG-friendly, ESG-approved compared to Bitcoin because of Bitcoin's energy consumption. Also, external, like trad investors enjoy Ethereum more because of its similarity to a high-growth tech stock in comparison to Bitcoin. And so some of the rumblings I've heard is that when we have both a Bitcoin and an Ethereum ETF, Ethereum will have outsized flows versus Bitcoin in relation to its market cap. What would you say to this alternative position? I'll push back on that. I'll push back on that.

The first is that I don't believe in ESG. I think the ESG narrative is fading. The courts in Canada have dismantled Trudeau's green agenda. The UK Prime Minister has backed away from their green agenda. South Korea has just reinstituted plastic straws, baby. So that story is going away, right? Polish carbon use. The other wrinkle here is that, especially for these ETS in the U.S.,

it doesn't appear like there will be staking involved in those ETSs because of the regulatory uncertainty. So I'm not sure that the product will have quite the same appeal as the buy-in hodel Bitcoin ETF, at least in the early days. Matt, do you think that Ethereum will get an ETF in 2024? I like, what's your over under on that prediction? It's not one of your 15, I don't think, but I'm curious about that. I do, I do. The deadlines for the SEC to rule on the spot applications that are pending, which include hours, is May.

So there is some time. So that'll be good for Ethereum. And you're saying that in this prediction, not good enough to flip in Bitcoin and not good enough to preserve its market share in the face of what you call growing competition from other smart contract platform. So that's the prediction for 2024. Precisely. Okay.

So that kind of seems to fit under the general sentiment that Ethereum is just squeezed. You got the bigger brother capturing a lot of attention on the Trad side of things. And then you have Solana, which is like the shiny new fast toy on the crypto side of things. Are you saying that you're in line with this kind of like vibe of the crypto space in the present moment? Yeah. I mean, I think that ETH is going to outperform BTC for next year. I just think that most of that outperformance will come in the second half of the year. in the second half of the year.

And, you know, we can get into with the next one why that's the case. But there's a lot that has to do with East Roadmap. So prediction number five, post, and this is what I love about this new Vanek that I'm seeing. Maybe guys were always doing this, but I didn't realize you were going this deep on crypto, and it's great to see. Post-EIP-4844 implementation, Ethereum layer twos will capture the majority of EVM-compatible, TVL and trading volume. Of course, as crypto-natives, we understand what EIPs.

are. And we've defined what this is. Many time we've got entire episodes on EIP 4844. But tell me about this prediction. So you're saying Ethereum Layer 2s will capture the majority of EVM compatible TVL, total value locked. So assets under management in these chains and trading volume. What's a, what are the details there? Well, as you guys have covered so well, Ethereum will have a fork next year. This fork will reduce transaction fees dramatically and improve scalability for layer two chains like Polygon, Arbitrum, Optimism, and others. So one of the challenges of managing assets in this space, as the L2s have come to market, is that the market share has been super volatile, and investors have just been kind of going where the air drops will be. And it's hard to allocate capital if you have to change your

every couple months, especially when you're managing a decent amount of money and the space is not that liquid. So I'd say my confidence level on this prediction is perhaps lower than the others, but our call is that within one year of the Ethereum fork, the upgrade, EIP 4844, Ethereum L2s will consolidate down to two to three dominant players as measured by value and usage. And one of those players will achieve a higher monthly dex volume and TVL than the ETH main net for the first time. And collectively, those chains may accumulate 2x the dex volume of Ethereum. Right now, that ratio is 0.8x and 10x, the number of transactions. As you know, right now that ratio is about 5x.

So this is predicting that one of Ethereum's layer 2s will actually be a stronger settlement layer than Ethereum itself, at least in terms of on chain decks activity. I wouldn't say that settlement because it still settles back to Ethereum. Sure. Exactly. Exactly. But it does predict, you are predicting more of kind of like power law winners in the layer two space rather than just we have thousands of chains.

And all of these layer twos and the TVL is distributed across these hundreds or thousands of chains. Yes, by volume. Now, by users, the long tail may not, you know, by users there may be still plenty in the long tail. but by assets, we think it'll consolidate. So, Matthew, I can tell you about like 10 different layer 2s that are very, very different from the optimistic roll-ups like Arbitroman optimism that we know or even the ZK roll-ups like Polygon that are coming onto the scene. There's FHE-based layer 2s. There is Solana Virtual Machine-based layer 2s. There's privacy layer 2s, just like a splattering of new flavors of layer 2. And what you're saying is that the layer 2 canberine explosion of different flavors, nah,

No, we're getting consolidation, not growth. Yeah, I mean, all that liquidity fragmentation is suboptimal, and eventually there's no choice but to accelerate the dominance of the winning L2s. And that's already occurred in Dex's, right, where Uniswap, pancake, curve, the three of those are 80% of Dex volumes in 2023. So, you know, we're going to make the call that that same market consolidation will occur across L2s. We think arbitrament optimism are probably.

the main contenders there. I can't wait to ask you about power law winners of ETFs, by the way, Matt. But again, that's a tease. Toward the end. We'll get there. Sorry, David. Go ahead. Number six. Number six, NFT activity peaks to new heights. NFTs are coming back, Matthew. I know we've seen a few NFTs pick up in steam, but NFTs across the board, the entire sector is coming back to life. What's this one? Yeah, Vanek Intern laughed at us about this one, but we are sticking to it. NFT activity will rebound to an all-time high. We think the activity will gravitate towards the top collections on ETH, better crypto games,

and importantly, new Bitcoin-based offerings. So if I were to tell you that since inception, the issuance value of NFTs, ETH to Bitcoin, is a 50 to 1 ratio, 5-0-1. In the last month, that ratio is 1-1. So we're making a call that for 2024. In terms of quantity or value? Value of the NFTs. Yep.

At the mint. So we're going to make a call that for 2024, that ratio will be 3 to 1 ease to BTC, which is still enormous progress for Bitcoin. What the heck? So Bitcoin the NFT platform, that's what you're saying. Yeah, hang on. I'm calling some flubby weird numbers here. Bitcoin NFT minting is just like a super weird metric to measure.

How do we actually measure? the value of these things because we're talking about ordinals, right? Among others, ordinals, inscriptions, we're using the good folks at CryptoSlam for their data on that number. I don't think that's a weird, like you can definitely measure the value minted, along with, like, existing value. Like, both are not comprehensive measurements, but both are definitely measurements. So in November, that number was 319 million for Ethereum, 363 million for, Bitcoin. So there's there's a flipping egg. When you say Ethereum, are you talking, are you including the L2s and as well in kind of the Ethereum number? Are you just talking about like

main net Ethereum when you're, when you're doing a three to one together? I believe that incorporates L2s. We might have to check that for you. That's a big, that's a big bull prediction on Bitcoin. Okay. So prediction number seven. Let's talk about this. Binance will lose its number one position for spot trading with competitors like OKX, Bybit, Coinbase, and Bitgett, contending for leadership. Coinbase's future market makes seed one billion daily volume as regulated index inclusion becomes key. Okay, so Binance without CZ, I guess now everyone knows that. Of course, he's no longer the leader of Binance is going to lose its number one position for spot trading. It's maintained that for a number of years. Certainly maintained it during the last

bull cycle. Explain yourself, Matt. This is just an easy one. Nobody likes the colonoscopy and that finance is about to have a three-year colonoscopy with the DOJ up their ass checking all of the data. And we don't think investors are going to be too keen on putting their largest trades on that platform. So we think they'll lose share. The point of that prediction about index inclusion, I just want to spend a minute on. One of the unique dynamics in this Bitcoin ETF battle is that the SEC objects to market manipulation of Bitcoin, right? They think that Binance was using its own wholly own market makers to wash trade coins back and forth between itself and that a lot of that volume is fake. And if you look at the underlying indices that the ETF sponsors are using to track the price of Bitcoin, there's CF benchmarks, there's CoinDesk indices, Vanek owns a company called Market Vectors, which is an index manufacturer.

Those indices have to decide what prices are they going to use to calculate Bitcoin. And the regulator doesn't want them to use finance prices. So if you look at the exchanges whose prices are included in the feed that constitutes the Bitcoin ETF, no Binance. And we think that, and it's a very small handful of exchanges that are included because the SEC wants to see these surveillance sharing agreements, data sharing, between the listing exchange, call it NASDAQ or CBOE, and the crypto exchange. You know, finance is not going to be approved for that.

And being approved for that is key. That's why Coinbase really sits in the capital. separate seat among U.S. players. So part of this prediction, I think, is bullish coin, the coin-based stock on the public market. And the story of coin has, over the last like six weeks or so, is up 76%. What, where is how, is this like kind of a one-to-one transfer of value from finance to Coinbase, would you say?

Are you trying to get a bonus prediction here, David, on the price of coin? Yeah. What's the impact on Coinbase's valuation here? It's bullish for Coinbase. they should be a market share. They've been gaining market share all year. They should gain more market share next year, profitable, cash on the balance sheet. They can pay back that debt.

They've got the custody business they're doing the custody for the vast majority of the ETF sponsors. I think it's a pretty clean and obvious story with a lack of other stocks in the market to buy for large-cap, Tad5 PMs. We like Coinbase a lot here. What I heard from that was an all-time high coin-based stock by Q4. What do you think, David? Is that what you heard? Is that in the predictions, Matthew? Not in there.

Not in there. I can't hold them to it, though. All right, coming up next, stable coin market cap hits record high with USDC market share recovery. Usually the sentiment around USDA hasn't been great as USC has kind of just bled into, flows into tether. Like every dollar that USC seems to lose, Tether seems to pick up. up. You're calling for a reversal of this. Unpack this prediction for us, Matt. Yep. So we see total value of stable coins on chain reaching an all-time high above $200 billion. It's currently $128 billion. We see a number of regulated stable coins that will launch in Europe

in line with Europe's new MECA regulation. We're seeing a proliferation of yield-bearing stable coins. and the first quarter over quarter rebound in stable coin market cap in a couple years. So the more, I think that, you know, stable coins reaching an all-time high, not such a controversial prediction. More controversially is the one that USDA will flip tether. So we think there's going to be more institutional adoption this year, and those institutions will reveal a preference for USDA that we can already see on some of the newer L2 chains. I'm curious of your guys' thoughts on that. Wait, wait.

So you think that not only this, because this isn't in the, at least the Twitter version of these predictions, Matt, you're also saying that USDC will flip tether? That's a hot prediction. That's a hot take. That's even more bold. Well, there's a catalyst for that,

and it involves a three-letter acronym called D-O-J. That's another prediction. There's also super hot. There's another acronym, K-Y-C. And you might have heard of it. that one. So, you know, the lawmakers are asking for the U.S. DOJ to take action against Justin Sun and Tron. You know, that could be a catalyst. I mean, last week, I mean, we were just talking about this earlier this week.

Justin Sun is a last big, dubious character in crypto that seems to be unscathed. Well, but Treasury is actually talking about Tether specifically at this point. like specifically. So this is a prediction of kind of some action, I would guess. Like can I, and you also say in this in this prediction that emerging layer two's will be a catalyst for USDC. And you certainly see that. Like you can imagine that is that is part of the reason Coinbase decided to launch its base chain as a layer two to kind of like, you know, push out USC everywhere. But I want to ask another question. Like part of the reason I think that there's been kind of a vacuuming of liquidity out of stable coins is because we don't have a tokenized version of a treasury

on chain at this point. And so, like, I don't necessarily want to keep my funds in stable coins if I can go to a mutual fund and get, you know, my yield, I get my five, collect my 5% courtesy of the Jerome Powell AirDrop. And so to what extent does that factor in here? Do you think USDA will have some sort of treasury product or, you know, what do you think about tokenized treasuries. Does that, does that factor in at all? Nobody's figured out how to pass along the yield on treasuries to U.S.-based stable coin holders. Thank you, Gary. Yeah, that's unlikely to change until he's gone.

But Circle will be the closest to enabling that. and these kind of quasi KYC L2s that are beginning to emerge are likely to use USC rather than tether, would be my guess. But it's not, you know, it's not one of our predictions that it's a circle USDA yield product, which catalyzes this market share shift. It's more about on the margin, the institutions are coming this year. On the margin, they prefer USDA to tether and enforcement action. versus Tron or Justin Sun might catalyze some tether market share losses.

Prediction number nine, Dex's, will hit all-time highs in spot trading market share driven by fast blockchains like Solana and wallets, enabling automated transactions, promoting on-chain trading and self-custody. So this bull market is the bull market of the decks is what you're saying. All-time highs here. And part of the catalyst here is really cheap, fast block space. Explain this one for us. Well, you can see following the Gito AirDrop that Solana just flipped avalanche in Defi-TVL,

optimism and Polygon look next after that arbitram. So I think you guys have probably been on the Solana chain, and the experience is very pleasant compared to what many people first experienced with ease three years ago. and with these airdrops that are here and coming, there's going to be more folks that are using specifically Solana. And I think that is what's going to power the Dex share of spot trading, which peaked around 20% in June of this year to make an all-time high closer to 25%. You know, yep, go ahead.

Oh, I will say. So the first time I you touched the Salana chain was in April of this. this year when I bought a Mad Lad. And then also I touched it for the first time since then yesterday. And everyone's like, oh, the Salon of UX. it's so good. It's so refreshing. It feels like Web 2.

And I'll say it just like, it feels like optimism. It feels like arbitrage. I think the whole entire narrative around crypto right now. But David, I don't have to bridge. I don't have to like go through all this. David, these are your predictions. These are Matt's predictions. Stop.

All right. But this is a general. prediction about dexes, but you're saying specifically dexes on Solana as well. You're not just saying dex volume is all-time high. You're saying Solana specifically is a big driver towards those decks volumes. Correct. You know, putting the entire order book on chain is not possible on Eith Mainnet. It is possible on Solana. So the marginal crypto user whose first experience is with Solana is more likely to make an on-chain transaction. Mm-hmm, mm-hmm.

All right, so these are all predictions one through nine. We still have 10 through 15 left to go, which includes more Salana predictions, which I'm just super stoked for. So we're going to get to all of these and more. But first, a moment to talk about some of these fantastic sponsors that make the show possible.

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Start swapping seamlessly with products from the most trusted team in D5. Visit app.uniswap.org to get started today. And we're back starting with more Bitcoin stuff. We'll get to GameFi in a second and then Solana after that. Prediction number 10, Bitcoin yield opportunities driven by remittances in smart contract platforms, I will say, I did not have this one in my bingo card for this episode. Matthew, unpack this one. What is this emergence of Bitcoin staking prediction?

Yeah, Bitcoin yield will be a thing again in 2024. Remittances will emerge as a killer blockchain use case. They always have been, but easier off-ramping and spending of stable coins will make it easier for the recipients to monetize their remittances. And given the use of Bitcoin and Layer 2, Lightning Network in some remittance corridors, Bitcoin staking will become a narrative in 2024. So where does it come from in staking? It comes from channel fees, which are low. Staking to lightning nodes happens today, but it is

risky and has low return because your Bitcoin is used for payment settlements on the lightning network. But there are new protocols that abstract some of the technical nuances of managing these lightning nodes. There are also federated self-cutting. solutions that are on their way out. So users should be able to participate in the remittance market from cold wallets and earn some yield. That yield may be low and it may be hard to do, but I think that'll be a new narrative for next year. And there's another Bitcoin yield narrative, which is using Bitcoin as a provider of security to proof of stake blockchains like Babylon. You may have seen their capital raise yesterday. That's a cosmos-based chain that allows Bitcoin to

holders to earn yield offering non-custodial staking of POS chains. So you're making a prediction on the Bitcoin app layer. No, I mean, that's not. That second one is not. That second one is basically like Babylon is like an eigenlayer sort of for Bitcoin. And you're actually using the monetary value of Bitcoin to secure an entire chain. It doesn't necessarily mean kind of the app layer. But app layer expansively is how I would say that.

Yeah. Yeah, but what I did here is the year of lightning for 2024. And I've heard that in so many predictions for a very long time, Matt. Is it finally going to happen? Like, why hasn't lightning taken off in the past 10 years? I think it's too decentralized. And there's been no VC-driven driving force to power this thing forward. So everything just kind of takes more time.

but I've been pretty impressed with some of the protocols that I've been looking at. Like one is Ambos, which basically makes a market for lightning channels so that you can sell your lightning channel and earn a yield and vice versa. These federated self-custody solutions like Fetamint, you know, it's a slower ramp. But when it takes off, there's going to be a big market for yield on Bitcoin. So this is kind of a sleeper for next year that Bitcoin holds. holders will finally be able to earn some yield and participate in an array of other productive use cases for their Bitcoin from self-custody. That's the key, self-custody, because Bitcoin yield was a thing last bull run, if folks

remember it, at 2021, except in the form of Celsius and BlockFi, and it all got rugged. So hopefully, Bitcoin holders will learn their lessons this time and only trust the self-custodial ones. All right, let's talk about prediction number 11. a breakout blockchain game may surpass 1 million daily players. Mutable X is poised to climb market cap ranks with key releases and the mutable passport, streamlining wallet usage and enabling wider adoption. I think 2024 could be the year of the blockchain game,

but it's, you know, games are notoriously difficult to build. It takes time. But explain this prediction. You think 2024 GameFi could make a resurgence? Yeah, so there's been $14 billion of investment into Web3 gaming over the last three years. And the best we have to show for it so far is Alien Worlds, which is a game on the wax blockchain. Who's heard of that? They claim 400,000 daily unique active wallets.

We think the majority of these are probably bots farming the tokens due to the simplicity of the game. So our call is that from this $14 billion in investment, a real breakthrough game will emerge that can surpass 1 million plus daily active users, which is still quite a small number in the context of the overall gaming market, which is $200 billion a year. And here we're going with the largest player. Amutable has multiple AAA games being built on their platform that implement token models that can't simply be farmed. It's where the games are truly fun to play. So these titles have been building for several years. They have more than $100 million in funding. A number of them are being released next year. We also like their wallet management.

They've got this passport that allow you to log into games and manage all your blockchain items through one single sign-on process, which abstracts away all the blockchain interaction. They've got distribution partners like Epic Games and GameStop. So the call is that one of those titles becomes a mainstream hit. Okay. And if one of those titles becomes a mainstream hit, can you tell me whether that is bullish for? You're calling out specifically immutable.

So message received there, is there anything else that benefits from this aside from, obviously, like, the winning GameFi games themselves? Well, that would be ETH, sir. I'm ready for it. Heath? What? The forgotten asset. Okay. I'd be ready for it as well.

Speaking of Eith, though, let's get to number 12, David. What's this one? Yeah, number 12. Solana outperforms Ethereum. Wow. And researching TFI TFITVL. This analysis foresees Salana becoming a top three blockchain by market cap. And I think it's not far off.

I think only one other chain. Binance, I think, is ahead of Solana before it needs to flip Binance to dethrone and get itself into number three. Talk about this prediction. XRP, sir. XRP, excuse me. I would be remiss for getting XRP, I would say. How dare you? Well, part of this prediction also is that Solana will join the spot ETF battles.

We think a number of asset managers may submit filings. That's no comment on our own plans. And one headwind I would highlight to that call is that there is no Solana futures market on the CME. So that problem may have to be fixed before. they can be a Solana ETF. But look, the chain continues to take share. We think that the Solana-based Oracle Pith is a better model than chain link. There's an out case for Pith flipping chain link in total value secured next year. Right now, those numbers are 15 billion versus $2 billion. And we think there's a couple of genuine innovations that Pith has brought to the market,

the pull architecture, their confidence interval system. The self-custody trading experience on Solana just continues to impress us. And we think it's pretty clear that they will take share next year again. I'm definitely getting a flavor for the Vanek thesis going to 2024. And it's definitely pretty heavy Bitcoin and Solana as a recipient. So do you think, Matthew, that Solana becomes kind of the vanguard of defy this cycle rather than Ethereum in the layer. 2 ecosystem. Is it the big winner in terms of the new value unlocked in DeFi? Certainly from a marginal flow perspective, yes.

We're not making the call that Sol is going to flip ETH either in market cap or in TVL. But it's interesting when we have these models, right, we came on and talked to you about our ETH price target. We put out a Solana price target. Solana's run quite a bit since then. There's actually the same amount of upside now in our models, both for ETH and Solana, so that would argue for similar position sizes. But one of the interesting things about our model for both of these projects is we have Solana monetizing at one-fifth of the rate of ETH, right? It's a lower

cost chain. There's less value flowing through the token. As the transactions pick up, we think Solana could actually raise prices. And I guess what I'm saying is that there's more flex to raise our numbers for Solana than there is for ETH right now. And we've got about a 5x return for both, given our current price targets. Not to go down a rabbit hole, but we will include a link to that report in the show notes. One quick question there. When you guys are thinking about fees generated by Solana, is it primarily through the form of like MEV, like block ordering type sales rather than fees? Or do you also think, you know, I think you just said that fees would go up to an actual user fees, but is there a higher proportion of like MEV from Solana?

Because that's sort of how I think about Solana's eventual value proposition. Yeah, we have a higher percentage of the value coming from MEV in Seoul than for ETH. But our foundation is that Solana is building from an abundance mindset and keeping prices extremely low at the beginning to catalyze activity. And that will set them up to be able to monetize more fully and raise prices after the activity comes, whereas Ease is kind of starting from the high price and then looking to cut prices. It's kind of an opposite approach. Okay, let's talk about prediction number 13. This is D-PIN, meaningful adoption of D-PIN networks, especially HiveMapper and Helium.

They'll see increased adoption with HiveMapper mapping significant distances and helium's 5G network expanding rapidly, offering cost-effective alternatives to traditional infrastructures. We actually haven't done a lot of content on bankless about D-PIN. Could you maybe explain what it is at a high-level mat and then get into what you're predicting here? Sure. HiveMapper, in my opinion, is the best example of a decentralized physical infrastructure network. Basically, they are trying to replicate Google Street View in a bootstrapped community-owned network. And once the map is built, then anyone can come and license that API, just like a Google Street View customer,

would license the Google API. And fleet operators like UPS or FedEx who pay Google millions of dollars to embed that mapping API into their, like built-for-purpose delivery apps, will end up spending these honey tokens. And you've got this virtual cycle. So I bought one of these dash cams right when they came,

out like 16 months ago, you mount the dash cam in your car as you're driving around. It's mapping all your environment. And every week, you get these honey tokens that are airdroped to you. There's a curators in the middle who ingest that data, scrub the license plates and other kind of privacy information. They get paid honey tokens for collating and cleaning that data. And then the third side of the network is anyone who wants to license it. And the mapping business is like a $15 billion annual top line industry. It's dominated by three players. So it's an oligarchy. They charge very high rents. And we think that a project like HiveMapper can offer considerable consumer welfare by giving the same data or even better because HiveMapper is going to

sell real-time data at a cheaper price. So I just want to disclose. We do have a position in this token in one of our strategies. One thing I was learning it when I I was diving into the deep end world, Matt, is there's like 30, 40, there's a ton of projects out there. And so I thought there was like a handful of them. And I've heard of helium. I heard of a hive mapper. I go in there and like, I look around.

It's like there's way more than I thought there were. Yeah, there's even a coin market cap segment. There's even a coin market cap sector that they just put on their site to capture that, that ecosystem as well. So, you know, our conviction is, is mostly with, with hive mapper. and with helium. So the specific predictions is that HiveMapper's going to map

its 10 millionth unique kilometer. That would be 15% of all global roads capacity. And as a reminder, they use their native token honey to incentivize these thousands of drivers worldwide to mount dash cams to their cars and then contribute to that growing database. And for helium,

the prediction is that the network will reach 100,000 paying subscribers for its nationwide 5G plan, which was just announced yesterday. They currently have 5,000 subscribers. So that would be a 20x growth. And helium hotspots can be set up by anyone. Again, those operators are paid through crypto rails in the helium native token. So that's a pretty powerful system of incentives. And we think it'll give them some advantages relative to the incumbent wireless infrastructure players.

Matt, I understand the bull case for like DPN and this kind of model is basically like, oh, you're using it to bootstrap a network, basically, through token incentives. I mean, Chris Dixon has even given this take before. I think the bear case, though, is just like a glorified Ponzi scheme or like a pyramid scheme, which is basically like people are getting paid in these tokens, like, but the tokens actually aren't tied to any values, not like their capital assets or anything else. And they're just like going up in price because more people are getting in on kind of the, you know, the pyramid scheme. And as it goes down, you know, like, what's, you know, what's What's your conviction around that kind of a bare case, that this is just inflated expectations

that are hyping up tokens and, you know, like, it'll go up, of course, and it'll drop back down and all of the network effects will completely dissipate as the value of the token decreases. What's your take on that? I think that's a fair, fair case if the demand doesn't materialize. And Helium's first IoT network, the demand never materialized. So I call it a failure. And you need to see folks actually sign up for this nationwide 5G plan. And then the other thing I'd say is that some of these D-PIN projects are skating around the edges of what is a security versus a commodity.

And that's a risk for a number of these projects. Yeah, the token model for these projects do kind of remind me of the 27. velocity token, utility tokens for their projects, which is kind of why I've always been a little bit skeptical with these whole systems. But sometimes old ideas just need to become reintroduce in newer times. And maybe with newer blockchains. When I was looking into these deep in the token models, it did remind me of the 2017 Velocity token, utility token model, which is always kind of why I approached these newer projects with skepticism, like I've seen this token model before, but at the same time, sometimes old ideas just need to be rebirthed in

newer times with newer infrastructure. So I will remain open to that. Let's go into prediction number 14. Corporate crypto holdings boosted by new accounting standards. This is not a prediction that I would have been able to articulate. That's for sure. Matthew, what's going on here? Yeah, what is this? Yeah, so the call here is that Coinbase will become the first publicly traded company to break out and report layer two blockchain revenues in its quarter. early filings. And we think that base protocol is going to cross $100 million in annualized revenues and become a meaningful contributor to the business. And one of the tailwinds for Coinbase breaking out that business and perhaps denominating it in Ethereum are changes in the accounting

standards, which now allow corporates to book mark-to-market gains on their crypto. So it used to be the case that if a corporate bought a billion dollars in Bitcoin and it went down by 50%, they had to take a haircut and mark that Bitcoin down by 50% on their balance sheet. But if it doubled again back to a billion dollars, they weren't allowed to book the gain. So for a lot of companies, that's just the way it was. Yeah, I don't disagree. It's dumb. Yep.

So, you know, Tesla and Elon were puking their Bitcoin into the 3A bankruptcy in Q1 and Q2 of last year, partially for that reason. These new guidelines should make it easier for companies to buy and hoddle their crypto. The changes don't take effect until 2025, but they can be adopted by corporates earlier if the corporates decide. So it also lends some credence to the case that a major non-crypto financial entity like a bank or an exchange could announce a quasi-public blockchain like an L2. and then with bridging capability to public blockchains by like regulated, authorized participants, that might be a 2025 call. But you can look at Sochchen, for example, announcing a stable coin yesterday in Europe as some evidence that were on the way.

And these FASB accounting guidelines will make life easier for corporates that want to get in the game. So I think if FASB accounting guidelines sounds really boring to you, bankless listener, let me also explain that in another way. what Matt is saying, what he's predicting is basically corporate upside in crypto that we've not seen before. So in the case with the accounting standards previously, previous to 2025, if a company purchased Bitcoin, ether, some sort of crypto asset on their balance sheet, right? And it goes up.

Like, they can't mark that to market. So it's like there's not the benefit to them. They also don't have a model for how a layer two actually works. And so Coinbase is kind of because it's a publicly traded company, it's going to start help teaching TradFi and Wall Street how revenue generation can work in the world of defy because the base layer two is going to start throwing off some fees. So all of that is basically a predictor of corporate adoption of purchasing crypto assets, but then also maybe using blockchain in a way to produce revenue in the way they haven't previously.

It's going to prediction number 15. This is the final prediction of the report. Defi's reconciliation with KYC regulations. I already don't like the sound of this. It sounds like we are having to kind of come to terms with the powers of the nation state. Is the vibe here? Matthew, what's going on? Yeah.

So the call here is that KYC enabled and like, Waldgarden applications that use the Ethereum attestation service or uniswap hooks will gain significant traction and may even approach non-KYC applications in user base and fees. So uniswap is likely to lead enabling this functionality, and we think that'll drive institutional liquidity and volume to the protocol, and that the additional volume from these KYC gated hooks that uniswap will enable will significantly bolster protocol fees because they'll allow new entrants to participate in this version of defy without the fear of interacting with OFAC sanctioned entities. We think that'll probably help uniswap reinforce its moat and competitiveness, but the main call

is that Ethereum attestation service is a functional way now to verify identity and, and KYC status. Coinbase has already started to build its on-chain verification service on top of this Ethereum attestation service. And that should catalyze some additional institutional participation. You might not want to call it defy, but it's at least trading from self-custody. Okay. So with this uniswap hook thing, there are hooks that are being developed that can be a little bit more

expressive with allowing permissions as to who can trade and also who can access liquidity. So there's a potential hook out there that somebody adds liquidity into uniswap from a KYC institution and only allows for other KYC people to leverage that liquidity. And if they are not trading through that uniswap hook, then they're trading on vanilla uniswap in the non-KYC fashion, but they're not having access to that liquidity. Is this kind of the model that you're talking about? That's right. Yeah. So uniswap hooks allow. individual liquidity pools on Uniswap to check a wallet's KYC status before making the trade. And that effectively will KYC gate specific liquidity pools.

That's launching soon on Uniswap v4. Now, there's a nuance here, which is that Uniswap is permissionless and immutable. So nothing stops anyone from creating a new liquidity pool without the KYC check. And having those separate KYC pools and non-KYC pools and non-Kywis. CYC pools could fragment liquidity and lead to worse trade execution for consumers. But, you know, it's up to the builders to build hooks. You know, there's one that works with WorldCoin ID now. I noticed that in the UK they may need to scan your eyeballs before you look at porn.

Like, do you want that story just came out this week? Like, do you want the government scanning your eyeballs or do you want, you know, a decentralized protocol scanning your eyeballs? That's a question that people are going to have to make and we're going to have to answer. KYC doesn't have to be government KYC. It can be some other entity that's doing it. And to be clear, there's the idea here is that uniswap V4 was vanilla and will not impose KYC. It's just that there will be this extra pool of liquidity that I think it won't pull away from current uniswap liquidity because that's the non-KYC source of liquidity.

I think what you're saying is that it will actually attract new liquidity that you will have to KYC in order to access. So it'll actually add to Uniswap liquidity because it's a venue for compliant players to provide compliant liquidity per their nation state. And so it's not, I don't want people to walk away seem like, oh, Uniswap's about to be a KYC app. Because there's actually going to just be perks. If you choose to KYC, you'll be able to access KYC liquidity.

That is right. And those hooks should help the protocol reinforce its moat. And we think that'll drive token appreciation and maybe a catalyst for the day. out to finally turn on the fee switch, although we expect those fees to be pretty low. That's another prediction right there that the governance token actually becomes kind of like a more of a capital asset. Just the last thing here.

So the prediction number 15 is KYC compliant defy app. So I could totally see that happen. One question I have for you is whether that is going to be fully opt-in or do you have a take on whether Treasury kind of like comes down on a defy in the U.S., for example? I mean, there are some draconian measures that could be put in place, making non-KYC D5 front ends basically illegal. And that could happen in the U.S. Is that part of this prediction or is that something kind of like separate? Well, we got to go back to what was it prediction number four, which is how this U.S. election is going to shake out.

And if things turn the other way and we have another four years of this administration, then I think it's totally. possible that one of these very scary anti-crypto provisions that turn minors and validators into financial intermediaries could pass in some type of like defense authorization piece of legislation like there's still a lot of negative tail possibilities on the regulatory front that can happen here in the U.S. Hopefully that's not going to be the case. One quick question on that though, Matthew. My impression has been like, you know, under Trump, Steve Munnuchin, the former Secretary Treasury, wasn't necessarily any more favorable on crypto

than kind of the current Janet Yellen Secretary of Treasury. And I'm a little bit worried that across the aisle, both parties have this kind of like AML, KYC enforcement type of streak. And so you might have like a Trump administration being much more favorable on, you know, like securities and CFTC type regulation, but I'm a little bit worried on AMLKYC and the OFAC stuff, that they're both of one unified mind, and that is like, get rid of it. Is that concern valid or do you have a take here?

I think that concern is valid. I think that the difference between four years ago is that Donald Trump owns $5 million worth of Eats now, which he reported on his financial disclosures. He kept the EATs. So I think things might be different in this administration, but what you're highlighting is definitely a risk. Tradfine investors care about it. It highlights the fact that Bitcoin is highly differentiated versus all other coins and should be, sorry, this is like heresy on your program, but it should still be the largest component

of any investors' digital asset exposure. That is heresy on this program, yeah. Matthew, this has been great. I know, so these were all the 15 predictions that you have in your report. Anything else that's floating around in your brain? What's the prediction that you didn't write down? Give me something spicy. Well, the one that came true today is that filings with the SEC revealed that the ticker for Vannex proposed spot Bitcoin ETF will be HODL.

Here we go. Here we go. So we are very pleased to bring that the news is that our Bitcoin Spot ETF will, if it trades, trade under the ticker HODL. That is by far the best ticker of any of the proposed 12 Bitcoin Spot ETFs. and look forward to all your support. Is that going to be a power law winner as well, do you think? Historically, ETSR power law winners, yes. There we go.

Let the games begin. Hopefully those games will begin in January and looking forward to a successful 2024 for crypto. Matt, these were very concise, I think, well thought through predictions. So thank you so much for sharing them with the Bankless Nation today. Thanks for having me, guys. Guys, we will include a link to both the Twitter version of that in the document form of that on the Vanac website.

Gotta end with this, of course. None of this has been financial advice. Despite Matt's fantastic predictions, no one can truly see the future, except for David Hoffman, my co-host. He knows what's going to happen. But we're headed west. This is the frontier.

It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.