The Wolf Of All Streets - Trading The Ethereum Merge | Macro Vs. Fundamentals With Joshua Frank (The Tie) And Jeff Dorman (Arca)

Episode Date: September 8, 2022

Is the Ethereum merge positive news? How will ETH behave 6 months after the merge? Why is Jeff Dorman, crypto fund Arca's CIO, so bullish on Ethereum? Why is Joshua Frank, the co-founder and CEO of the Tie, the crypto data provider, not happy about the narratives around crypto and feeling skeptical about the adoption while being fully invested in crypto? Listen to this strong debate between two crypto masterminds. Joshua Frank: https://twitter.com/Joshua_Frank_ Jeff Dorman: https://twitter.com/jdorman81 ►► Get 20% off on your ticket to W3BX. Use my code: WOLF20. Register here: http://web3expo.live/ Timestamps: 0:00 Intro 1:10 Josh Frank & Jeff Dorman 2:35 Is Ethereum merge positive news? 4:10 Ether will behave like bitcoin after the halving 6:00 Ethereum will x4 in 6 months 8:05 Is crypto value sustainable?  10:00 Crypto repeats dot-com era 12:44 Two major shifts in crypto 14:20 What projects will survive 18:00 Bitcoin underperforms, Ethereum outperforms 20:00 Narratives in crypto change too often 21:12 Most of the crypto industries did not exist 3 years ago 27:00 Can we still trust centralized lending platforms? 32:19 Will merge spark centralized platforms to blow? 34:00 There is a lot of cash and fear in the market 36:50 VCs have a lot of dry powder 39:00 Very big correction in the private markets 42:50 How VCs invest  48:00 Gary Gensler 48:30 Security is not an illegal word! 52:50 We just need more clarity in crypto 53:40 Institutional money is actually teachers’ pensions 57:30 99.99% is garbage 59:00 Wrap up  The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

What's better than listening to the Wolf of All Streets podcast? Listening and watching the Wolf of All Streets podcast? Listening and watching the Wolf of All Streets podcast live. Well, they say what happens in Vegas stays in Vegas, but this time that's not the case because I'm hosting a stage at a conference from October 10th to 13th. That's the WebEx conference. I'm going to be bringing you live podcasts,

live panels, masterclasses from the leading minds in the industry. This is going to be absolutely epic. It's going to be live streamed, recorded, and presented to you live. You can come have a happy hour with me, eat dinner, potentially play golf, and watch all of your favorite content being recorded in real time. Guys, the link for this is web3expo.live. That's web3expo.live. Use code WOLF20 to get 20% off your ticket. WOLF20 for 20% off your ticket. Guys, let's hang out in Vegas, October 10th through 13th. On a day when we have Gensler, Lagarde, and Powell all talking about inflation, macro environment,

and even specifically about cryptocurrencies, it's very hard to still focus on all the exciting things that are happening in crypto. Of course, the Ethereum merge has been the dominant narrative for the past few months, and that's coming up within the next week. So the question I have for my guest today is that Ethereum merge enough fundamentally to fight macro headwinds

and everything that's happening around the world? I'm sure we'll dive into quite a few more topics after that, but that's likely where we're going to start. You guys don't want to miss this. I've got Josh Frank and Jeff Dorman. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. And as I mentioned, I have two amazing guests today, two that have been on here quite a bit and have been among the most popular guests we've had. I've got Josh Frank and Jeff Dorman. I'm going to go ahead and bring them right on

and save all the niceties and suspense. How are you guys doing today? Doing great. Thanks for having us on. Yeah, thanks for having me. We were talking right before and Jeff was like, I'm on the West Coast, but there's no such thing as morning and night anymore. Right. I mean, we basically at that point right now are 24-7 survival mode, Jeff. I mean, I think we've been in that mode for, you know, since I started in this business five plus years ago.

So, you know, you never know when interesting news is going to drop or when volumes are going to spike. So, you know, you got to be on your toes at all times in this market. How about you, Josh? Are you a 24 seven right now? I know you guys are building a lot of things. So perhaps that's the reason. I mean, we're, we're, we're, it's, it's never ending. It only gets worse over time.

It, you know, it's, it's, this bear market is really loud for a bear market. You know, there's, there's really a lot, there's a lot going on. There's a lot of building. I've never been as busy as we are now. But that also has to do with the fact that we're growing pretty fast. But I'm in the same boat as Jeff. I mean, can't sleep. And you know, we're hopefully a second away from some positive news, you know, having some impact. But you know, I feel like we've been waiting for that for quite some time. Is that positive news, you know, having some impact. But, you know, I feel like we've been waiting for that for quite some time. Is that positive news, the Ethereum merge potentially? Do you think that we've seen sort of the hype train already leave the station and slow down from that? Or do you think that we're going to actually see any major changes with that happening in the coming week?

Could that be that catalyst you're sort of mentioning? I think the bear market ended two months ago. I mean, I always cautioned and use, you know, broad terms like bull market and bear market, especially when there's no definition of it. But I mean, you look at the price action over the last two and a half months since we basically bottomed post the three arrows uh implosion and you know there's way more upside in prices than there has been downside right you know bitcoin is stuck for a billion reasons and i don't think that's going anywhere but if you look beyond bitcoin which most people in the digital asset industry do right everyone on the outside just focuses on bitcoin as a proxy for everything but when you're inside the digital asset market there's been home runs left

and right i mean there's i can name 10 off the top of my head that are up 50 to 200% over the last two months. And it's because of for real reasons, right? There's either been real growth, there's been restructurings, there's been tokenomic proposals, lots of governance, there's been liquidations of DAOs. I mean, there's been all kinds of things happening. I didn't mean to cut you off, Shash. I'd like to hear your thoughts on the Ethereum merge being the major catalyst. But you look at the price action and this is not a bear market, right? There's been way more upside to prices than downside over the last two months. Ethereum was up two and a half X from the bottom as well, just on the merge, right? And that's the second largest asset by market cap. Josh, go ahead. I'm actually going the opposite direction

of you, Jeff, on the merge. I think that it is not a major catalyst. I think it's a played out narrative at this point. And I think it's going to look something like the Bitcoin halving looked. You know, I'm sure you remember that day, Jeff, or the day before that, right, where, you know, Bitcoin halving was coming, Bitcoin ripped, and then it sold off going into the halving. I think we'll probably see something like that. You know, there's not, you know, there were a lot more things originally proposed in ETH 2 than are actually going live with the merge. So I think it's a narrative that's been talked about a lot. And I don't really understand, you know, maybe it's just an exciting narrative to

pitch to institutional investors, you know, people care about ESG and the fact that, you know, you know, you know, we're not mining it anymore. It's more environmentally friendly, things like that. But I don't think it's this major catalyst. I think what's a lot more exciting is all of the work that's been done on, on, you know, all the products building on top of Ethereum, right? Like Polygon and others and Arbitrum, right? And how that's made Ethereum a lot more scalable.

I think that's getting kind of missed in this narrative. But I think there's a tremendous amount of things to be excited about around Ethereum. I just don't think the merge in and of itself is, I don't think it's not exciting. I just don't think it's as exciting as we've tried to play it up to be, because I think we're trying to, you know, fight for narratives here. I make the same corollary to the happening.ing, but I think that that's depending on your time preference, right? I don't think that there's a reason to trade the merge the day it happens, unless, of course, you're an institution and you're doing it for free fork coins. But I mean, that 90% reduction in issuance over time should play out massively in Ethereum in the market's

favor, right? So sort of maybe in six months, you see it play out rather than the day that the merge starts happening. Yeah, 100% what I think. Sure, sure. Yeah. Sorry, what Josh just said there, I completely disagree with just in the sense that what he said is exactly what I yell

at my team for every day, which is thinking way too short term. Like the day of the merge itself is irrelevant, right? The only thing that matters in the day of the merge is that the press is going to say the merge happened and now we start this long process of the Ethereum 2.0 transition, right? I mean, this just begins with the merge. It certainly doesn't end, right? We've got a long roadmap ahead for Ethereum to reach sufficient scalability and security

to be able to onboard millions or billions of new people. It certainly doesn't end. We've got a long roadmap ahead for Ethereum to reach sufficient scalability and security to be able to onboard millions or billions of new people. But what it does is, as you were just alluding to, Scott, is this is a huge supply demand shift. And just like the halving, the day is going to come and go with no fanfare. But six to 12 months from now, Ethereum is going to be up three or four X. We're all going to look back and be like, well, that was obvious because we went from inflationary rewards that went to miners of 13,000 ETH per day, which is basically $21 million per day of selling pressure to now 1,600 ETH per day, which is two and a half million, right? As Scott said,

about 88% decrease in the inflationary rewards. And on top of that, you probably have a deflationary ETH because we're still burning over the last 90 days around 2000 ETH per day. So, you know, what we talk about all the time in digital assets is there are revenues everywhere, right? Outside of Bitcoin and all the Bitcoin forks and all the nonsense that nobody cares about it anymore. When you look at the other parts of digital assets that are actually growing, there's revenue everywhere. It's just a matter of whether or not that revenue accrues to the token or not, right? Sometimes revenue accrues to miners. Sometimes it accrues to LPs. that revenue accrues to the token or not. Sometimes revenue accrues to miners. Sometimes it accrues to LPs.

Sometimes it accrues to stakers. In the Ethereum case, this ETH fees and Ethereum being the dominant leader in fees for years, these fees now accrue directly to the token through the EIP-1559 proposal that burns the fees. And on top of it, you just have less inflation. That's a huge, huge supply-demand shift. So again, merge merge come and go. Nobody cares.

But three months from now, six months from now, nine months from now, 12 months from now, if you're trying to trade tick for tick, the news around the merge, you're going to lose. Because long term, this is going higher based on the fact that supply is going down. Yeah, look, I don't disagree with that. I also don't think $21 million is that much money with the amount of trading volume that we have today. I do think it's a significant amount of money. I don't think it's that significant amount of money. But I think we also need to figure out what are the long term drivers of demand, not just supply, right. And I think the challenge that we have, as it relates to token rewards, and this idea of value accruing is how sustainable is that value, right? Like,

yeah, Axie accrued a tremendous amount of fees that's gone down over value, right? Like, yeah, Axie accrued a tremendous amount of fees that's gone down over time, right? Stepin accrued a ton of fees that went down over time, right? We have all of these projects that come out in crypto and temporarily, there is some revenue that gets generated, but that revenue, I think Ethereum is different, right? But I think with any of the applications that are built on top, and I think ultimately Ethereum does need killer applications, right? Like the value that accrues, I mean, there's just no, I mean, we now track retention like on-chain and trying to figure out how sustainable usage is of these applications. And you look at things like, as an example, I was looking at Compound, like if you look

at like the cohort of users that came on in 2020, in terms of wallet addresses, less than 1% of them are still here. And I feel like we constantly have that, where, yeah, these applications are generating revenue, but how sustainable is that revenue? Is it actually worth any sort of multiple, even if that revenue is accruing to token holders in some way? I mean, isn't OpenSea a very good example of that, right? I mean, it's been reported that their transactional volume is down like 99% in the last six or seven months, though. But to that end, we also always see a new narrative or a new, I guess, genre or class of tokens that seem to drive adoption. And I think we all agree that once there's another bull market, everybody's going to rush back into all of these assets and be trading in FOMO.

It feels like people are chasing narratives though, right? There's a really big difference between chasing narratives and trading things versus actually building long-term sustainable value. And I don't think any application has yet managed to do that. I think you guys, again, focusing on time periods, right?

OpenSea's volumes and revenues are down a ton over the last six months. They're still up more than anybody would have believed, you know, two year over two year. But they also raised it a $13 billion valuation, right? That's fine, right? Valuation is a different story though. But here's what you have to, here's what you have to understand about digital assets, right? Like there's no question that this is all infrastructure right now, right? Everything is levered to user growth, transaction growth, and volume growth right now, right? In the same way that you go back 20 years ago, you know, when you looked at all the growth of internet companies, there was a reason they were called dot-coms, right? People put dot-com in their name. It was

amazon.com, priceline.com, pets. com, right? Because these were all companies that would not have existed if not for the internet. 10 years later, every company is an internet company, right? Companies that have existed for 100 years are now internet companies, right? JPMorgan Chase is an internet company. You know, hospitals are internet companies. Domino's Pizza is an internet company, right? Companies that existed long before the internet became internet companies, even though the original internet companies were dot coms, right? We're still in the dot-crypto era, where every single company or project that exists only exists because of blockchain. In 10 years, every company under the sun is going to be a dot-crypto. They're going to have some form of blockchain and digital assets.

So we will lose that tether to transactions and volumes over time. You'll have a regular company like take Reddit or take Disney or Netflix. They will all have the token. And those tokens will accrue economic value independent of just trading volumes and transactions. But today, it's very leveraged to that. So there's no question that if you look at fundamentals, every fundamental across the board is down right now because users left, because transactions have slowed, because volumes have slowed. But as an investor, what you're looking for is you're looking for the companies and projects that have massively high operating leverage for when those users inevitably return. And when they do, there are certain projects that won't bounce back because they had no product market fit. They had no real stickiness in their application.

They had no tokenomics that mattered. And there's others that are going to fly 510X because they have that massive operating leverage to that increased usage again. And if you actually dumb it down, it's a very, very, very small list. You're talking about how things like Axie have gone from billions of revenue to now less than a couple million dollars a day of revenue. There's always going to be a flash in the pan here and there. But there's a good 10, 20, 30 tokens and projects out there that actually have found real product market fit, real stickiness of users and have that high operating leverage to the upside. And when you look at what has happened in this market, there's been two major shifts in the last couple of years. The first is that most investors, you know, no longer think Bitcoin is representative of the entire market.

Bitcoin is great. Most people have a bullish long term view on Bitcoin, but it is not representative of the entire market. Bitcoin is great. Most people have a bullish long-term view on Bitcoin, but it is not representative of the market. 99% of what happens in the digital asset space has nothing to do with Bitcoin or currencies or global macro. Most of it has to do with what is being built on Ethereum, which is stable coins, DeFi, Web3, NFTs, gaming, you name it. So that's that's been a big shift. And we're seeing that with investors. Investors are now looking for ways to play, how do I get long blockchain, right? What is the best way to get long blockchain? And it's not Bitcoin anymore, it's Ethereum.

And second, and more importantly, is there's less than a trillion dollars total of tokens out there. 400 billion of it is Bitcoin, and about 150 billion of it is stable coins. And another 200 billion of it is just and about 150 billion of it is stable coins. And another 200 billion of it is just worthless random tokens that shouldn't exist or certainly are going down, right? Your Bitcoin caches, your Litecoins, your Dogecoins, things like that. The actual investable universe for real fundamental investors is less than a couple hundred billion dollars. And you have 150 billion of stable coins sitting there with nothing to do other than buy these assets so the window is really really really small when

investors do decide to get back in so you know by no means am i dismissing what you're saying right there's no question that a lot of the companies and projects have models that maybe don't work but for those that do there's a reason these things aren't going down right now it's because there's just not enough of the supply of these assets relative to the amount of cash and stables and demand for the growth of this industry. I just feel like we have these conversations every few months or every year or whatever. And there's a list of tokens. People are like, yeah, but this thing is clearly accruing value or this thing is or this thing is or that thing is. And then we just see six months later, it's gone and the users are gone and they don't exist.

Right. And I know it just feels like we're talking in hypotheticals in terms of like, yeah, at some, like, yes, there were internet companies, which became giant businesses. Right. And we've been saying that for crypto for a very long time, but we haven't really seen any examples of that yet. Right. Where there's actually some reason that somebody's using this beyond i'll give you 15 off the top of my head centralized exchanges binance and ftx not going away bnb and the ftc token clearly accrue economic value they're both amortizing tokens they use real revenues and cash flows to pay down the token there's a reason those two tokens have outperformed the market in both bear market and bull markets dexesXs, Uniswap, Curve, not going away.

Lend-Borrow platforms, Aave, MakerDAO, Compout, not going away. Decentralized derivatives, DYDX, 88% market share. But these are all speculative platforms. How are they speculative? These are platforms that have been around for two, three years. But they're all speculating on other assets, right? So every single thing here, whether it's a lending platform or it's a trading platform, is all focused around speculation. And I'm trying to make the case that there's nothing that actually has some sort of application beyond speculation of this.

Okay, I'll keep going. How about Chili's? Number one in trading fan tokens, invented a whole genre around sports and entertainment. You have Chainlink, which powers everything in the industry. You have Helium, which is working on healthcare, or sorry, healthcare telecom. You go down the list, there's plenty of applications that have found a way to infiltrate the real world. Now, again, I'm not dismissing the fact that we are in the infrastructure build-out. As I said before, most of these are levered to trading volumes and user

growth right now. There's no question. But that infrastructure leads to regular companies issuing tokens. There's no question in five years, Disney will have a token. That token will give you fast access to the parks. It'll give you discounts on Disney Plus. It'll give you access to certain IP and content. Netflix will have a token, right? How does Netflix solve all the problems that they have? Great. You issue a token, you give every single one of your billions of users equity-like upside in your business, right? There will be real companies that eventually build on this. Right now we are in that infrastructure, right? But just because we are in something that is based on speculation and trading today, it doesn't mean they're not real companies and projects,

right? These things have existed for two, three years in bull and buyer markets and have real product market fit. If you just invested in every hot flash in the pan like Stepin, yes, you're going to get murdered. But if you look at the ones that have number one or number two market share in real subsectors that exist and have product market fit, again, there's just not enough of these projects relative to the demand and the interest in this space. I've heard the same argument, by the way, made against Bitcoin, right? You have on-chain analysts who point to increase in wallets, increase in transactions, increases all those things. And then to Josh's point, can't one say, well, that's all just because more people are trading and speculating

on it and not actually adopting it. So this is sort of an infinite regress. This argument goes all the way back to Bitcoin. I lean towards Jeff's point. I think we're going to have incredible things built, but I think it's going to be very hard to pick the five out of 5,000. Right. We all, as Josh said, we look back and say, well, Amazon became one of the biggest companies in the world and Google and Facebook, and that dismisses the thousands of internet companies that outright failed, that probably had more secure regulatory rails and a better plan than most of the crypto companies we're talking about. Well, I think honestly, that's why Ethereum is becoming... I mean, if you look at Ethereum, Ethereum has now 4x'd Bitcoin over the last two years since the Bitcoin halving, right? The big event that was supposed to make to find those four or five or ten best projects out there.

But the one that's obvious and staring everyone in the face is Ethereum. I mean, we wrote about this in our blog, you know, just the other day. But Ethereum is, you know, if you are just saying, I want to be long blockchain, right? Let's say you're new to investing and you're just like, I don't have any philosophical views. I don't have any ideological views. I don't really care about proof of work versus proof of stake. I don't really care about decentralization or anything like that. All I care about is if blockchain really works as a technology, I want to make sure I make money. You're going to buy Ethereum. That's just what you're going to

buy. If you don't know anything else, you're going to buy Ethereum. It has the number one market share in stable coins. It has the number one market share in DeFi. It has the number one market share in NFTs and gaming. It has the number one market share in Web3. It has the number one market share in DeFi. Has the number one market share in NFTs and gaming. Has the number one market share in Web3. Has the number one trading fees accrued. It's the no-brainer generic ETF of blockchain right now. And that's why you're seeing interest flock into that. We talk to OTC desks left and right around what are some of the TradFi guys doing right now. And a lot of them are gearing up to buy Ethereum once the merge goes through,

not because the merge itself necessarily matters, but because they lack the technical expertise to have an opinion on it. So as soon as it goes through, that's how they're going to take their long exposure. And I think that is really important, is that, of course, us in the industry who are actively managed funds

are doing everything that we're doing. We're going to look for those idiosyncratic winners and those diamonds in the rough. But for everyone else, they're just like, I want to make sure I make money if blockchain works. And it becomes, it's looking pretty inevitable that blockchain works. Yeah, but I think, you know, go ahead, Josh, please. No, I was just saying, I think that's also, you know, saying I'm going to take this ETF approach is also, you know, this, you know, saying like, okay, there's DeFi, there's NFTs, there's all these different things on Ethereum. It's also saying, well, we don't really know what is going to work if any of this thing is going to

work. So to your point, yeah, it's a bet on blockchain. But the point that I was trying to make earlier is we really haven't seen that adoption of anything. Okay, like, yes, somebody's getting a fan token, which is a Chuck E. Cheese token for PSG, right? Which says, okay, you get a little reward or whatever. It's no different than being point of a loyalty program. I think the fact that it's on the blockchain just means that people can speculate on it. But I think I agree with you on the Ethereum point. Obviously, Ethereum makes sense if crypto is going to take off. And look, I obviously believe in crypto. I run a crypto company. So just to be clear, I just think the thing that I'm struggling with is the fact that

just every few weeks, there's a new narrative or every few months there's a new narrative come out, whether it's NFTs or GameFi or anything else. And it's like, are we just trying to force things to be on a blockchain and then say they are then valuable because they're on a blockchain? I think Jeff probably agrees that that's the case a lot of the time, but not entirely all of the time. Right. So couldn't we argue that the one thing that has been sticky and is actually used very regularly beyond just speculation or stable coins? I was going to say, perhaps the most compelling innovation we always talk about as Bitcoiners and stuff, you know, how people in foreign countries can use a hyperinflation pledge, but as a hedge, but really people in foreign countries generally want access to dollars and to quick cross-border payments

and the ability to do micro payments. I 100% agree with the stable coin argument. I'm totally in agreement on that. Well, but I mean, it's funny listening to you, Josh, because I know you believe in this space, obviously. You and I know each other for a long time now. You believe in this space, I believe in this space. But it's funny listening to your talk

because you sound like somebody who's very jaded by what's happened over the last nine months and unable to look back three years ago. Three years ago, literally nothing existed. Now you have stablecoins, which is a hundred and- I think the thing that's frustrating- Let me give you some numbers. Stablecoins went from literally $0 of AUM to 150 billion of AUM in less than two and a half years. DeFi went from zero TVL to about 100 billion of TVL in less than two years. That puts it as a top 25 US bank in terms of deposits and assets. These are real numbers. NFTs went

from non-existent a year and a half ago in most people's eyes to now a multiple billion dollar industry. You laughed at loyalty rewards. Loyalty rewards is a $31 billion industry. If you look at airline rewards and coffee and restaurant rewards and all this stuff, there's reasons to be skeptical given the events of the last six to nine months and the fact that a lot of things that looked too good to be true turned out to, in fact, be too good to be true. But let's not dismiss that two years is not a very long time in the growth of technology and the massive product market fit in stable coins, DeFi and in NFTs. So I don't disagree with stable coins. I think there's a use case for stable coins. I think

they make sense. But a lot of this is still just because the number goes up doesn't mean it's not just speculative, right? That doesn't mean that there's actually a use for any of this stuff, right? People put money into DeFi because it was paying really high yields. And it turns out, well, if you're paying really high yields, there may be some sort of risk associated with that. Or you're just inflating a nonsensical coin that's not actually worth anything, right? Like, okay, you're getting rewards in some random token. What does that actually mean? Is that actually a reward, right? Like, I agree with you. I think rewards as an industry are great. Starbucks loves rewards because they get people to buy their gift cards, which is basically

interest-free loans to Starbucks to allow them to expand. There's reasons that reward programs exist and that they make sense. I think the thing that's frustrating to me is that in this industry, we're always trying to push the next narrative onto people as opposed to taking a step back, swallowing our pride and going and looking and saying, hey, is anyone actually really using this thing? Take, for example, let's take new things that have come out, like NFTs or GameFi. GameFi is an example.

How many people are actually interacting with this? This is a narrative that's being pushed, but the number is less than 2,000 people. When do you think you took your first Uber ride? What year? Probably 2012 or 2011. Yeah. It started in 2009. Okay. It takes three years for things, three to five years for new companies to get product market fit and adoption. The fact that we're like laughing at this industry because in two years there hasn't been enough product market fit is crazy. It's more than two years. I mean, the bull market in 2017 was five years ago.

Okay. But of the projects that we just mentioned, where there is real fit, stable coins, DeFi, and Web3, most of those are less than three years old in terms of like really existing, right? Not just when they ICO. I mean, most of the ICOs from 2017

were largely, you know, a quote unquote, you know, Ethereum or Ethereum killers, or it was like Bitcoin spinoffs, right? It was a bunch of different... Or the classic utility tokens, which were all... The ones that we're talking about today in the industries that are actually working, which again, right now I would limit to just stable coins, DeFi and NFTs. Most of that is less than two and a half years old, right? You know, I remember, you know, it took me... I remember when people were talking about buying Apple stock in 2002 and 2003 because they invented the iPod. It was like 2010 or 11 before I got an iPhone.

I mean, these things take time. It takes time for these things to build. And I think we just get too lost in the trading aspect of it and token go up, token go down. I forget how fast this is really happening. So many hundreds of billions of dollars have been poured into so many different applications in this space, right? And you'd think that there would be like one thing that a million people are using that's not trading, right? Like you'd think there'd be one thing out there. Okay, but there is, right? That's the point. Like Axie Infinity's revenues have

gone way down and their token has gone way down, but they still have a million daily active users relative to like 10,000 two years ago. There's still people using that. That's a step in. As much as we don't love the tokenomics of step in because it's a token that's designed to go down, there are real people that are using that app. As we mentioned, stablecoins and DeFi, there are millions of people using this stuff. I think the difference is you talk about there's just as many failures in traditional fintech and traditional technology startups as there is in crypto. You just never hear about them because the stocks never make it public. Whereas we hear about something the day it's launched and the day it's traded on Binance or on Uniswap. I think this is the attitude of like,

just because you see it doesn't mean that you should have. 99% of failed tech investments in companies you've never heard of and never will. That is a fair point and we're front and center because a token launches with the company immediately, right? So that's a very good point. Josh, I want to hone in on something you said before. We kind of pointed out laughingly that, you know, we're offering these huge yields. Where's the risk?

Where does that come from? We still have centralized lending platforms that are offering double digit yields right now, even after Celsius and Voyager and Vauld and others blew up? Where are they getting these yields now? And can anyone trust these platforms anymore? I think it depends on who you're talking about. I think there are certain ones that you can probably trust and others that you can't trust, right? I think Celsius was a pretty clear example of anyone who knew much about the industry

knew that Celsius was full of shit. I think a lot of people were afraid to call them out because it is a very small market. Everyone knows everyone in this industry. You know, at its core, it's a very small market industry. Like, I think there's... But I think there are folks that you can trust, like as an example, you know, take like an Anchorage or take, you know, take some of these

prime brokers that are trying to build real trusted businesses that have gotten licensed in the United States that are that are regulated, that are well funded, right? I think there are folks like that, where you can where you can trust, but I don't think those are the same people that are paying 15%. You know, Anchorage is an example, but I think there's others. There are lots of others out there that are similar. And I'm sure there's others that Jeff does business with, right? I have no comment on them as a company, but Nexo seems to have survived this and is looking to buy up the other companies. But effectively, you would imagine a similar or same model that they maybe just avoided those specific blowups. I'm just, you know, really wondering if

CFI is going to completely die here after so many people. And these were, this wasn't people who invested in ICOs and it went bad and they lost their money. This is like your average person who thought they had a bank account and it exploded, right? This is a completely different profile. I think there's a difference between retail-facing lending platforms and institutional lending. That's what I'm talking more about, yes. I think institutional lending is going to be a huge business moving forward and is only in the infancy.

I mean, it comes down to the transparency, right? I mean, we were calling out BlockFi, for example, years ago. Obviously, BlockFi, at least thus far, has been one of the survivors. But you can't- Barely. Yeah, exactly. I mean, they took a bailout. Who knows exactly what their balance sheet looks like? But that's the point. You don't know, right? Arca, for example, we run a lot of hedge fund strategies for institutional investors. They go through 18 months to two years of due diligence with us before they invest in our funds because they want to make sure they understand our team, what we invest

in our risk management practice, all these things that we do. BlockFi spins up a website and just says, hey, in 10 minutes on your phone, you can come deposit your assets with us and we're like a bank. And then of course, what are they doing? They're doing the exact same strategies we're doing at a hedge fund. They're doing arbitrage, they're doing DeFi lending, all this kind of stuff. GBTC, Cash and Carry. Yeah, exactly.

Whether it's Celsius or BlockFi or whoever, and I don't mean to single anyone out, but they're all running unregistered, unlicensed hedge fund strategies while marketing themselves as retail banks. That's the issue. So it's not about whether CeFi will go away. CeFi will exist. It might be Barclays or JP Morgan or Bank of

America who ultimately runs these businesses because eventually they just buy the businesses that are left and buy their user bases and do it once there's real regulation in place. But CeFi will always exist. It's just that- With one and a half percent yields. Yeah. Well, the yields will, yes and no, right?

I mean, the yields will definitely come down, but don't forget, we started this show by talking about the Ethereum merge. Don't forget that part of the Ethereum merge is the fact that you're now going to have a proof of stake network where you're going to have a real staking yield. And whatever that staking yield is in Ethereum will effectively become the risk-free rate of digital assets. And as a result, anything else that happens in this market will be ETH yield plus something else. Just like today we talked about liable plus or treasuries plus. So there will be some yield. The difference is what you have to think about is that a layer one blockchain is effectively a nation, right? It's a nation and the token is the currency of that

nation. So if you bought an island in the middle of the Pacific that nobody lives on, right, there's some speculative value to that island the day you buy it, just because who knows what could be built on there one day, just like there's speculative value to all these VC backed, you know, layer one blockchains that pop up overnight. But eventually you need real economic activity, right? You need roads being built. You need houses. You need schools.

You need, you know, businesses paying taxes. And that's when the value of that currency becomes valuable. Right. But it's only valuable if you do everything within that ecosystem. Right. if you do everything within that ecosystem, right? If you go ahead and you might have the most thriving island in the world, and all of a sudden everything looks great there, but that currency is depreciating 90% against the dollar or the euro or the yen or whatever. So, you know, the ETH yield may be really high, but if you translate that back to dollar terms, people might be like, well, that's, you know, it needs to be high because I don't want to take that currency risk. So

there's a lot of nuances to what the right yield is, right? Whether you're doing it in dollar terms or you're doing it in the native currency terms. I would argue that more and more activity is going to start happening on Ethereum and on some other layer one blockchains that are solving for different niches. And when that happens, people will just accept the yields in those ecosystems and they'll be higher than what you're seeing in TradFi. Again, in that native currency, not necessarily translated back to dollars or euros or whatever you're benchmarking. Is there a viable chance that we see any DeFi lending explosions around the merge because of the interest in borrowing for people to obviously get spot ETH and earn proof of work coins? I mean,

there's been Aave's taking one approach sort of saying we're turning off lending altogether. We want nothing to do with it. I think Compound, I could be wrong. Conversely, it was like, we're just going to make rates so high that it's unattractive and not worth it. But it seems like there's some real risk of more platforms potentially struggling through this because of the amount of trading, to Josh's point, speculative interest in the merge. Yeah, I can't say I'm an expert, and I haven't spent too much time looking into this specifically, but I mean, I have seen the same thing, and not just with ETH, but with other assets too, like ETC and others, where I think people are going to have a lot of fun speculating on the merge, especially with more volatile assets. But I can't say I'm an expert, Jeff.

I don't know if you have an opinion. Yeah. Shout out to Nick Hodes, who works with us over at ARCA, who wrote a great article back on August 22nd saying six reasons ETH merge concerns are overblown. And I'll just read what he wrote about concern number three that we keep hearing is some DeFi apps will stop working or assets will not copy over correctly. And he basically said, this is no different than Y2K. If you go back to the year 2000, everyone was freaking out about what happens when the calendar turns from 1999 to 2000 and everyone's computers are going to crash because they weren't ready for a move from 1999 to 2000.

The date change. But this just isn't really how the merge works. A hard fork means that blockchain nodes and validators decide to build a new block on top of a changed set of code. So the code change only affects the Ethereum protocol and does not refer to any individual applications. So all the teams that we've spoken to within DeFi and all the roll-ups and everyone else, who all said the same thing when we asked them, that they're basically doing to prepare for the merge is nothing. It just happens. It's sort of like it'll take an hour or two for all the nodes to kind of sync.

And then it's business as usual on the new block. I was talking more about the human risk, right? The same sort of reasons that we saw CeFi blow up, which is humans speculating, basically overloading the system. And then if things don't go the way that's planned, mass liquidation cascades and all the fun things that we've experienced over and over and over in this space. But I agree with you, Jeff. Obviously, I make the Y2K comparison literally all the time. It's just going to happen.

Yeah, I mean, look, there's always going to be some speculation. But I think, you know, I can't speak to, again, what happens to the markets, you know, an hour or two hours or a day or two days after the merge. I mean, who knows, right? There's certainly going to be some volatility. But you have pretty negative funding rates across the board right now, right? I mean, you look at Ethereum right now, like negative 15% funding rates, Bitcoin, negative 8%, Solana, negative 2%, EOS, negative 20. I'm just looking at a few of them. I didn't realize they were that high. Pretty much. I mean, there is a huge short base built into this. Well, it's true in equities too. I mean, just last week, it was like the biggest,

the highest record number of puts ever bought on the S&P in one day, just when markets started going down last week. So I think there's a lot of cash in this market, as we already said. There's a lot of fear in this market. I think that's why you're getting these kind of buys on every dip right now. Everyone is so focused on macro, macro, macro, macro. But the reality is most of what we know from the macro environment is already out there, right? We know rates are rising.

We know, you know, that the Fed is jawboning to try to get inflation down. We know the ECB is, you know, fighting inflation and trying to get the euro to stop death spiraling. You know, a lot of that's already out there, though. So when you already know all these macro conditions, it doesn't mean things can't get worse. It doesn't mean third and fourth quarter earnings might be a disaster, it might send us lower again. But a lot of this whole, you know, we're just following macro is overblown. But again, if you look back to like the mid July kind of three arrows, you know, bankruptcy, since then, there's been a lot of idiosyncratic trading going on. And, you know, like I said, there's been there's been liquidations of DA then, there's been a lot of idiosyncratic trading going on. And, you know,

like I said, there's been liquidations of DAOs, there's been restructuring like the Luna blockchain, there's been tons of governance proposals from Maker to DYDX to Uniswap. You know, there's a lot going on in this market right now that has nothing to do with macro, and you're seeing it in the returns, right? Go look at any 30 day or 60 day time period right now. And half the market's up, half the market's down. And there's been some real winners and some real losers based on actual news, not just this macro. So again, could you see a blow up with liquidations around the merger? Sure. There's always going to be speculators who use too much leverage and get blown up. But I don't think the applications themselves or the CeFi lenders themselves are really going to be in trouble based on this.

You talk about the amount of dry powder and stable coins you mentioned earlier, literally hundreds of billions of dollars waiting to get into the market. Well, I mean, it's very clear that there's also a massive amount of venture capital still being raised and coming into crypto, right? Not into Bitcoin, as you sort of alluded to earlier, that that's become the boring thing. But VC are pouring into, you know, Metaverse, NFTs, GameFi. As you mentioned, I mean, Y Combinator, I think 30 of their new companies now are crypto-based companies.

Andreessen has raised $5 billion. And now even Brevin Howard is raising the largest, this will be spankly, but Brevin Howard raising a billion dollar crypto fund. Yeah, and also, I mean, keep in mind that it's not just that. So there's definitely dry powder out there. You know, the other piece of the dry powder being the large traditional hedge funds and venture funds moving into crypto. And I mean, you know, we know among the top 50 hedge funds in the world, at least 25, if not more of them are actively in crypto with GP money or very, very close to being live.

So there's a tremendous amount of capital that's on the sideline. And the thing that I've seen, which is really interesting is there's actually this hunger to deploy more capital, right? Where like a lot of the biggest funds in the world think $50 billion funds, right? They're like, how do we put another $500 million in DeFi? And it's like, well, and Jeff, you know this, you can't. There's not enough yield that exists. So I don't think there's a lack of capital out there. And I think to Jeff's point, there are a few good ideas out there that they're going to chase, which maybe leads to certain projects getting very inflated in terms of their valuations at some point. But there's a ton of interest, there's a ton of capital,

but it is slowing down. And I think you're going to start seeing that, especially, you know, private markets tend to follow public markets. And I think, you know, obviously, you have the private market side of crypto, and then you have the liquid token side of crypto. And as we're seeing, and I know ARCA has a venture fund, so I'm sure Jeff can speak about this as well. Like on the private market side, I mean, valuations are getting slashed. I think multiples that most companies were trading at, like I think series A companies are kind of in a unique stage, but later stage growth crypto companies are really struggling to raise money. I know a ton of down rounds or they're not down rounds because they have 2x liquidation or 3x liquidation

preferences that are baked in, which aren't getting announced because the founders don't want to announce down rounds. So yes, there is a lot of capital that is going to be deployed, but there is a very, very, very, very, very large correction happening in private markets right now. You know, there's, you know, I think Axie as an example, we mentioned earlier, trading at 13.3, secondaries were going around 5 or 6 billion. I don't know if the board ever approved and allowed the sale of secondaries at that number, or sorry, not Axie, OpenSea is what I meant to say. Sorry about that. OpenSea. So I think there is definitely a correction, but I think the great thing is I've been having a lot of conversations with folks about distressed opportunities funds. And I think that's going to be huge. I think there's going to be a lot of

really interesting opportunities for folks to get in this market, to buy distressed assets, to buy distressed tokens. There are a lot of projects that Jeff mentioned that he thought were good that are actually down 90 plus percent still, which if you have a thesis that it's a good asset and it will gain traction, that's an unbelievable buying opportunity. So I think there's gonna be a lot of opportunities and opportunities to buy like Bitcoin at a discount in different ways and ETH at a discount through different means. I think there's a lot of excitement there. And I think we're going to see that taking shape in the next few months. Yeah, I mean, it's not even unique to digital assets, right? I mean, I came from the debt and equity world many, many, many years ago. And

when markets are hot, it's actually really boring, right? Everything gets financed at stupid rates. Everybody's fighting for the same assets. But when things get a little choppy, that's when you get loans with much tighter covenants. That's where you get warrants attached. That's where you get all these kind of cool financial structures. And the same thing happens in digital assets. You go back to 2019, two of the coolest token offerings in 2019 were the Bitfinex Leo transaction. Remember when Bitfinex lost $800 million and they had to do a token really quickly? Well, what did they do? They put a 35% cashflow sweep amortization on the token. Plus they said, if we ever recover the stolen funds, we're going to use it to buy back all the tokens, right? There's a reason the Leo token is

the best performing token of the last three years. It was built in a bear market with very, very onerous terms for the company and very, very good terms for investors. Same with Algorand, right? Algorand in 2019, what'd they do? They issued tokens that came with a put. You could buy tokens on their initial offering that came with the ability to put it back to the company at 90% of that value a year later, right? That had tremendous value. You're seeing the same thing now, right? You're seeing tokens, you're seeing down rounds in the equity world. You're seeing better investor protections. You're seeing tokens with better tokenomics, whether that's amortization features, maybe it has some warrants or something attached. You're just seeing cooler structures. You're going to see some M&A. You know, I mentioned a tribe DAO, right? Liquidating. Well, you know, that token was

up 30, 40% because the liquidation assets were more than the token was trading at. You know, you're seeing, like I said, all kinds of governance proposals of trying to find ways to change the token or change the tokenomics of a company or a project to help it actually accrue that economic value. So I love these kinds of markets, right? Because you can't just issue some BS token and be like, oh, it's inflationary and it's a utility token and it's going to go higher. Everyone buy it. That doesn't fly in this market. Now you're going to have to see, I want to see cash flows. I want to see yield. I want to see amortization. I want to see some path to financial success or you're not getting funded. And as a result, two years from now, most of the projects that are either changing

their token now or issuing for the first time to VCs now, those are going to be the ones you want to own in two years because they're going to be built and structured better. You just described a world where VCs are actually being more discerning and not willing to just sort of spray and pray. But how does that? I think it's not just that VCs are being more discerning. I think it's that a lot of the shitty funds are getting wiped too. But my point was going to be, if you're Andreessen Horowitz then, and you've raised 4.5 billion and you obviously have a mandate to deploy that. And as we're discussing, it's down rounds. I mean, try to get more than a million or $2 million of VC into a seed round of something. You can't, that means I have to literally try to, in the next two or three years, invest

in hundreds of things. How does that even work? You raise the money, you need to deploy it, right? Yeah, no, look, it's a challenge. Look, I mean, SoftBank is challenging. Obviously, SoftBank is a different scale, but I mean, we've seen it with very large, it's very easy.

If you gave a top fund a million bucks, you told them to deploy it, they would figure out how to get you a really big return, right? At $100 million, that return would go down. At $5 billion, that becomes very, very aggressive. I think the good thing about Andreessenessen correct me if i'm wrong can they not also buy liquid tokens and do other things too yeah yeah so i believe that they can i'm not sure jeff might have more clarity on that um yeah it has some flexibility but they yeah i don't want to speak specifically

to them uh based on the information i have what i will say is that there's another answer to what you do when you have more money than the market can give you to put to work. What you do is you start expanding what you can do. And what I mean by that is, you know, there's going to be tons of other companies in the fintech world, in the private world that are not blockchain companies per se, but are going to start saying, oh, we're going to utilize blockchain. Oh, well, great. That now fits my crypto mandate. I'm going to invest in your series A or your series B, right? You know, you're starting to hear some of the bigger names in the market, right? You know, you're seeing things like, you know, Nike get involved in NFTs and Starbucks, you know, I think next week is having an announcement about their NFTs. You're seeing the big, huge public companies, which obviously are not going to be

touched by the venture firms. But there's also tons of these small 10 to 50 to $100 million startup market caps that have been funded by venture that are not blockchain companies are going to start exploring, well, how do I use an NFT? Or how can I use Web3? Or how can I use DeFi? And that's where the money will start to flow. I think that to my point earlier about the utility is what frustrates me, right? Like the whole Long Island Ice-T becoming Long Island blockchain in 2018, just to chase higher valuations and higher multiples, right? Like companies that wouldn't historically have been in crypto or needed to be in crypto deciding that they're going to be a crypto company to chase that capital. I think that's what's more frustrating to me. Well, I think that's a very cynical view, right? I mean, certainly that can happen,

right? You can have your Long Island, you know, blockchain, ice tea. Or Kodak. Right. Exactly. You can have your meme stocks, like your Bed Bath & Beyond and your AMCs trying to take advantage of that. Sure. But don't forget, and this is where I keep going back to, if you're an outsider looking in at digital assets and you're not as cynical and skeptical as we are because you haven't been burned up and down 90%. And you're just like, hey, what happened? I fell asleep for the last two years. I've been focused on pot stocks or healthcare.

What's going on in digital assets? Oh, well, three years ago, it was just Bitcoin. Now it's Bitcoin, stable coins, NFTs, gaming, Web3, DeFi. Oh, well, that's pretty interesting. Maybe I should be looking at a strategy within my company to take advantage of that or to build on that right not everything is going to be a marketing ploy there will be some real companies out there who say you know what there's some real reasons to engage my customers through web3 where they become you know quasi shareholders and more engaged with our brand and our business

you know it doesn't mean they're all going to work but there will be some companies and projects out there perhaps being guided by the same venture firms that have both crypto arms and non crypto arms. But there will be some companies and projects that try to take advantage of blockchain and try to utilize it in some way. And those will get funded, you know, in the same way that these, you know, quote, unquote, dot cryptos are being funded. I think there's also a lot of really interesting infrastructure that will get funded as well. That is not yet at scale. You think about prime brokerage and traditionally prime brokers have massive balance sheets. None of the crypto prime brokers have a balance sheet yet. So there are places that could have capital deployed to

them. A crypto prime broker could go out and say, hey, I need a billion dollars for my balance sheet, or I need this or I need that to make it a lot easier for me to actually trade on behalf of my clients and, you know, get funds on different exchanges. I know, you know, folks like I think Fireblocks and Copper and others have tried to, or maybe BitGo have tried to pioneer different, you know, partnerships with exchanges where you can actually, you know, trade on those exchanges and settle with them later. I don't think any of those have gotten, you know, all that much traction quite yet. But I do think there is, there will be places to deploy capital that, you know, that you can scale with. But I think to the point on tokens that we made, right, you know, I think Jeff said, maybe there's 25 of them,

right, you know, maybe there's 100 companies, right, or 50 companies, or whatever the number is, right. And, you know, the venture game is a game of bets, right? And you're going to lose money 80% of the time or 90% of the time, whatever it is. You're also betting on the fact that Densler doesn't just sweepingly deem them all securities and call it a day, right? He was just speaking actually with Coindesk, which what a get by Coindesk. And he basically said, yeah, the CFTC can take care of Bitcoin. But I don't think that's necessarily the death of crypto. I don't think it's the death of crypto at all. But I'm saying it's certainly an external factor that regardless of how successful that company or is,

that could have a major effect on investors' ability to get access to it in the United States. Well, also, I mean, in some ways, I think people in this space have started to make the word security as if it's illegal, right? Being in a security is not illegal, right? It's illegal for an exchange to allow you to trade a security in the U.S. if you're not licensed to do so. But as an investor, you're allowed to buy securities and non-securities. I could put baseball cards in my fund if I wanted. It doesn't matter if it's security or not, right?

I mean, it just makes it more difficult on the issuer, right? Like at the end of the day, like, you know, I actually don't think it's the worst thing in the world if everything gets deemed as security. I think I'm kind of at this point now where I'm like, let's just get it over with. You know, one thing everyone should keep in mind, there's still way more people and money not in this space than there is in this space. And a lot of them are still hung up on that regulatory clarity. So when you get that clarity, even if it's, you know, a short term negative, it is absolutely going to be a long term positive. There's going to be some hiccups. There's going to be some changes. Right. You know, some of the incumbents in this space who have a huge lead will eventually lose to, you know, your trad five banks and brokerages once they get involved because things are, you know, because they're finally allowed to get involved.

But, you know, from a user standpoint, from an investor standpoint, it's going to be better once there's clarity, regardless of how, you know, how impactful it is negatively in the beginning. So, you know, look, a lot of the companies and projects that are trying to win and fight that battle right now, they're pretty well resourced, right? As much as Coinbase's stock has suffered and, you know, Coinbase is often the kind of butt of jokes, they still have, you know, $4 to $5 billion of cash in the balance sheet and plenty of access to new capital if they need it, right? Same with your Gemini, same with your FTXs, right? There's companies and projects that are going to be able to weather the storm. And if everything becomes security, great, you know, it's going to be tough for some issuers. They're going to have to raise more money to be able to register. And so what? There's plenty

of money out there to give it to them. So I don't think being a security is a death knell at all. Now, at the same time, I actually think most of these assets are probably not securities, right? You know, I think you want, like, I'm still really interested in what Commissioner, SEC Commissioner Hester Peirce said a while back with her three-year safe harbor, right? Safe harbor. It's the most reasonable proposal ever. It's the most reasonable approach we've seen. For those who don't know what it is, it's basically, hey, do whatever you want for three

years, but here's going to be some checkpoints along the way that prove that you're moving towards some sort of a Web3 or decentralized entity where there's some form of utility and some form of decentralization of your project. And then we'll give you a pass. Right. You know, because you can't just a lot of these. Don't forget, like companies and projects, they pivot all the time. Right. They have a great idea that this is what we're going to do. And six months later, like, well, that didn't work, but this did work. Let's pivot to that. So to label everything as security right off the bat, when you're not even a hundred percent sure what your company or project is going to do, it's not great either. Right. So you need a little bit of leeway here, but, but if you get some of that clarity, money and interest is going to pour in.

Yeah. I love her. And centralization and decentralization is it's a, it's a, it's a continuum, right? And for many things to become decentralized, they have to start with some level of centralization to gain traction and become successful. So they could become non-securities after starting effectively as one. Yeah. I mean, I think the thing that just like, there's so much capital, there's so many things on the sideline that just needs some clarity. It doesn't even matter what the clarity is. It just needs to like, like Boney Mellon is the world's largest custodian, they're ramping up to launch crypto custody, right? They're kind of sitting here on their hands just waiting for clarity, right? Goldman has built out a massive crypto operation, they're kind of sitting on their

hands, right? They're, you know, like, you know, even if these things broadly get swept as securities, which I agree, I think a lot of them aren't securities, right? But even if that happens, and then, you know, they can be tradable on your Schwab account, on your Fidelity account, on your TD Ameritrade account, right? You can, you know, as an institution, you can buy it directly from JP Morgan or from Goldman or from whoever else, right? The TAM of this market expands drastically very, very quickly. Are we at one of those moments there where you have to be sort of careful what you wish for? You know, I've seen it's interesting, right? You have the original ethos of crypto or, you know, short the bankers, long Bitcoin, all that. And then it's like, yay, BlackRock, right? And there's a bit of cognitive dissonance there. And there's been some

great arguments. I can't remember his name, Josh Lamb or something from Genesis did basically a long thread on how Bitcoin has just effectively become the easiest asset for institutions to short to hedge against everything. Hence why price, it will always be dampened and volatility has been removed. So all of this cheering for institutional adoption, does it actually help the market long term? It certainly will help the number go up if we get more money in, but or are we basically just turning it into another wall street asset that they can short 24 seven months? Institutions is this giant word that we use. Of course. Like it's just this, it's, it's, we always go back to this. It's just too big of a word, right? Like, like, you know, you know, sovereign wealth funds deploying sovereign wealth funds. Yeah. They'll put

money in some hedge funds that are going to short, yeah, they'll put money in some hedge funds that are going to short, but maybe they're also just going to take a direct long position eventually, right? And pensions and endowments and others, right? So yes, they're going to invest in hedge funds that will go short, but they're going to invest in venture funds that are long only too, right? And so, yeah, look, part of the reason we see crypto trading, what feels to be a bit more correlated to macro, right? It depends on your timescale.

And I think Jeff made a good point about that earlier with, you know, with timescales, right? Depends what the timescale you're looking at as to whether or not it's correlated. But obviously, institutions coming in is going to inevitably make this asset more correlated to other ones. Because, you know, if you're a portfolio manager that's trading a billion dollars, and you have a 4% allocation of dollars and you have a 4% allocation of crypto, you have a 96% allocation of everything else. And that's all part of your portfolio. But I think broadly speaking, I mean, institutional capital, what is it? It's

the retirement funds of teachers and it's the retirement funds of firefighters and it's the people of Singapore's money, right? So it's just bubbled up future retirement money from people that is going to be deployed into this asset class. So I think, yes, it's going to cause more volatility. There will be more short selling. But I think in the long run, the more capital, the better. I mean, there are tons of funds in the space that have even announced that they've started to raise from these folks.

So I only think it's a good thing. Well, regardless of whether it's a good thing or a bad thing, it's inevitable, right? I mean, you know, the small minority of people out there who are still living on this, you know, freedom libertarian, you know, view of what digital assets are, like, it's just not realistic, right? I mean, you know, you're always going to have regulation, you're never going to have something that just lives outside of regulation. You're always going to have some government influence. It's just, you know, if you really believe that this is some utopian future where you're just outside of the banking and brokerage system and the government, it's not going to happen. Right. On the flip side, I will say that this still has democratized access. You know, we wrote a white paper, I think, a year and a half ago talking about, you know, everyone was so up in arms about ESG and how Bitcoin was so environmentally non-friendly.

And everything was talking about just Bitcoin and just the environment. We're like, well, what about the S&G in ESG? What about societal and governance? Like, that's what digital assets were built for. This is the most, you know, we have the worst wealth inequality ever, you know, around the world. Well, digital assets solve for a lot of that, right? Instead of waiting for a company to be venture funded and then seven or eight years later, everyone has access to it after it's already gone up 100x. Well, now individuals have the ability not only to invest

in an earlier stage, but also to be a user and a participant in the growth of the ecosystem. That's a huge societal advantage. So even if the Black Rocks of the world get involved and the J.P. Morgan and the Goldmans get involved, it doesn't mean that, you know, Joe retail can't still be an early participant in something, earn some tokens, buy some tokens and benefit as well, right? So, you know, like I said, whether we want it or not is irrelevant, it's going to happen. But this is still a better system in terms of democratization of access and wealth equality. I'm going to make a take a hot take and say it's happened, not that it's going to happen. BlackRock? It doesn't get bigger than BlackRock.

Yeah. Yeah. I mean, keep in mind, though, it's not going... I made the point earlier, these folks want to deploy a lot of capital and there's not enough assets to deploy it, and it's only at the top rate. So there's still going to be that long tail of assets where, you know, to Jeff's point earlier, right? You had all of these dot coms and there was shit that no one thought was going to work that kind of came out of nowhere. And so they're still going to, you know, they're still retail can trade certain things

that other folks cannot trade still, right? But 99.999% of that is garbage. You know, there is going to be the diamond in the rough. So we conclude the conversation with 99.999% of that is garbage. There is going to be the diamond in the rough. So we conclude the conversation with 99.9% of that is garbage because we're at 1030. I don't necessarily agree, but that was a funny last sort of comment from you, Josh. If anybody gets us a little soundbite from it,

they'll go and FUD us on Twitter. I want to thank Joshua Frank from the Tide, Jeff Dorman from ARCA. Guys, that was great. And a very constructive and reasonable debate. I think, listen, a lot of us, we've gotten eaten up, you know? So I think I saw a lot of comments.

People say, you guys sound a little bit jaded. Well, not you, Jeff, amazingly. But maybe Josh and I to some degree. Hey, look, guys, I have a higher percentage of my net worth in crypto than probably anyone listening or most people listening. So I do believe in this industry.

Don't get me wrong. You just have to be realistic about it. Yeah, I think we need to start, you know, we need to, if we want this industry to succeed, we need to start having a pragmatic approach to how we actually think

about these assets. I agree. Jeff, any final thoughts? No, I mean, look, you know, what's the opposite of unscathed? Scathed? We've all been scathed. You know, there's no question that asset price going down has hurt everyone. But that doesn't mean you lose your objectivity, right? A lot of people go from this is the greatest thing in the world to this is never going to work. And they're just living these two worlds of extremes. You know, there is a pragmatic middle, which is

there's been real progress. There's probably too much excess. We've cut a lot of that excess out and now we rebuild with good projects and good companies. So the pragmatic approach is there's always somewhere to find growth and to invest your money. And the joke about, oh, inflation crushing all digital assets and all equities and all real estate, it's like, well, that's true to some extent. But at the same time, you know, the only way to beat inflation long term is to own assets, right? Which means that money again will pour into equities and real estate and digital assets. So, you know, yes, we need inflation to stop going higher at the pace it's been going. But once it flatlines at three or four or five percent or whatever it is, guess what? Holding cash isn't going to do a whole lot for you when you're losing three to 5% of your purchasing power every year. So, you know,

there is going to be a resurrection of investment and that investment is going to flock in the areas with the highest growth and the highest value capture. And that is real estate equities and digital assets. Like it's just, you know, it's going to happen. So, you know, try to separate what has happened over the last, you know last six to nine months with what will happen. And that's kind of the approach. Just focus on March 2020 when Bitcoin bottomed and went up 17 times while the stock market doubled and just leave it there. I think we all at least can agree what asset class we want to be in when things do finally bottom and start going up again. But thank you again, Josh and Jeff, guys.

I tagged them on Twitter and below in the description. You should follow both of them and look forward to having another conversation with both of you in the very near future. Guys, I will be back again at 930 a.m. Eastern Standard Time tomorrow, probably by myself. It won't be as exciting. I'm sorry I don't have these great minds every single day. But thank you guys once again. Thanks, everyone. Let's go.