Unchained - Bits + Bips: Why Grayscale Sees ATHs Before Q3, With ETH Outperforming

Episode Date: January 19, 2026

Thank you to our sponsor, Walrus! Walrus is where the world’s data becomes reliable, valuable, and governable. Geopolitical tensions are rising. Crypto legislation is stalled. And pressure on the Federal Reserve is intensifying. So why are Bitcoin and the broader crypto market holding strong? In this episode of Bits + Bips: The Interview, Steve Ehrlich sits down with Zach Pandl, Director of Research at Grayscale Investments, to unpack what’s been driving markets since 2026 began, from Washington’s regulatory battles to global instability and the Fed’s fight to maintain independence. They break down where U.S. crypto policy stands, why Wall Street isn’t waiting for Congress, and how macro forces like inflation, debt, and geopolitics are shaping crypto’s next move. Hosts: Steven Ehrlich Guests: Zach Pandl, Head of Research at Grayscale Links: Robinhood CEO warns Congress delay is hurting Americans - TheStreet Crypto: Bitcoin and cryptocurrency news, advice, analysis and more Senate Banking Committee postpones vote on crypto market structure legislation amid industry pushback Crypto bill delay 'may ultimately be constructive' for final product, Benchmark says Trump attacks on Jerome Powell testing Fed’s independence Why the Federal Reserve has historically been independent of the White House Learn more about your ad choices. Visit megaphone.fm/adchoices

We think Bitcoin reaches a new all-time high in the first half of 2026. My view would be Ethereum continues to outperform. Hi, everyone. Happy Thursday. Welcome back to another episode of Bits and Bips, the interview. I'm your host, Steve Ehrlich. We're here after a few week hiatus and a lot to discuss. First, I want to introduce my special guest, Zach Pandal,

Director of Research at Grayscale Investments. So welcome, Zach. Hey, Steve, great to be here. Lots to talk about. Happy to get into it. Yeah, absolutely. I mean, from the Fed entry on, I guess, Monday or Sunday night when word leaked of a drum palping investigated to geopolitical tensions all around the world that are making more intelligent, intelligence analyst brain really kind of go exciting. The very first country I ever worked actually was meant as well way back in 2008. So that and then obviously all of the, I guess, negotiations surrounding the market structure bill and whether or not it's going to pass. Is there a way forward on a few key sticking points which we'll get into? And on top of that, Bitcoin, Eath, and the broader market seeming to brush all of this off and remain brilliant as it enters an exciting but potentially dangerous period of time.

or a trading range where in the past it's retreated. But there might be a few signs that things are going to be different this time. So we'll get into all of that. Before we do, just a little bit of housekeeping. Nothing that you hear on this program is investment advice. Please see Unchained.com backslash bits and bips for more information. And before we dive in, I'd also like to just take a brief break so we can hear from some of the sponsors who make the show possible. If you look at most stats today, they depend on quite a complex mesh of different infrastructure, a lot of which is centralized.

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19 plus, Ontario only. If you have questions or concerns about your gambling or the gambling of someone close to you, please go to Connixontera.ca. Just to come and build on worse. Okay. All right. So let's kind of dive right into this. Zach, we're talking a little afternoon Eastern time on Thursday.

And I guess late last night, word leaked that Senator Tim Scott, the Republican chairman of the Senate Banking Committee, has decided to delay potentially indefinitely a markup session for their version or his committee's version of Market Structure Bill. And, I mean, this kind of came after several days of discussions, negotiations, about a few key. issues. Ethics concerns pertaining to President Trump and his family and close advisors as it pertains to their involvement in crypto. There's a lot of questions about defy and how and whether it will be sort of regulated under this legislation. And the really big one is, right relates to stable coins and yield because something that came out of the Genius Act was some very clever ways for for stable coin issuers and companies associated with the stable coin ecosystem to sort of indirectly

provide yield, which at least according to the banking lobby and I guess some of the senators who helped draft the Genius Act and bring it to law last year is against the spear of what was intended. And the banking lobby in particular wants to close that this time around and sort of have a bit of a redo when it comes to the genius. So I know you're not a D.C. lobbyist. I know you're not a policy insider, but it's been impossible to ignore the story. So I just want to briefly start off by getting your reaction to what happened. Yeah. Thanks, Steve. A very intense week for the crypto policy community and all the legislators and staffers working on this topic. Look, taking a step back, you know, we see a very encouraging trend on regulatory clarity for the crypto industry here in the

United States. President Trump came into the office with a mandate from voters to work on these topics, and we've made huge strides, the Genius Act that you mentioned, all the changes from the SEC and other agencies last year, including things that are quite central for asset manager like grayscale, generic listing standards for exchange-traded products, for example. So we've made huge strides. And those are going to continue regardless of what happens on the market structure bill. We're going to see more progress from the SEC, for example, this year,

more ETF a product launches. So to me, the trend is very positive. That being said, this piece of legislation is quite important. There's lots of different types of crypto industry players, and they have different interests in the legislation. Grayscale is an investment's business. We're helping investors get access to crypto assets safely and securely and build them into diversified portfolio. So those are the things that matter most for us for this legislation. And what that means is really the Section 1,

Title I of this piece is the most important for Grayscale. And that's clarifying the commodity and security status of tokens in the market. That's what's most important for investments, business like us. So we're pretty happy with how that piece of legislation works. I agree with all the industry players on some of the other important issues, the protections on D5, the need for stable coin yields. We're focused on really that first section, regulatory clarity on assets that are in the market today, which will allow issuance of these assets to pick up.

And that's great for investors, the clients that we serve. So that's really the kind of the gray scale perspective. We're happy with how Title I of the legislation looks. And we're going to let some of the other industry players battle on some of these other important topics. Yeah, it seems like this is one area. I mean, after Grayscale had been in the news for years and years fighting with the SEC to convert GBT to an ETF, et cetera, I guess.

Maybe it's a little nice that you guys not. necessarily are sitting on the sidelines, but you're not quite the central player in this particular fight. And we'll let people battle those fights today. We're very happy to see regulatory clarity coming for the industry, broadly speaking, and it feels like it's happening at a very rapid pace from our standpoint, from the standpoint of an ETF, crypto ETF issuer. So things are moving in a good direction. These are all important issues, DFI protection, stable coin yield, very important issues, but we're letting other players. take the lead in those negotiations.

Right. I mean, you've gotten clarity on staking, so you're allowing that first marine UTIFs. And I guess it's really more just, I don't know if accounting was the right term, but if you're going to file in your products under the 33 Act or the 40 Act and some of that type of stuff, I know you offer some defy products and theoretically, like depending on treatment of defy and adoption that could have associated impacts on demand for that type of product, but I get it. Absolutely. That said, I mean, you've got decades of experience in finance, in particular in Wall Street.

So I really want to get your sense of like what's going on at banks. Like what is your sense there? Because it's hard. The stable coin yield, I mean, that's a big discussion, although there is a bit of dichotomy between like, for instance, B of A and JPMorgan. I mean, some are more cautious or concerned about stable coin yield, sucking out deposits in liquidity versus others. There's accusations that these big banks are hiding behind community banks to sort of

protect their own turf. And all of this comes within the context of President Trump, I guess, trying to mandate a 10% cap on credit card fees, which could really be devastating for bank credit card issuers, their finances, or really restrict credit in the ecosystem if they can't serve a certain communities profitably. So that's the bigger context. I mean, what do you, what do you see there from the bank's perspective? Well, a lot of moving pieces. You know, on the narrow issue of institutions, traditional banks, investment banks, broker dealers, engaging with crypto.

Look, what we see is everybody is building, and nobody is going to wait until President Trump's signature hits the legislation to begin building in the space. There's lots of competitive dynamics at play. If you wait until the legislation is done to begin kind of planning and investing, you're going to be behind your competitors. So all these big institutions have been engaged with crypto in various different ways, really for the last couple of years, and that process is accelerating as the regulatory rulebook

is getting more clear. So what are we going to see? I think the things that people, the visible things that people are going to start to see this year are first stable coins showing up in lots of different places, stable coins on corporate balance sheets in their official SEC filings. You know, stable coins as collateral on big derivatives exchanges. You know, these are going to be some the big visible things that you see Wall Street banks doing. And then you're going to start to see, I think probably after the market structure bill gets laid down, banks engaging with blockchains directly interacting with their own wall, it's their own directly holding crypto assets on balance sheet and engaging with the blockchains. And then the kind of last piece and the thing

maybe that I'm most excited about following this regulation is issuance. You look at big companies, they have lots of different ways to finance their business or ways to optimize their capital structure. You know, they issue stocks, bonds, hybrid instruments like convertibles and preferred stocks. In the not too distant future, our view is that they will also be issuing tokens, crypto tokens, blockchain-based tokens as a part of their capital structure. And regulatory clarity is going to allow that to continue. So I think an explosion of issuance from large, businesses of tokens as a natural part of the capital structure is going to be one of the biggest

implications of regulatory clarity in this space. So locks going on, but in my view, issuance will be the most long-lasting and probably has the biggest implication for investors, the clients that we service at gray scale. So just to follow up on that, and then we'll move to markets, which is, I know your real area of expertise, who do you think has the most to gain or lose from all of this? Like who's going to benefit the most? And I guess the answer could be a little bit depends on how the final bill. If there is a final bill, how it's constructed. But who's got the most at stake here?

Yeah. When we look at decentralized finance, right, I think that the bigger picture vision is that we're going to compete with all aspects of traditional finance, all aspects of trading, lending, payments, custody. We're going after all of those things. But decentralized finance excels at a couple specific things. today. And these are things like cross-border payments, trading of crypto-native and collateralized lending. So focus on those issues. I would think those are the things that are most at threat

from continued growth in the crypto ecosystem, the decentralized finances, cross-border payments, trading of crypto-native assets, and collateralized lending. The parts of the large banks, large financial institutions that engage in those businesses, we're going to go after first. And eventually many other things, trading of equity, securities, and bonds, uncilateralized lending. We'll get to all those things, but I think those are sort of next generation, Defi. Today, I would focus on those specific pockets. You know, the banks are very well where their margins and those business are the things that are a threat from defy. And so, you know, they are preparing either investing in stable coins or other infrastructure so they can

hold back the industry or at least compete alongside it as as defy continues to grow. Gotcha. Okay. So let's turn to the markets. I mean, it seems like Bitcoin, Ethan, and a bunch of vaults are, I guess, I don't know if ignoring is the right word, but they're certainly taking some of this turmoil in stride. I mean, Bitcoin briefly touched, I think, $97,000 last year at the first time in months. It's up 10% on the year.

It's dragging a bunch of other tokens along with it. I mean, the rally really seemed to start a little bit with, everything that happened with Jerome Powell and, I guess, you, US attorney, Piero over Sunday night, and I guess concerns about an increase in easy money, et cetera. But these assets are jumping. And I'd love to really kind of understand because you go very deep into the data. Why? And the real question, I guess the real two questions then on people's minds are, one, how sustainable is it?

And two, how high could it, could we go? Yeah, lots to dig into. And I think maybe we could separate the kind of fundamentals and the fund flow topics, the technical topics. As you mentioned, Steve, we look at both of those things at gray scale. You have to look at both of those things to understand why any asset moves in the market, definitely Bitcoin and Ether. That's the case. Maybe just starting briefly from the fundamental side of things, look, I think the regulatory clarity piece is an important piece of it. But as you say, as the kind of odds of this legislation are moving back and forth, it's not translating into markets right away. I think that that's partly because people still think this legislation is going to get done. But I think the bigger piece of it is that the number one driver of capital flowing into crypto is demand for alternative stores of value. It's this macro imbalances that are driving capital into foreign currencies, into precious metals, into industrial metals.

These are the same forces that are driving capital into crypto. And to me, that story keeps getting bigger and bigger. And you can look at, you know, things like gold, silver, platinum, palladium, you know, everything that is happening in the precious metals. Clearly, the basement trade still running there. And I think basically the debasement trade has arrived in crypto in the last couple of days. So that's sort of a fundamental perspective. And that's overriding any of sort of like the endogenous things that are happening in crypto right now.

Yeah, I would say maybe if I had to put a kind of rough number on it, I'd say it's sort of 70-30, you know, 70% of the kind of macro trade, dollar debasement trade, and 30% the regulatory trade, again, like just to roughly approximate my own thinking. And then the fund flows are very interesting. There's always a lot of moving pieces. But, you know, I think primarily the driver at the moment is the ETFs or ETPs, exchange-traded products. We use those terms synonymously. in December and in the very beginning part of the year,

it was all about kind of a tax-related trade. You had a billion dollars come out of the Bitcoin ETFs in December and a billion dollars come right back in in the first two trading days of this year. That's a sign that probably there's people realizing tax losses in the 2025 tax year and then buying back those positions at the start of the following year. I don't think it's suggested anything fundamental. And then in the last few days, you've started to see some of those real, longer-term fundamental capital flows come back into

the ETS. And that's really the flow story, why price is up is the ETFs have come to life again. And that's what we want to see. That's what we'd expect to see. The ETS are the natural place for institutions, for intermediated wealth to access crypto. We're starting to see that now. And I think, again, I think it's driven by both the macro story, a demand for alternative stores of and to some degree improved regulatory clarity. And I'm happy to dig into the other types of flows, derivatives, and some of the Oath, some of the big stories from Q4, but I think it's the ETFs that have been the big mover since the start of January.

Great. And we will get into that stuff. But I do want to ask you about just at least flows for your ETF. I know sometimes it's hard to know exactly who's buying your stocks or who's trading them. But I am curious, like your sense, are these big institutions, are this is this retail? Are these flows coming from RIAs that have mandates now to offer these products to their customers? Like, what's your sense of actually who's buying it? Because I have seen a lot of reporting and data suggesting that in this time, it is largely a retail-driven, spot-driven sort of surge in demand, at least for now. Derivatives, volumes, and open interest

remain somewhat flat. And I think even the Bitcoin funding rate I saw was negative. So it seems like it's really a spot movement. And I'm curious, like, how that correlates to what you're seeing, at least when it comes to the GBTC and broader ETF flows, which I'm sure you track. Yeah, absolutely. Crypto derivatives markets, especially that offshore market dominated by perpetual futures, is still pretty quiet. We can talk about that more at length. It really has not been a re-leveraging offshore futures market driving prices recently. it's been real money or fiat currency being converted into Bitcoin through the ETFs coming into the market. And who is the buyer?

You mentioned that there's lots of different types of buyers. There's retail. There's traditional institutions like pension and endowments. But the big piece in the middle of the bell curve for the ETFs is advised wealth. And this is RIAs, as you mentioned, independent wealth advisors, but also increasingly the broader platform. forms are onboarding our products and other crypto ETFs and advisors are building them in to diversified portfolios for their clients. We think that this has a very long way to go. So our data would suggest that conservatively there is less than half a percent of U.S.

advised wealth allocated to the crypto asset class, and I would say it's probably even quite a bit smaller than that, but conservatively less than half a percent. You know, that and that, number probably grows to a few percent. Actually, if I could interject, I apologize if you don't have the number off the top of your head, but what is a half percent of like advised wealth? Like what does it actually mean to make it tangible for? It's like a couple hundred billion dollars, hundred billion dollars, something like that. U.S. advised wealth is probably a $40 trillion or so industry. There's no exact precise number, about 40, 45 trillion in that ballpark. So you have a, you have a lot of money that has moved into the crypto

ETFs, of course, over time, also into digital asset treasuries like a strategy or micro strategy. And we count all of those things together. When you look at the portion that's held by advised wealth, again, all added up, we still think that is a good deal less than half a percent. And so when we look over the coming years, you know, grayscale, we'll focus on all those different investors, institutions, retail, but advised wealth will be a huge piece of it. I think that this will be a very steady source of demand for capital inflow into the ETFs and something that will create a persistent bid for Bitcoin for either for some other altcoins over time. Yeah, I think so too. I mean, I'm going to try to do a little math in my head

and might not be a good idea because I actually made some mistakes helping my fourth grader with her math homework last night. But I think J.P. Morgan came out with a report saying that there was about, what was it, $150 billion of inflows last year into crypto? Does that sound about right to you? A bit less than that. I mean, if you look at the net flows for all crypto ETFs, just the ETFs. Not just ETFs. I mean, I think you're talking about Treasury. With the debts, probably it reaches that number. Yes. Yeah. So, yeah, so I'm just thinking like a couple hundred billion in advisor denominated funds, like it would be much less than, well, I messed up, I think, doing math again. But it's much less than a half a percent.

It seems correct. So I'll stop trying to do that. All right. We have a lot more to get to, but we need to take one more break so we can hear from the sponsors who make the show possible. Before we built Waris, what we heard a lot from developers was the need for speed, and we headed ourselves. So reads and writes are extremely fast on Waris. And this means that apps don't lag even with really large. files. Privacy was another thing that we heard a lot about. And Waris lets developers encrypt data

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The real question now, I mean, it seems like some of the fundamentals are much more encouraging than perhaps other brief rallies. And the real question now comes, or the real question now is what happens next? Bitcoin, like $100,000. We haven't gotten there yet, but that's a very psychologically significant price point. Typically, when Bitcoin has these surges, the long-term holders are selling, although I've seen some data suggesting that those sales have slowed down and profit-taking may not be as robust this time around. But what are you seeing?

Do you see the potential for a breakout back into six figures? what would it take and sort of, are there any big stimuli catalyst out there that could sort of help build the, I guess, grow the narrative, like the bullish momentum because I know traders are starting to get a little more greedy. Yeah. Look, I think the fundamental pillars driving the bull market very much in place. And those are the two things that we've touched on macro demand for alternative stores of value, regulatory clarity. I see a series of catalysts from both of those things over the next few months.

In terms of price predictions, we typically don't do price targets, but we have said, Grayscale has said that we think Bitcoin reaches a new all-time high in the first half of 2026,000. So we hit $126,000. This is just doing me and a few thousand friends. That's right. Between you and me, a few thousand friends, we think something above 126 by June 30, something like that is a reasonable summary of our expectation. But what we're trying to get across, Steve, is we think the bull market is moving ahead. We think that there are these fundamental drivers, and we think that there is plenty of room for capital to enter the crypto ecosystem and drive of valuations, and most of that likely to be through the ETFs. But I think, you know, some other things are re-leveraging of offshore futures.

We may see that as the kind of speculative piece of the market comes back. So that's sort of the high level picture. You know, what are the risks to that? You know, things are looking pretty good right now. What are the risk to that? Like when I look back at the fourth quarter and all the things that that happened, look, with the benefit of hindsight, it looks like basically an OG bitcoiner crash out was the main reason for the underperformance of price in the month of November, which was really the, really the key month in Q4. We can see that on chain. You know, there were these. two big events last year, one in July, one in November, where a lot of old coins moved on a chain.

And I think that essentially this is a sudden kind of profit-taking moment by some of these OG holders. When we think about where Bitcoin is going over the next few months, that's really the question mark. There's a lot of positives from a fundamental side and I think new capital coming to the ecosystem. The risk that we're underwriting, you know, being long Bitcoin over the coming months is, is uncertain. about some of that OG holder behavior? Do we continue to see some profit taking by long-term holders that holds back the price from reaching all-time highs as soon as I think? I think that we are mostly through that. I don't predict more of these big liquidations by OG holders, but we need to acknowledge they were a factor in 2025. They are a little bit hard to predict in terms of

timing. So that's going to be a thing we need to be watching over the coming months. The good news is it's all very transparent on chain. That's a great thing about the Bitcoin blockchain. You can see all this activity. We'll be watching on very closely to see whether we see more of those large profit-taking moments by some of the early Bitcoiners this year. So let's talk about a few other assets then. I mean, let's talk about ETH. I know that when things are going well, ETH can actually be, I guess, deflationary. And, but it has a certain, it has a very different value proposition from, from Bitcoin. What are you seeing there? And maybe we could also talk about Solana too. I mean, like the two big L-1s, how are they behaving differently?

And how does like sort of this debasement trade affect those particular assets or are there other drivers that are really impacting what's happening there? Yeah. Great set of questions. A lot of nuance. You know, this is a pretty sophisticated. crypto audience. So, you know, I think we can talk about some of that nuance on on this call. Look, obviously, Ethereum smart contract platform, in some ways, it benefits more from regulatory clarity than Bitcoin. You know, Bitcoin is building some of these things, layer twos and all that, but they're all quite early a stage. And there's some other regulatory questions like taxes on on de minimis Bitcoin transactions, et cetera, that that'll matter more for Bitcoin. But when we're talking about unleashing defy, stable coins, tokenization, you know, Ethereum will benefit more

from that. So if we get regulatory clarity with the market structure bill with more actions by the SEC this quarter, my view would be Ethereum continues to outperform. So I think Ethereum very well placed here in that regard. I also think that Ethereum may be different from Solana in that it has some of the macro bid behind it. You know, Bitcoin. is in demand as an alternative store of value in monetary asset. Ethereum is not exactly the same as Bitcoin, but I do think it is considered by many investors as a scarce commodity because of relatively low inflation and maybe capture some of the macro bid as well.

So I think Ethereum very well placed for both of those reasons. As your listeners know, Ethereum can't do everything. It has more slower block times, higher cost of transactions. etc. So many of the other smart contract platforms also will benefit, you know, Salana, tons of positive things going for the Solana ecosystem. I think it will continue to be a leader in this space, particularly on things that, you know, require higher turnover, tokenized equity trading. I think something that Salana continues to lead in. I would expect a lot of growth in that area this year. And then some of the other smart contract platforms are going to be coming

on board, maybe just briefly from a gray scale standpoint, we're thinking a lot about the ETFs that will become available this year. We have Ethereum ETFs, obviously, Solana ETFs. I think investors can expect more of the smart contract tokens to be available to mainstream investors through the ETF structure this year, and that potentially also helps them capture a bid. So, you know, to summarize, I guess if I had to put kind of one of the major assets at the top of the list for myself starting off 2026. To me, Ethereum stands out in a lot of ways because it benefits from that regulatory clarity. And probably it also has some of the macro bid. The ETFs are ready. We're staking in the ETFs. So it's really ready for institutional adoption.

And I think many of the other smart contract platforms are going to perform very well also. But they are more about that regulatory clarity and adoption of the technology and less about the macro bid for these assets. Alchemy is one of Walrus's many great partners. They're an advertising platform. Every click and impression is recorded on chain. They're live. They've got great clients.

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not only is it super important, but is actually a legal requirement in many places. And being able to prove what happened. and that what you're saying has happened hasn't been edited or massaged in any way. Well, it's really important for detail today. But to be honest, it's only going to become more and more important as this industry grows and more value is pushed through blockchains. Going back to the market structure discussion that we had, I am curious, since you mentioned, ETH, like, are there certain smart contract platforms are ones that have more at stake?

than others. I mean, I know that ETH dominates Defi, especially in terms of like TVL and high value transactions. Other blockchains are making place to get pieces that D5Pi successfully. I know I track, U-Track on the rise of like tokenized treasuries, money market funds, et cetera, across blockchains. Which ones in a very not official investment advice type of way? Like which ones do you see as having the most at stake and could potentially outperform that are perhaps a little bit more under the radar,

at least to people that don't follow this industry every second of every day like we do. So I'll tell you how grayscale research thinks about this. On the market structure bill, I think you're absolutely right that Ethereum has more at stake than some of the other players. And it ties back to some of the debate points that you mentioned at the outset, stable coin yield. You know, Ethereum is the largest home for stable coins. Decentralized finance and protections for those builders, Ethereum also the biggest DeFi ecosystem.

So it affects all of the smart contract platforms and many other things, frankly, in the crypto asset class. But I do think it's fair to say that Ethereum has more swing on the success of the market structure bill than some of the others. When we look at the category as a whole, look, smart contract platforms are the cornered. stone of crypto investing beyond Bitcoin, the really essential part of the asset class. To our account, there are around 40 or so projects that are, you know, large enough listed on major exchanges, 40, 45 or so that compete really in this space. And our view is that you have to have a differentiated strategy in order to maintain pricing power and capture fees over time. And so there are maybe 40, 45 of these projects.

there's maybe a five or half a dozen or so that'll compete in the long way. And they have to have distinct strategies. In our view, Ethereum, great example of that. It is going for high quality block space, more decentralization, more resilience, and not competing on fees and speed in the same way as others. Other chains competing to be fast and cheap, you know, Salana, Sway, good examples of that. And there's other ways to compete in this market, whether through distribution, customization, you know, you know the stories for some of these other chains.

So RV would be half a dozen or so smart contract platforms that capture the lion's share of the fees in the space. And I think some of them will be leaders today, like Ethereum and Solana. And some of them will be emerging chains that are, you know, are just getting going. But they need to have a distinct competitive strategy. There's a lot of chains and not all of them are going to be capturing huge amount of values over time. That's it.

Okay. All right. So we're going to start wrapping up soon, but I have a few more questions. For one, we've been talking around it a little bit, but I want to give you a chance to directly address what's been going on at the Fed. I mean, I know Chairman Powell's video was, I guess, at least on late-night shows, was sort of seen as akin to a hostage video. But the content of what he said was was pretty direct and very incisive. I mean, he sort of, for most of Trump's I guess second term has been dancing around, not directly addressing, I guess, some of the insults and other things that have been directed his way. But he very clearly said that this is all about political pressure.

This has nothing, at least in his opinion, this has nothing to do with concern about, I guess, cost overruns for rehabilitating a refurbishing a couple of buildings. And, but interestingly, it seems like he has, D.C. on a side, especially some Republicans. I know Tom Tillis

pointed out that he will not vote for any successor to Chair Powell when his, I think his term expires in May until this issue is adjudicated or resolved in some way. So is it possible

Trump went too far? What are the broader, like, reverberations for the U.S. dollar, U.S. dollar primacy, and how do you think that impacts the price movements that we've been seeing and just everything we've been discussing about so far on this episode. Yeah, great, great question. Look, we are seeing the macro case from crypto play out in real time through these events and through many others. You know, when I look at the events over

the last weekend, you know, it becomes it's all about Federal Reserve independence and that's a term that people are hearing increasingly in the last week, of course. You know, why is that so important? what does it, what does it mean? When we say Federal Reserve independence, why do you tell everyone who Arthur Burns was in case they didn't know. Yes. Right. Right. Well, so, so what we, what we mean by central bank independence in a substantive way is independence from the nation's debt problem and from the political or election cycles. That's what we mean independence from. We say independence from the White House, et cetera, but really what we mean is independence from our debt problem in our election and our elections. And if the Fed becomes dependent on those things,

if monetary policy is dependent on the fiscal situation and on an election, likely it will lead to a higher average inflation rate over time. That's the nuts and balls. Less independence means higher average inflation. And why? Higher average inflation. Well, on the debt, it's because the interest rate is also the coupon rate that we pay on the bonds. We have a huge debt problem. we're making more and more bonds all the time and we have to pay interest on them. And the Fed, its interest rate decisions directly affect the cost of that borrowing for the Treasury. So the Treasury has an incentive for cheap borrowing. It wants the Fed to keep interest rates low, to keep the nation's borrowing costs low.

Same thing with election cycles. President Trump wants to see the Republicans do well in the midterm elections. He'd love to see a hot economy going into that period. So he also maybe has an incentive for at least temporarily low interest. rates and fast growth. I don't know if low is even strong enough term. I think he would almost refer close to zero if he could get it. I think he's been very clear on his desire for low raise.

So when you look at, you look exactly, one percent or so I think is the number that he's been advocating. So when you see these, what I would encourage people to think about is independence, because independence from the fiscal policy and from elections. And if you create a dependence on those two things, you get more inflation. So what does this have to do with crypto, with investing? When there's a risk, the debt problem, the underlying debt problem is the root of all of our issues and all the demand for precious metals, the macro demand for the crypto asset class.

These are all about debt imbalances in the United States and to some degree in other parts around the world. And we are watching the consequences of those debt imbalances on our institutions, on our macro institutions in the U.S. appear in real time. is exactly that thesis of playing out. And what it means for me is higher inflation over time, a weaker dollar, dollar debasement over time, and persistent demand for alternative stores of value.

And that's exactly what you're seeing in markets. And so I don't want to cheerlead these. It's important, of course, as Bitcoin is for our business and as enthusiastic as I am about the asset. I don't want to cheerlead these types of things or root for them for having. I'm just, but as a markets analyst, I do think there are the consequences. I do think the consequences of these things are high inflation, dollar debasement,

demand for alternative stores of value. And that's where the bid is coming from in our assets. Many other investors watching these same events and moving their capital as a result. Yeah. And it's a really tricky conversation to have, too. I mean, playing with interest rates can be difficult. I mean, I know we had an inflation reading last month. And there's a lot of other factors at play that will,

sort of drive inflation. I think even more, I don't know that's a return, but in addition to whatever happens at the Fed. I mean, AI, we've talked about this on previous episodes of this show. I mean, the impact of that on productivity and potentially driving down certain costs and lowering inflation there. And then everything that's happening with oil from us like seizing or obtaining, I think, what is it, like 30 to 50 billion barrels of oil from Venezuela that I think we're supposed to get. And I think Trump pointed out that he wants to bring down the price of a barrel to $50, which I think would actually be economically problematic for certain major producers. Geopolitical strife in Iran, we didn't even get to Venezuela and Iran yet. But depending on

what happens there, I mean, the Iranian regime has famously choked its own oil economy and not to mention the sanctions that it's under for its bad behavior in the region. All of that could also lower inflation. So, I mean, theoretically, like, if, Trump is playing 3D trust here, all this goes well. Like, there could be a case that inflation could still stay steady, even if he does lower rates, which I guess would be really great for Bitcoin. If oil continues to go down, AI keeps prices down and lower inflation, I don't know. Maybe that's the bet he's making.

Maybe not, but I'm curious, like, now we have a chance to talk about some of these sort of like geopolitical hotspots. Like, how do you see that impacting the inflation discussion and correspondingly on the price of, of safety haven assets like Bitcoin. Yeah, absolutely. A lot of moving parts. And I just try to tie them back to the most basic things. So when I see these events like Venezuela, you know, what does it mean from the standpoint of the dollar from broad U.S. macro markets?

I would encourage people to think about the bonds. You know, we have a debt problem, a deficit problem, which means we issue lots of bonds. And so the question, when I see these events, it says, I think, is this going to me bigger? deficits and more bond issuance, and what is it going to mean for the willingness of foreign investors to buy those bonds? Those are the questions that matter for thinking about the market implications in the longer run of things like these events in Venezuela. And of course, if there's a

wide range of possible outcomes and nobody really knows how it's going to go, and it could be that it's a very benign outcome where it doesn't have very large implications for our finances or for the appetite for U.S. Treasuries. But there are tail risks in both of those directions, right? There's a tail risk that this becomes nation-building, which is expensive, as you know, Steve. So that creates potentially higher deficits, more debt, more bond issuance over time. So that's one potential consequence. And the other potential consequence is more regionalization. You know, the dollar is a global currency. People have treasury bonds and therefore dollars all around the world. But if we narrow the scope of U.S. geopolitical interests, say, to the Americas, and we give

China more scope in Asia and we give Russia more scope in Eurasia, you know, potentially it means less demand for treasuries, less demand for dollars in those places. So these are longer run tail risks from these geopolitical events, but I think that those are the material macroeconomic consequences. Is there more deficit debt and therefore more bond issuance? And is there destruction of demand for our bonds because of geopolitical change. I think the answer is, yes, in general, but there are small amounts for each of these events. All the things happening around the world move the NATO a little bit on these things, event as well, just the latest example of uncontrolled U.S. deficit and debt growth and questions about how long lasting the bid for

treasuries is going to be from official institutions around the world. That's how I try to evaluate these events from a kind of macro markets standpoint. And I guess in that case, let's go stablecoins if you need some additional demand. That is potentially another kind of crypto-specific consequence. You know, we know it doesn't seem like Venezuela has a large stockpile of Bitcoin, as was briefly rumored in the last couple of weeks. But we do know that tether on stable coin use is very active in that economy. And so that's another thing to keep an eye on is does this stimulate more use of stable coins?

in Venezuela, in the region, that could be also a longer-lasting consequence for the crypto industry from these recent events. Yeah. And for anyone that's really looking for a nice cheat sheet on Venezuela that doesn't want to bother with reading the New York Times or Wall Street Journal, season two of Jack Ryan, a tremendous series on Amazon Prime was literally all about Venezuela and its oil wealth and the impact on U.S. interests. So it's a sometimes the truth is a stranger than fiction, I guess, is a good way to put it. All right. So we're about to wrap up. But, Zach, I just want to kind of give you a chance to share anything else in your mind, any sort of high impact low probability events that investors might want to keep an eye out for. Is there anything in particular you're going to be watching over the next couple of weeks? I know the Senate Ag Committee is going to at least is planning to have its own markup session at the end of January. We'll see if that happens. But like, what are you going to be watching over the next couple weeks?

The negotiations around market structure are the central issue over the short term. And look, I would say what I would want to say, Steve, is I don't get discouraged by blood in the street. You know, bipartisan legislation in a very partisan polarized nation is very difficult to pull off. And so unhappy people and some, you know, tough times ahead of. of this legislation is part of the process. So I'm not necessarily lowering my probability of eventual passage from recent events. These are tough negotiations happening in a real bipartisan way. And that's amazing. That's amazing for the crypto industry that we have a chance of real bipartisan legislation in a very polarized time in Washington. So I'll be watching this very closely.

I think the ball is moving forward. I think it's very important for crypto. And maybe the last thing I'll say, you know, for crypto investing, which is what Grayscale focuses on first and foremost, the main implication is a reduction of downside risk. You know, once you provide a clear regulated infrastructure around crypto, it means that investors have protection, that issuers know how to behave. And you reduce downside risk to the asset class as a lot.

a whole. To me, that's the most long-lasting implication of what we communicate to our clients when they're thinking about putting to capital work in this space. Yeah, I think that's a great way to put it. And I mean, for me, I mean, I remember back the days of like drafts like the Token taxonomy Act and real questions about what is a security, what's not a security, as I think you alluded to it in the very beginning of our conversation. And the fact that those aren't really questions is actually a major sign of progress. But again, it's really important to codify that in law because if there is a new administration and new SEC chair, those issues could come back again. But right now, everyone is sort of copacetic when it comes to that very important debate when it comes to crypto.

So let's hope that progress continues. All right, well, Zach, thanks for joining us, though. We'll definitely have to have you back again soon and have a good day.