The Wolf Of All Streets - Q4 Will Be Strong For Bitcoin | Grayscale’s Head Of Research Explains Why

Episode Date: October 28, 2021

Finding well-researched information about crypto can be challenging. Most retail investors dig through the haystacks of Twitter and YouTube in search of a rare valuable needle. Thanks to Grayscale and their dedicated research team, tens of thousands of investors can enjoy free access to incredible material if they so choose. Today’s guest, David Grider, leads Grayscale’s research team and is developing a deeper understanding of what it means to participate, invest, and build in a cloud economy, aka the crypto universe. -- Arculus: Arculus is the new crypto cold storage wallet that combines the world’s strongest security protocols with an easy-to-manage app. Store, swap, and send your crypto all with a simple tap of your Arculus Key™ card. Order the safer, simpler, smarter crypto cold storage solution today at: https://thewolfofallstreets.link/arculus -- Kava: Kava connects the world's largest cryptocurrencies, ecosystems and financial applications on DeFi’s most trusted, scalable and secure earning platform. Kava lets you mint stablecoins, lend, borrow, earn and swap safely and efficiently across the world’s biggest crypto assets. To learn more visit https://thewolfofallstreets.link/kava -- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

This podcast is sponsored by Kava and Arculus. Stay tuned for more information about both of them later in this episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast, where twice a week, we talk to your favorite personalities

from the worlds of Bitcoin, finance, trading, art, music, sports, politics, basically anyone with a good story to tell. Now, anyone who attempts to keep the pulse of the crypto space knows that it's nearly impossible for any human being to track this market 24-7. So luckily, we have incredible researchers like David Greider, who is the head of research at Grayscale to provide us all of the information that we need. So today, I'm looking forward to hearing how they manage to keep on top of this market all the time and what they're looking at in the future and what they're expecting from

this market. David Greider, thank you so much for joining. It's a pleasure to have you. Hey, Scott. It's great to be here. Thanks a lot for having me. So listen, I'm a fan of your work. I always read Grayscale's research report.

To the very basic level, what are you guys focused on on a day-to-day basis? So maybe I could start with kind of a little bit of an overview of who Grayscale is, and that would give a little context for viewers who maybe don't know. So Grayscale is the world's largest digital currency asset manager. I think we manage somewhere between $30 or $35 to $ 50 billion, depending on kind of market fluctuations of crypto and assets. And that's across a number of products, which, you know, range from both diversified products that give investors and clients exposure to, you know, baskets of the crypto market or,

you know, single asset products that give folks exposure to kind of individual crypto assets themselves. And GBTC, which most folks, you know, probably know Grayscale4 is probably the most, you know, the most recognized one, because it's one of the first ways to kind of buy Bitcoin in your IRA is kind of one of the single assets. We have other DeFi and large cap kind of crypto asset products. You know, so with that kind of lens in mind, we're really focused on educating the market, helping folks understand the investment thesis for crypto, understand what's going on in the markets broadly and looking for new opportunities

that are attractive for clients. So you mentioned, obviously, GBTC. I think that's sort of the flagship product, of course, and has been really one of the only ways to have exposure to Bitcoin in your IRA, certainly for American investors who want to take advantage of that. The other ways have been, you know, sort of ancillary products like buy MicroStrategy or buy Coinbase and get it or buy a Bitcoin miner and get exposure that way. Well, as we're recording this today, actually, within hours of the first Bitcoin futures ETF launch. So what are the implications of that for you guys now that people really do have another option?

What does that mean for GBTC? Yeah, I mean, you know, I think if I just think about GBTC, honestly, you know, its impact on crypto market has actually been monumental right from the very start. I mean, it was the way that, you know, I first got exposure to crypto back in late 2015. And I think that's the case for a lot of people. And, you know, obviously the market has matured and evolved. You know, that has been such a huge value add for investors over the years, just getting easy access in a brokerage

account to take that first step. And obviously there's been a lot more access that's kind of come from that as the market's matured, right, from, you know, these regulated on ramps like Coinbase making it easier and people getting on there and the PayPals of the world. And the market's obviously evolving to a point where now you're seeing, you know, kind of different products make their way into, you know, the brokerage account accessible universe for kind of the RA and financial planner type of investors that are now coming to this. And I think that it's all good because it really just shows the market's maturing and the approval of any types of these ETF products is very important for helping the

space mature, gain access to a wider base of capital and giving investors the opportunity to just access this asset class that has just done so well for so many that many have just been trapped and left out of. So I'm very excited about what's happening with the ETF. And there's obviously pros and cons to kind of how it all works know, we're very optimistic about what it means for crypto overall. You guys definitely set the stage. No question about that. And like you, I was a very early investor in GBTC and I still hold it in my IRA. And I think that that's probably the case, even for a lot of people like me who, you

know, not your keys, not your coins and are holding our actual Bitcoins offline. And in multi-sig, I think we generally have exposure to those products. But obviously, GBTC isn't the perfect product, right? It doesn't track Bitcoin exactly. And a Bitcoin futures ETF also won't, right? So I think for a lot of people, and I understand for Grayscale as well, you're looking to eventually move from GBTC into a physical ETF. Yeah, that's right. Actually, that's some news of the day. We actually just recently announced that we had done the filing for that. So it's actually been something that Grayscale has been talking about doing for some time that we had been 100% committed to

converting GBTC to an ETF when the time is right and the regulators do approve that. So our expectation and hope is that, you know, if regulators are comfortable with a futures-based ETF, you know, given that the futures are based on the underlying spot market, that they would be comfortable with a spot-based one as well. So we're very optimistic and excited to see how things evolve. Yeah, the entire song and dance feels like semantics to me, right? Like, well, you're going to approve a futures ETF because it's filed through mutual fund rules, basically, but a physical ETF doesn't really get there. But yeah, I think everyone's looking forward to

eventually having a really perfect product that they can invest in Bitcoin and in their IRA. And I think that you guys will likely be the ones to provide that if history is any guide. And so what are you looking at on a day to day basis when you're trying to track this entire market? Is it extremely Bitcoin faced for you guys? Are you on top of everything that's happening in DeFi, NFTs? How far down the rabbit hole do you really go as to what you believe is relevant to present your research? I, you know, honestly, I track everything. I've been doing this a while. So, you know, I'm pretty much on top of everything, you know, the best I can. And,

you know, the way I look at the market, you know, from kind of a market's perspective is kind of top down what's happening in the macro, because that obviously influences crypto prices, and then down to what's happening within Bitcoin, Because, you know, we also have, you know, like I mentioned, some of our single asset products, we have a number of kind of emerging crypto assets as well that we think have a lot of potential for investors as well. So I think that that's, you know, another thing that we obviously want to keep an eye on. But so I think that's from kind of like the markets perspective. And, you know, maybe in a minute, we could kind of talk about kind of the way I kind of like the markets perspective. And, you know, maybe in a minute, we could kind of talk about kind of the way I kind of view crypto markets, because maybe one interesting frame for,

you know, thinking about kind of, you know, what I think, you know, the opportunity is and how that's kind of been evolving. So yeah, go right down that rabbit hole. I would love to hear that. I think it'll give us a lot of context. Yeah, I think I think this is actually really the important paradigm that people who are looking at crypto need to kind of like think about and understand. Because it's like, it seems very confusing to people, but it's actually really similar to everything that we kind of know and exist today. If you think about crypto, it's really just an emerging market economy. Except, you know, instead of being in, you know, Latin America or somewhere in Asia, this emerging market economy is in the cloud. And these are cloud economies that are really forming.

And the reason that crypto is so unique and is so different is because for the first time ever, right after Bitcoin was invented, we first had the internet. Facebook could connect us into online communities. But we couldn't form those communities into actual places where people in different countries outside of different borders could have their own systems for agreeing with each other. And what Bitcoin did is it lets you have sovereignty over the internet and you can form different internet economies. So the waves of that have really been you know this wave one was like digital money you know letting people have a trusted

system for value exchange and that's bitcoin litecoin zcash right wave two is really infrastructure for these digital businesses right for cloud economies to form and that's like ethereum and that's like solana and these things that provide legal agreements that provide the ability to like i'll use the word technically like incorporate these digital application businesses across all these sectors right then wave three has been this financial system that has been defy and that's what's allowed for you know as these economies have started to mature and you have to finance these different things that are developing these economies, DeFi has done that with these ecosystems that have NFTs is like the first signs of what is a consumer sector in the crypto economy. And if you think about how this is building kind of like the traditional economy, right? We have financials, we have consumer, we have tech.

And these other things are emerging, right? So you have these other tech kind of web three infrastructure plays. A lot of these things are just replacing the cloud and big tech and different applications. And you're also building up to, you know, having an entire consumer economy, which really I think can end up being at its full form, you know, a metaverse kind of owned or a bunch of different ones that are owned by their users, as kind of AR, VR, all of that collide with crypto and the internet. I agree 100% with that, the way you laid that out, it's brilliant, the phases and what's likely coming. So from an

institutional perspective, a company like Grayscale, how can you, I don't want to say capitalize, but still, how can you offer products to your customers that take advantage of metaverse play to earn gaming and NFTs and all of these things? Is it a picks and shovels approach where you find the companies that are doing that and you create a basket or I really don't know what is the other way you would do that? Yeah, absolutely. I mean, there's obviously a lot of ways to invest in any industry or economy. As you mentioned, picks and shovels is one, right? People have gone that route of investing in businesses and private venture. But what we focus on here at Grayscale really thus far is our products have been the crypto assets themselves, the public liquid ones. And I think that Grayscale has done a really good job of kind of giving investors, you know,

options for kind of the largest kind of mass segment of each of those. We've kind of had that evolution. So, you know, GBTC, you know, and Bitcoin and with Litecoin Trust and the Bitcoin Cash and Zcash, which recently got listed, right, That kind of fits that first bucket, which I talked about, and the digital money and that evolution have been out there. And, you know, we have our large cap trust, which, you know, has captured today a number of these, you know, cloud platforms as kind of that next wave that I talked about as well. So, you know, you have the Ethereums and the Solanas and those. And for some folks, Cardano, right, is exciting.

But now we have our defi trust as well which which is is another one that you know obviously captures that other way that is often which is the financial system and then mana which is the central land right that's starting to get into that metaverse era and we're excited about you know other potential things that could be on the horizon so i think that that's kind of the way that, you know, we've really allowed folks to, you know, get access to kind of the cutting edge of what this innovation brings. You talked about the emergence of layer ones, Ethereum, Cardano, Solana, of course, we always hear this narrative of an Ethereum killer, or that sort of one of these chains will rule. I've always been sort of

the opinion that they'll each find their niche and be interoperable and, you know, and they'll all sort of move on and have value. What's your take on the emergence of all these layer ones at once? Because in the last few months, those have been the coins that have gone absolutely nuts, the Solanas and Cardanos, Avalanche, Elrond, across the board. So do you think that they will all find a place? Or do you think that investors should still be trying to find the winner? Well, I mean, I think there's, you know, obviously, distributions of value that will shake out in the end. But I don't think that there's any, you know, chance in my mind that there's only one winner across, you know, a number of these segments. And I think the reason for that

is like, if you just look at, you know, why, you know, why different ones exist, right? Like there's different trade-offs that exist. Like sometimes it's technically, but a lot of times it's actually, it's actually like social political trade-offs, right? Like, just like we have different countries that exist across the globe, right? It's not just the U.S. or Russia or China that rules, right? Like there's all these different places where people have come together and they said, we want to form

a collective governance system, right? And that's what crypto is at its root core is it's an internet native way to form a collective governance system across the globe, right? That's borderless. And just like these crypto cloud economies will have, you know, people come to different ones, and there'll be different utility, and some will have different tech features. Like, I think that's

what you see forming today, right? And that's why, you know, like something like Cardano, like, you know, some people like just don't like it. And then some people just love it, right? And like, the people just don't get each other. But like, that, because it's like nationalism in a traditional economy sense. And that's what unfolds and exists from the sense of what happened with Bitcoin to Ethereum, from Ethereum to Solana. And I think that it's OK, right? Just like you have cloud platforms, like many of them, AWS, Microsoft,, you know, Microsoft, Azure, they have theirs, you have, you know, Tencent, Alibaba Cloud, like, I think there'll be a distribution of market share

for these things. And I think that there's just opportunity, you know, across the board to really disrupt the legacy big tech system and the way things are done already. And that's like, that's really the opportunity I think folks should focus on. It's my feeling that tribalism that you described, I talk about it all the time. I just wish that everybody could come together for the greater good, which I think we saw happen with the infrastructure bill to some degree, actually, it was the first time that we saw the crypto community galvanized against a common enemy. But the you know, that sort of just petty nonsense between the communities of each of these, when we're still such a small industry, it's only $2.5 trillion market cap for the entire industry.

If everybody would just work together to sort of further the cause, I think that we could get much further. I just think that that tribalism you described is one of the things that really holds us back as a community and for adoption. Yeah, totally. And I think it's better when it's like constructive and people really focus on like different tech, you know, features and improvements and stuff. But I think when, you know, folks are close-minded to one or the other, I don't think that's best for the whole, but you know, I understand it at that root level too. Right. So it's, you know, uh, just, it's just how the world works sometimes. We've seen sort of a consistent, uh, bullish Q4s for crypto. And now we're seeing obviously the ETF sometimes. We've seen sort of a consistent bullish Q4s for crypto.

And now we're seeing, obviously, the ETF launch. We've seen what's happened in October after having sort of a sluggish summer. Do you think that that's something that is predictable, coincidental? Do you personally have higher targets for Q4? What do you think is coming in the next few months? Yeah, I mean, I'm not going to give, I'm not going to give, you know, a target or anything to that. But, you know, I think I think there is seasonality in all markets. And, you know, I think historically Q4 and, you know, these last few months have been stronger quarters for crypto most most years in existence. So I think there's a few reasons maybe

for that. Part of it is, I think managers right now are actually kind of allocating into crypto and trying to maybe catch up on the year for, you know, performance and for other areas relative to the market. So, you know, if you're a manager and, you know, your competing managers have kind of gotten into crypto earlier in the year, maybe you need to catch up. You know, you need to catch up trade. That's part of it. I think that, you know, there's probably some tax reasons as well that exist. But you know, I think I think that the flow story, the kind of adoption story right now is what's driving the market, the ETF story, how that's going to play out with, you know, Bitcoin and other potential other assets in the long term, what it means for those is kind of the story.

And that lift that that, you know, capital inflows could provide to the market. Plus, you've seen a lot of larger banks, now that more products are getting out there and they're offering different ways to access crypto from even the mold brackets. I think that those folks are pushing these assets to their client base. And I think that that's, that's probably one of the drivers right now that we're seeing as well, but you know, on the macro side, that's the thing too, that that's still a little uncertain, right? Like how, how will this kind of inflation picture that exists and what's happening with

some of the stuff around the fed and the taper and what's going to happen with that? So, you know, is there going to be volatility around that and how that kind of net balance is kind of some of these individual crypto specific tailwinds that we have against the macro? Or those could be tailwinds as well, right? Depending on how the Fed adjusts, but it's to be seen. Do you have specific thoughts on the macro environment now? Do you think that that's actually what's driving crypto price to any great degree? I mean, do you think your average person is really waking up and saying inflation's bad,

I need to buy Bitcoin? I think a few people, right? But I still don't think there's this general mass awareness that you need a hedge if you're an average person. But do you think that that's why people are buying Bitcoin? Or do you think it's still sort of a speculative number go up trade? I mean, I absolutely think that the macro matters. I don't think that that's what's driving the market over the last month. I think over the last month, it really is this individual kind of ETF story. And that's actually a divergence, right? From what it usually is. Like the correlation has been like really falling with the S&P over the last month. You know, obviously, crypto is an uncorrelated asset because the returns have been so strong.

But I honestly think like the macro matters a lot because, you know, over the long term, like, if you think about this, right, like these are, again, emerging market economies, right? And just like, you know, what happens with the US economy matters for what happens with, you know, India or Brazil or something like that. It's, you know, if there's a flow story that can, that can't be stopped, right. Cause crypto is like out on the risk curve of like your capital allocation, like investment options list, right. Like, you know, for people there's like, you know, there's like treasure, there's like cash and there's like treasuries and then there's like, you know,

corporate bonds. And then there's like, you know, there's like treasure, there's like cash and there's like treasuries and then there's like, you know, corporate bonds and then there's like, you know, equity or in high yield debt or something like that, high yield debt and equity. And then there's like venture and then there's crypto. to allocate and invest in, you know, when, you know, the broader market risk appetite goes risk off, like it's something that can be a vacuum or it can be a tailwind. And, you know, we've seen that kind of exist, you know, many times in the past, right? So for example, like, you know, part of the 2013 sell-off was around taper, but we also had Mt. Gox, right? So it's a little bit of noise there. But like 2017, the market topped then when we had like the fifth rate hike. But also like, you know, if you look at the liquidity driven kind of rally of 2020 to 2021, you know, we had that huge run up to 65,000, right? Until like peak liquidity kind of rolled over, right? In the earlier part of the year. So, you know, how that stuff unfolds

is actually, I think it still matters a lot, but it's not the only factor, right, which is the beautiful thing about crypto is it's like investing in the internet. You know, these tech stocks can grow through just like internet stocks grew through 2008 better than other assets. That's the beauty of crypto. Well, you talked about the path up to 65K at the beginning of the year. I think at that point, it's fair to say that we were starting to really get that heavy retail FOMO coming into the end of that move. What is, I mean, we're a few percent off that price as you and I are talking. What looks different in October than it did in May with Bitcoin trading at effectively the same price? And what looks the same? Yeah, I mean, I think actually a lot's different right now.

So, I mean, I think there's a few things then that were like really kind of pushing us kind of more kind of speculative. Like we were over levered. You can see that in a few things, you know, in hindsight, like obviously looking at kind of the futures open interest and that kind of being, you know, one metric for thinking about leverage. You can also look at what rates were both on the kind of dollar borrowing side and what the basis was on some of the, you know, futures products of the spot. And you can, you can get a sense for kind of what, what the demand was for leverage back then. And, and, and I don't, I don't think we're anywhere near that today. If you're just, just looking at the numbers and you mentioned, you know,

if you really like interesting, you know, points that I think that I think do hold true, right? Like we had the Dogecoin. I mean, I don't want to say frenzy, because I think I think those people kind of, you know, they were in it for what they were in it for. But like you had the Dogecoin kind of, you know, run and you had these, I guess what you would call them to be to some more retail oriented, like, you know, metrics to say, like, these are at retail oriented assets, right? Maybe you're seeing that a little bit with Shiba again today. And, but I don't think that it's the same degree that we had back then. So I think it actually feels healthier and on more solid footing. So, you know, I think that also like, you know, institutions are

kind of coming at it as well. So I think that that's kind of really, and that's really what happened during the late 2020, that kind of really gives the strong one. So, you know, I think that also like, you know, institutions are kind of coming at it as well. So I think that that's kind of skepticism. The usual sort of PTSD from last time price was here. People thinking that it'll double top or whatever it is. And Dogecoin is a really great point, right? I mean, that was really the peak of the insanity was pretty much when Dogecoin was running. You talked about capital allocation and how crypto is obviously out at the end of the risk curve, even beyond

venture capital. When does crypto become just another asset in every asset allocator's portfolio? When is it secure enough, safe enough? Does that require a physical ETF or some sort of certain product for that to happen? But when is it so mainstream that it's just like, I've got my stocks, my bonds, a little real estate, some crypto and, you know, keep it going from there? Well, let's like put some numbers in to put this market in the context, right? So, you know, if crypto is, you know, two and a half trillion today, you know, the total investable kind of global asset base, right? I think it's like a little north of 300 trillion, right? So, you know, at that, like at that level, like what is, what is crypto is kind of a total,

you know, percentage of assets. Maybe it's, you know, so maybe, maybe that's like less than a percent, right? And I think that like, you know, obviously, you know, where it is in terms of like a portfolio allocation mix, most people, you know, have been underweight crypto and you'll being underweight is like being short, uh, that versus kind of being long through other segments of the market. So I think there's definitely a lot of like capital reallocation that has to happen within crypto. I think it's going to take time. I think it's an education, um, curve that, that exists mostly now. You you know i think that the things that were historical barriers which you know got a lot of talk back in 2017 which was like you know the

infrastructure the things for around uh custody and um you know getting folks other different regulated products that exist like those things have mostly been worked out and like i think like just like you don't really have a huge stigma of being on an exchange today to um you know trading like like i think the security and stuff has really gotten worked out and i think that like the the custody of like being able to access this didn't work i think it's an educational component now that exists in a product kind of on-ramp component. And then I think it just takes some time. So I think that's how we get there. That makes sense. You've been in crypto research for a long time. And we talk about these news events, the ETF, institutional adoption, large banks starting to offer these services to people. When you started, I would have to imagine that any single mention of Bitcoin in the news

in that sort of context would have rocked the market, like a 10% move in an hour, right? Back in those days. Now we don't even blink at Bitcoin being in the news cycle. Do you think that we've made it in that degree that now it's so mainstream that news doesn't really affect it so tremendously? Well, I mean, I think it depends, right? The degree and the magnitude, right? The market is so much bigger that, you know, the incremental dollar takes a lot more to move the market. And, you know, that's why it's a flow story, right? Like that's why even, you know,

if you think about early crypto, right, and why things were so reflexive to some of the macro events right it's just you know a few dollars you know just a little bit of liquidity was enough to kind of do it but the market's so big now um and i think that that's part of the maturity and like the price the repricing of of the risk that exists inherent with like investing crypto like when i got in crypto it was like such an unthinkable thing to like leave like traditional finance and like come to, you know, do this like thing like this, this book that no one got. And it was like, you know, for bad people, but that's obviously come to like, not be, you know, the prevailing view anymore. And it's not true, you know, for the most part. And like now it's like, I think it's the other

way, right? Like everyone kind of really wants to take that move to the, you know, out of kind of traditional finance to the next, the next thing. And, you know, I think that that's, it's really exciting to kind of see what's happened where, you know, all the people who kind of really bet on this technology and a bet on this really social paradigm kind of being, you know, something that is the future that people really accept and adopt. And it's a great way for our society to move forward, you know, seeing that kind of being, you know, something that is the future that people really accept and adopt. And it's a great way for our society to move forward, you know, seeing that

kind of come to its fruition. But, you know, I think it just takes more as the market's bigger, but I think it's all really healthy and exciting along the way. Guys, I'm so excited to tell you about this new crypto cold storage solution called Arculus. Their cold storage technology keeps your crypto keys off the internet and on an Arculus keycard. With no cables and no USB connections, it insulates you from the thousands of hacking attempts that happen online every single day. You can store, swap, and send your crypto all with a simple tap of your Arculus keycard. And if someone were to get a hold of your card, it doesn't even matter because they have three-factor authentication, ensuring that the only person with access to your crypto is you. Guys, you can check out Arculus at thewolfofallstreets.link slash Arculus. Secure your assets, secure your future with Arculus.

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They let you mint stable coins, lend, borrow, earn, and swap safely and efficiently across the world's biggest crypto assets with a simple and intuitive user experience and the full confidence of institutional grid security and quality. Guys, if you have not checked out Kava yet, then what are you doing? You can check it out at the wolfofallstreets.link slash Kava. Do it now. So obviously the sort of maximalist view of like Bitcoin could be the, currency, right? It could be the global reserve currency. DeFi will eat the existing legacy banking system and become the main

banking system. I don't necessarily buy those things. I believe there'll be parallel rails and an option for people who want to opt out or who just don't even have access to legacy systems. But I would like to hear your thoughts. You're looking at DeFi, you're looking at these as the use case moving forward for your average person. How do you think they interact with this? And do you think that that's a replacement for what they're already doing or it's something that's sort of ancillary or just makes their experience better? Yeah, I think that like the internet and what it did to a lot of industries is maybe like the first paradigm to kind of think about like giving a tangible example of how like these things could change. Right. So like if you look at the disruption that kind of happened with like, let's just pick like media, for example.

And you think about how you had like a few kind of large kind of incumbent places to gain like, you know, whether it's broadcast TV or newspaper and information access, right. And then, you know, the internet like disrupted that entire model. It let people kind of go straight to, you know, consumers, those, the, the, the, the, the, the access got expanded like immensely, right. Like people can now, you know, both, you know, access a bunch of different types and views and fragmented information, which is better because people just like, you know, people who don't have bank accounts today can access, you know, these crypto, you know, financial systems or they want just a different view, right?

Just like, so people can, you know, have like, it's not just like your few main banks or a few main media networks that, that exists. And, you know, like when Facebook came around, it redistributed the model, how people could kind of go and go peer to peer and produce content and come back and, you know, comment back on it. Right. Which is things you couldn't do with the legacy traditional system. And that exists today now with DeFi and finance where these financial economy interactions are peer to peer and people can kind of really participate in different ways so i think that same type of disruption is actually happening i'm not saying that i think like it has to eat everything right like at some point these things kind of converge right but it's still this like i said back to this thing it's its own internet

native economy it's like a different economy and a different financial system to transact in right it still has to connect with the traditional financial system, right? There's still, you know, rules of the road that exist internationally, no matter where you are, whether you're digital crypto or you're in, you know, Europe or you're in the U.S., right, where these things converge. You know, but ultimately, I think the tech and the institutions, they plug into the tech eventually. But it could be new institutions, just like you had new media companies start up.

And maybe it's disruptive crypto startups today that are much bigger and become kind of the future wave of that kind of fintech disruption or whatever you may call it. But ultimately, I think all this stuff is here to stay and it's for the better. You mentioned Facebook, obviously. And just today, the news came out that they're going to be running their pilot test on the Novi wallet. And they're, I believe it's USDP, the coin, which I think was Libra and became Diem and now USDP, running a test between Guatemala and the United States, allowing people to use it. Do you think that we're going to see private company currencies become real contenders on a global stage? Well, I think it's, you know, anything's possible. I think that, you know, we'll see how, obviously, the regulators kind of deal with that and whether they can address like their concerns. I think to the degree that like Facebook can solve, you know, really important

problems that people face around money and, you know, privacy and transactions, I think that they can, they could have market share and that they could also kind of, you know, gain the political will to do that. So, I mean, I'm totally not ruling it out, right? Like, I think there's a world where a bunch of these things exist, right? Like you have today, like there's really no way of getting around, you have a collection of like all of these different payment systems, right? in the U.S. and across the globe, right, from cards to cash to the way that all these different systems like kind of point of sale connect or they don't connect or, you know, your Visa network versus MasterCard network and people are on one and not on the other, but like it all kind of, you know, finds its way together. You know, I think that what they're doing with like having a digital wallet and

getting people access, I think that that's ultimately going to be good, you know, for these things. And, you know, we'll see how the final form of it actually evolves. But I'm not sure I kind of fully, you know, have the view what that will be just yet. Right. And then obviously the next topic from there has to be central bank digital currencies and what their role will be. Do you think that that's something we'll see at USTC, excuse me, a central bank digital currency, a United States digital dollar doing away with cash? Do you think that everything is moving digital? And if so, what are the implications

of a central bank digital currency? Yeah, I think that, you know, first let's start with the paradigm. Like what is, you know, unique from like a central bank digital currency to like crypto. And I think the first paradigm is like, just cause it's digital doesn't mean it's like the paradigm like what is you know unique from like a central bank digital currency to like crypto and i think the first paradigm is like just because it's digital doesn't mean it's like the same thing right so you know like i said before right like um you know the thing about crypto that makes it unique is you know it's internet native it's globally borderless and you can form kind of a new crypto native internet native cloud economy right and that's

like your governance system and that's like your laws and like the people who decide monetary policy ultimately for these things and um and yeah it settles on a blockchain ledger just like these things do right but like a fiat currency it's board it's a border governance system right just like we have right and that's like that's like the fundamental paradigm shift and um is that is that governance so you know i think you know, to the extent that different governments across the globe launch them, I think that they'll be good for kind of payment rail efficiencies. I think it'll be faster. I think that could be cheaper. I think, you know, you know, the US will be slower to do it, obviously, they've stated this, because, you know, that's just how the US works.. We let things happen in the private sector first. And you see that with USDC and what's happening there and stable coins with allowing banks to you look at like some of the, I mean, I think there are real

concerns, which are things around, you know, privacy, the ability to actually do what you want with your money to know that like the government isn't, you know, restricting, you know, whether this is something that you find as a useful form of something you want to spend your money on. Right. and like all the issues that could be inherent with every transaction kind of being tracked and known you know i think that for crypto and i don't think it's a bad thing like i think that it actually could be like a catalyst for you know folks wanting to move to crypto a lot of the economies today across the globe are still in cash you know for you know for a reason right like it doesn't mean that everyone using cash is doing something bad. It just means that in some cases, like, there's reasons you'd

want to use cash, right? And if you eliminate cash, and you think about what that means, like, like, let's just take one example back historically, like, look at India back in 2016, right? I remember that demonetization that occurred that kind of really was one key catalyst that helped spark that bull market rally that existed that took us up to 2017 highs and like for folks who don't recall like back in 2016 india did this demonetization they got rid of large bank notes and they're also trying to kind of get you know take out some of the kind of gold and stuff that was in the economy because they really wanted to move it to more of a digital kind of controlled um you know money system right but like that sparked like people wanting to really get access to crypto then i mean i was like arbitrage trading

you know buying bitcoin and coinbase sending it to india for like a 30 premium like letting it the spread contract and sending it back right like that was pretty cool but cool. But like those flows, like that was a big demand driver. And, you know, I think if China did something like that, like I think it would be useful. I think you could see a similar story just because it's kind of the things that I discussed. Yeah, I mean, at the very basic level, if central bank digital currencies are launched

and just teach every citizen how to use a digital wallet, I think it's incredibly bullish for Bitcoin and crypto just in that regard, because one of the, I think still, I know you've mentioned the infrastructure really is there now that was lacking in 2017, but I think your average person, especially if they're maybe over the age of 50, is just scared to open a digital wallet and try to figure out how to use it. They don't want to, or they're scared to do it. So if we get central bank digital currencies, they'll have to, right. And that can only be a good thing for Bitcoin.

Yeah, absolutely. I mean, it depends how it's all compatible and integrates. Right. But you know, if you look at Venezuela, maybe that's one example, right. They haven't, they haven't necessarily done their tech perfect. I know they had some rollout issues, but you know, we'll see how it all kind of integrates. But I mean, I think just getting people more comfortable with using these types of money, these forms of money will be positive. I mean, I read today, I didn't realize the extent to which El Salvadorians are unbanked. 75% of their country has no access to legacy banking systems. That's a huge number.

Yeah. I mean, there's a lot of the world that's like that, right? Like, I think honestly, the Philippines lately is actually the most interesting one, right? Like Asia has, you know, obviously a ton of, if you just look at some of the data, right. Like a ton of crypto adoption there in that region. But I think the stuff with Axie infinity and what's happening with like play to earn and like people getting, you know, onboarded to crypto, the crypto wealth of

the crypto economy um is such an interesting thing to see how people like you know not needing like a you know atm or like an exchange on ramp can play a game and get into the crypto economy and get value it's so awesome because it's like you know it's like back when like like why was mining so important with bitcoin right because you know if there's no exchange right like you know with a proof of stake coin how else are you going to get it well you have to buy it right so you have to exchange it somewhere so you have to give someone vr right well with mining you convert electricity to energy or energy or electricity or whatever a form right to bitcoin and like that's kind of the cool thing about some of these other ways

that are getting people on ramps and access to, you know, crypto financials. And you can move from there, right? You can go to Ethereum. You can go to DeFi, right? Like, you can go kind of all over the globe and transact with kind of global e-commerce economy. And that's one of the most exciting things. There's so many on-ramps into crypto now that we never expected before. It used to be just, you know, you had to want to buy Bitcoin and go find a way to do it. Axie Infinity is the perfect example. I mean, from what I've

heard, anecdotally, average Filipino people who have never had any interest in crypto or access have found a way to go through the very difficult process, frankly, to play that game. It's not easy. Even the CEO has said, you know, you got to get a MetaMask wallet, send some ETH, open a Ronin wallet, connect to the game. You need to spend money to get in there. And they're finding a way because they're making more money playing this game than they can at their jobs. So does that mean that we're going to see a future where people have big entire livings in the metaverse, put on their VR goggles in the morning, go hang out in the metaverse, make money and never get a real job again? Is that the level of shift that we're potentially seeing here?

I think over the long term, yeah. I think that like that was kind of the last kind of arch of where I, you know, in my story of like how I think this kind of builds up and, you know, what it ultimately becomes. I mean, obviously people are spending more and more of their time, you know, online every day connected to screens. And I think that, you know, as, you know, more of our human experience, right, you know, both individual and collective as a society moves into like these digital worlds, think that you know providing goods and services to to people you know in in and even creative things right like digital art or like to people in these digital worlds is a value add right and just like you know any economy can

export you know um you know you can export clothes or you can export you know uh raw goods to the other parts of the world and you can have flows and you can make money from that like these digital economies can do the same thing where people come in they can buy from them and and i don't even consider not having a job like it's it's a real thing like what these people are doing uh you know i'm not saying you're criticized i just meant didn't like have to show up at work like i'm not going to my job in construction because i can sit at home and do my job with my VR goggles on and never leave the house. Totally.

Yeah. I wasn't saying you're crazy. Like I want to be by this is like, it's, it's like, you know, there's this big rise of, this is like another trend. Like all of these trends are kind of mega trends that exist that converges crypto, right? Like it's remote work is another huge mega trend, right? That even before covid started right people are moving to other parts of the world with kind of this gig economy

and i think that that is just another thing that you know is propelling this um but you know it's it's bringing both you know more uh expanded access right to you know first world workers you know to go other places you know we'll see what happens with covid and borders and all that stuff and travel it's opening up but and then it's also bringing inclusion to, to other parts. And it's, it's exciting to see kind of humanity come together in these ways that we couldn't before previously. It's incredibly exciting.

And I think about the people who have been building these things for three or four years, because to me, it's like, it feels like it came out of nowhere, right? A lot of this stuff, but these projects have been building for half a decade already, some of them. So it's really some real true visionaries behind, you know, the potential, I think, of the crypto market. We talked about the fact that we now have a lot of the tools in place, certainly security, and how it's sort of different than 2017. We keep saying that. I remember it's funny that Bakkt was like the big news in 2017 or 18, that we were

going to get institutional adoption. Incidentally, they actually just launched on NASDAQ finally in 2021. But clearly in 2017, we did not have the tools for institutional adoption. There was no way they could securely or be expected to have put their money into this space. Those basic tools are there now. My question is, what tools are we still lacking, right? What still needs to be built here for the wall of money, for pensions and endowments and sovereign wealth funds and central banks to confidently put their money

into this space? Are there still things we need to build? Well, there's a lot to build because I think that there's a lot of potential with, you know, building this entire, you know, internet economy. But I think most of those people are here to some degree, right? And, you know, obviously it's like, you know, they're saying, you know, the future is here. It's just not evenly distributed, right? Like is kind of is kind

of what's what's what's happened right now um you know we've seen you know some of the endowments even getting back into you know crypto allocating through funds or um you know through other art you know our types of products as well i think i think that as more of these use cases just emerge that are really viable that can meet kind of actual utility and consumer demand. And, you know, we keep seeing, you know, fundamentals kind of underpin these things. I think that that's, you know, what will ultimately drive, you know, the value, right? Like we have to make sure that, you know, it becomes, you can't have the price overshoot the value you know the fundamental value of the utility of these economies today right you don't want to have necessarily like

a dot-com bubble uh that you saw back back in the 2000s you know you want these i'm not saying there's not going to be price over valuations and undervaluation swings right like that's any market you know but i think it's really healthy to see kind of the fundamentals evolving that you can look at it there and you could say like this thing's trading at like a 40 times you know, but I think it's really healthy to see kind of the fundamentals evolving that you can look at it there. I mean, you could say like this thing's trading at like a 40 times, you know, or something like that, like price to sales or, or like a 50 times PE. And it's like, really, it's like, I think for people like understanding that that those fundamentals exist, like, it's just like a cloud stock or understanding some of the, how do these DeFi protocols or things, you know, the usage and the users i think

as these things kind of grow i think the value will come and if you look back to the internet um most most most of the value of the internet is also kind of explained by like the number of users that kind of use the internet right so if you're you know 220 million you know active crypto users today you know and like four billion or, internet users, 6 billion people on the planet or seven, right? Like there's quite a bit of growth to be had as folks kind of get on board. Tech valuations have never certainly been based on earnings, right? I mean, it's always been, as you said, based on users and potential. And I think, like you said, I mean, crypto, if you're only talking about, I literally have no idea how many people are in crypto. Did you say you think 200 million-ish have exposure? I mean, that is such a small fraction of the potential. When you think about

a billion people in crypto or 2 billion people, or even just half the world, three and a half, 4 billion people, what this looks like, it's mind boggling. Then we'll really stress test the infrastructure, right? Yeah. I mean, I think the infrastructureling. Then we'll need, then we'll really stress test the infrastructure. Right. Yeah. I mean, I think, I think the infrastructure will mature like as, as we get there. Right. We've definitely seen that, you know, the scalability has come these different layer twos, right. They're still being tested and stuff, but like, I think for the most part they're showing that they can work right. They haven't reached their full adoption, but,

and just like the underlying Moore's law of like the traditional, like physical infrastructure that you need will improve as well, right? Like bandwidth computation and storage, right? Those things will ultimately kind of help this as it kind of goes along. Makes sense. So where can everybody follow you after this conversation and keep up with what you're doing and check out Grayscale's research? Yeah, so I think that would be the first place I would send folks. Just go to Grayscale's website and you can subscribe publicly to kind of the stuff we put out publicly for, you know, we don't go everything

public, you know, some stuff just goes to our client base of investors, but we do put a bit of stuff out there. You can follow me on Twitter, I suppose, at David underscore grind. And I probably have a tungsten cube is my picture these days. So if you just see a silver kind of square, that is me. I see the cube everywhere. Tell me really quickly before we're done. Tell me about the cube. I see it everywhere now. Everyone's talking about it. Yeah, the short answer is we like the cube. And I think that the cube, it's funny because the cube, I don't know if I'm supposed to give away the insider secret, but the cube doesn't actually mean anything.

Right. It's literally just a meme that's funny because people are like, well, like, what is this? Like, is there like an NFT around it? And there is now, it's for charity charity and i encourage people to support it but it's it's literally just buying a cube just because people wanted to meme it into existence and i think that there's actually a point to it which is that it shows that like the people can be convinced by social pressure in society and doing what their friends are doing doing the thing that's like popular just that like something is valuable

even though like i buy this thing it really you know beyond it feels really cool because it's very heavy to hold right and you're impressed if you wouldn't you get one physically but it proves that like why nfts are valuable right like if people in your circle right are willing to put value around this thing i'm willing to buy this thing that i'll just put on my desk and do nothing with and i'll spend they're pretty expensive for what they are how much is tungsten cube running these days what's the floor as we would say in the nft space right uh well the smallest one like i think like a half inch is like like 60 bucks and it goes up a lot like if you want to get like a four inch i think it's like three or four thousand um two inches like you know 400 uh and and they're

getting bigger but the ultimate thing that could happen this would be the crazy part would be you know obviously gold is just not much different than tungsten in some ways except it has this perceived scarcity this mean value to it uh so like if tungsten one day enough people of a new generation of a new, you know, the globe, is tungsten our hard money? It's our new gold, right? And that could be the real flippening. Who knows?

Money is just a shared myth, right? I mean, and so anything is. So why not, right? And it has a fundamental value, as you said, not far different from gold. Well, thank you for breaking down the cube because I have had a million people ask me about it. And I'm like, guys, I don't really know. I think it's just a piece of metal. That's mean. And so I love it. Perfect, perfect for 2021. It's the most 2021 investment you could

probably possibly make. Well, thank you for taking the time to do this. I really do appreciate it a lot of great insight there. Look forward to getting you back on about six months or a year down the road to update us on where we're at. Absolutely. Happy to come back anytime. Thanks a lot for having me.