📺 SotN #39: Is Wall Street Going Bankless? | David Grider of Fundstrat

wall street is wall street going bankless what do they know about crypto ethereum d5 bitcoin we brought an expert on to tell us david grinder who is uh gritter excuse me who is from fun strat to tell us all of the details around this uh if this is your first state of the nation we do these every tuesday we live stream them on youtube and then you can catch it on the podcast um david i'm really excited about this topic how you doing today man

sorry i lost my audio dude this is such an important conversation because uh at the end of the day all legitimate assets end up on wall street and this is the progress that we are seeing bitcoin run through this is the progress that we are seeing ethereum run through and uh at the end of the day like if we want this to be the world the worldwide asset class that we that we think it deserves to be it is the logical conclusion is that it ends up on wall street because that's the the center of capital of the whole entire world um and so this is

this is a fun story to to follow and i'm excited to ask david about how this is going to work out yeah they've come a lot farther than they were over the last 10 years or so but it still feels like they are in the early innings of understanding this and david is definitely key in in helping them educate them before we get to that david we've got to talk about what's new right before we started this episode something huge just dropped in ethereum in d5 writ large that is the uniswap v3 launch this has

been much anticipated by all of us so what are we doing david we're we're gonna do a walk through of uniswap v3 with the details that we have the blog post is pretty extensive and there's a lot of uh interpretation and guesswork that i think is going to be left for the readers of that of that blog post so we're going to go through that with the bankless community to figure out what actually is uniswap v3 so that is going to go live at 1pm pacific 4pm eastern time uh so join us back on the youtube as we learn what the

hell unit swap v3 is guys i think that's going to be an alpha leak and of course we will dm hayden adams you never know maybe we'll send the zoom link he might show up you never know to explain some of this uh but if not we will proceed without him because this is a definitely a major launch event for the d5 ecosystem and we need to figure out what it means for us also david we dropped an epic episode on monday on ether the asset and ethereum the economy with

justin drake that was a fantastic episode ultrasound money it is ultrasound money weak as well tell us about that episode and why it's ultrasound money week yeah so this is i think going to be over the long term uh can ultimately connected to wall street and the reason why ultrasound money uh meme is so powerful is because it it's the ultrasound money meme stuck before the podcast was even released which i think is awesome that's how you know a meme is going to work and what memes are are ways for interpretation and and

learning about something in a very small bite size package and so you know bitcoin has really been spearheading this like sound money narrative in the times of money printer go burr but justin drake came onto the podcast and talked about like well what happens instead of just replicating like what he called stone age economics which is like replicating gold 2.0 what happens if we do sci-fi economics what happens if we maximize and optimize both the cryptography and the economics side of cryptoeconomics and what the what that product is is ultrasound money in

ether the asset at least that is what that's what the long-term vision is and so i'm excited for that podcast to go out and start with the bankless podcast and as we have seen with other previous content i expect that to eventually make its ways to the ears of of wall street right and see like well you know because there's always this this cognitive dissonance of people professional investors investing in bitcoin because like is that really the what the cryptocurrency world has to offer is that really the best thing that is going to come out of crypto as bitcoin uh and that podcast suggests

that perhaps not perhaps there's something more that the world of crypto economics has to offer perhaps that thing is ultra sound money absolutely i don't think the world has heard the um the case for why ether is sound money they've heard the case for why ethereum they've maybe heard tidbits of the case for for why defy but they have not heard the case for why ethy asset they think of it as something else so hopefully you know we at bankless operate at kind of that narrative layer so we get it direct from

the researchers we sort of parse this into an understanding of the economics and of the asset itself and then ultimately the hope is that kind of filters up to to the higher levels and and makes it way makes its way to a global understanding of what these systems are and what this asset is david before we get into our episode with with david on wall street let's talk about the state of the nation i'm going to ask you the question i always do which is what is the state of the nation today the state of the nation

is maturing we are maturing especially on the day where v a uniswap v3 comes out which i think is going to be the last perhaps version of unit swap so uniswap is coming out in this max mature form uh you know ether the asset is both getting eip1559 and proof of stake expedited at a faster rate and meanwhile how we understand and explains the explaining these things is also getting better and improving so overall we are maturing as an ecosystem and i think this is going

to be the main through line that we have are about to have with our conversation with david from funstrat is that again wall street only pays attention to mature assets and wall street is paying attention therefore we are maturing as an industry and as a as an asset class absolutely well said all right we are going to get to our episode on wall street and crypto with david grider he is a digital asset strategy at fundstrap but before we do we want to thank the sponsors who made this episode possible

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boutique so they advise high net worth individuals wealth advisors people in traditional finance uh he does a great job educating what we might call what we crypto natives might call finance natives you've probably seen tom lee from funstrat he's a managing partner on cnbc this is really our bridge to wall street and david it's it's great to have you on bank list how are you doing today i'm great thanks a lot for having me well before we begin we should just echo of course like all bankless shows none of this is financial advice do your own

research of course but we are here to talk about crypto we're here to talk about d5 we're here to talk about ethereum and wall street particularly what wall street understands about it and we're thinking about this conversation david in two parts the first part is really what does wall street make of crypto writ large the asset class and then secondly i think we want to zone in on what wall street actually thinks of ether the asset and you've written some great reports on both of those subjects so i know you'll be able

to uh to cover it extensively but let's start with with that basic question at the 20 000 foot view what does wall street make of crypto like what do they think of crypto right now it felt like in 2016 you know crypto was this this weird sort of scam you know crypto anarchist a very small niche community but that's all changed this cycle i i get the impression where are we today yeah i think you know really starting um you know towards the end of last year and into this year i think it's come on

the majority of wall street's radar as okay this thing is real we need to figure it out and um you know that trillion dollar um asset class kind of revisiting um that moment was really a tipping point for for crypto because it became so large that you know if you compare it to i mean other sub-asset classes like you know different bond segments and different uh you know areas of the the credit or emerging markets right like it's it's a very large segment and it's

it's in terms of investment assets it's kind of flown under wall street trader and they couldn't ignore it anymore uh before that i would say you know um largely ignored which is why i think you know the question is you know what does wall street think about crypto is is it's very dependent on um different pockets right there's people who have been who have been following it who have been early you know i talked to some pms who who are you know traditional um portfolio managers very wealthy

fund managers right they have their family money they've been following crypto investing in it in their money money for some time but and they they're up on it but it's everything across the range of the spectrum to you know other funds who you know they're just mutual funds they don't they don't get it they haven't got it but now it's it's time and they're trying to figure it out and i think it's what do they think of crypto some of them they don't know yet and it's uh you know this this thing this this thing is bitcoin okay this thing is kind of real we got to get get a handle on it what are the rest of these things and how is that how's that going to fit into

our portfolio david i want to ask about career risk with crypto uh because this has been uh something at least from the inside of the crypto world is is uh something that we've all all been paying attention to because if there's less and less career risk for investing in crypto that means this this is just more legitimate this is uh capital will flow easier and i think back in back in you know 2017 2018 2019 perhaps up until 2020 perhaps that that career risk element was still very very strong

um maybe you could kind of give us the timeline over the last three years as the conversation of career risk and investing in crypto has has matured and developed yeah i mean i think the thing to remember is wall street i heard this once early in my career going to wall street and being an investor is like one of the best jobs you can get you know you paid a lot of money um you know you you don't have to do too much but perform outperform the market by a few percent and um all you have to do is really just um don't blow it up and don't don't don't don't take too much

risk and make right so um you know if we think back to right the 2017 wave and everyone's like the hurt is coming the herd is coming the institutions and they kind of never came at that time and i think one of the reasons was um you know the money that was coming in at the time was you know it was a trickle-down effect from wall street but i think it's the private money from wall street right it wasn't the um actual managed assets and managed fund assets from wall street and it's like it was the personal money of people because you don't have career risk if you're you're

putting your money in it and you see the upside and uh you know investing in the crypto economy but if you try to put your client's money in plus there's fun mandates and things that are constrained from it and it's new all the custody things um that stuff was just unheard of and impossible back then uh but you know we think we you know we've slowly seen of course um some of the endowments come in over the years right from 2018 and 19 you know i think on the liquid public market side um if i think about careerists for for some hedge fund managers right and setting

aside the kind of crypto fund crypto native group um the traditional sense of folks you know you know you know you could see those people play the futures and play the options and you know speculate maybe on the the price you know when the cme came out but when you when you saw paul tudor and and you saw some of these you know stan drucker miller um in 2020 you know kind of on the hedge fund side uh be willing to actually you know place kind of uh macro bets on uh the longevity of or at least the on

the trade of owning bitcoin for for that time and that that period um i think that opened up for for a lot of fun managers who really have been following those guys for years right this this is a time we can kind of start to look at this thing or at least it's not going to be such a careerist moment um and i think now that the banks have kind of gotten on board too right you know i think that that's that's starting to um change in a number of different ways across not just the hedge fund spectrum right because there's a lot of different places to invest capital right there's

also the rias and the wealth managers all right so you know now you see also that group with like morgan stanley getting a platform getting a place to to put capital to work right in the crypto ecosystem through what was just announced there um that's that's something now that's kind of reducing the career risk to investing in crypto and making it more accessible so i think the uh the macro narrative here that you guys are painting to to wall street really uh comes across in the report that you just wrote in the beginning of this year and i'm going to

show an image from that report maybe we could walk through some of it because this to me feels like the the lens almost like the narrative lens that um you guys are painting for for the rest of wall street and as i said i i see fun stratus really a bridge between digital assets and crypto and this new economy that's emerging and wall street like we do a good job i like to think bankless does a good job trying to explain this to crypto natives but what you guys do david is a great job explaining this entire asset class

and movement to traditional wall street folks so we want to go through maybe the lens through which you explain it and i love this image on the the report that you put out in you know 2021 and it's this image of like a family i don't i don't know but this looks to me like it's circa 1993 1994. they have like a a windows pc of some sort and it's a family like standing around a computer saying surf's up see you on the net right and this is like you know the beginning of cyberspace the

beginning of the internet before we all knew it uh you know before we all used it every day and it was sort of this this niche thing let's talk about that comparison first because the report is titled uh 2021 outlook what's the outlook for crypto it's going mainstream is wall street picking up on this comparison to the early internet the 1993 1994 internet and and seeing crypto yeah no i think i think it absolutely is i mean you know our focus is um like you

said like there's a lot of folks who are very deep into crypto and we try to be very deep ourselves but what we also want to do is kind of be the bridge right where we can help you know our traditional investors think about how crypto's merging with the real world um and when it was so small and when it was just emerging and the use cases were you know you know more limited than they are today it hadn't really kind of merged with the with the global and traditional economy and and we're seeing that really happen now right as similar to any of the you know emerging of any technology right just like when the internet came where it's going to

disrupt just like the internet disrupted many traditional business models right so our focus really with a lot of our research is um helping investors also think about right you own you know these uh these types of companies in your portfolio right here's what crypto's coming up and here's what crypto's doing across all these sectors just like the internet came up and disrupted some immediate disrupted uh broadcasting disrupted you know the way we all communicate online create social media right and here's here's how that's

that world is merging with our current world and it touches every part of of almost the traditional economy so you know when i think about um when we're trying to convey the idea to people of uh you know crypto this novel foreign thing you know we really have to kind of help them come back to the period of when a new technology emerged emerged like the internet and you know how foreign it was then to you know get on dial up to get on these you know these websites you don't know who you're talking to in the chat rooms and and but what did it emerge to and what what the technology really brought us

right and that's that's the same thing we want people to recognize is really happening here how does that metaphor land does that does that make sense for for people or do they still kind of need some convincing after the internet metaphor no you know i think i think the internet metaphor really does work for people because they you know they have enough experience to be able to think back to you know the dot-com days right and to kind of the early kind of getting online days i mean even i can remember um you know i'm not i'm a millennial

kind of mid millennial and i even i can remember um you know really kind of getting online the first time and some of the companies and stuff that were coming out doing interesting things so i think i think people people get that now and i think that um it's still like it's like the internet right then it's early but no one that there's so much new stuff happening so innovation like you get it's going to be big and you know it's going to change everything but you don't exactly know how it works right and from from you know even experts in the space across

all the things that are happening because there's so much innovation um but but you know it's important right and um you know and then i think there are some people who who maybe have gotten even bad narratives from the crypto community that have just been fed to them for for a while right and that i think that is possibly one of the reasons too that um it's taken so long has there just been some bad narratives what were some of the bad narratives dude well i think um you know i think a lot of the illegal

stuff right that's been a bad that was just a bad narrative and it's still even you still hear janet yellen saying it um you know and i talk about like money laundering and stuff like this yeah and then i think some of the other stuff around um you know whether it be like um you know i think i think wall street generally doesn't want to displace the dollar um i think that that from their vantage point is that you know it's very against their entrenched interests

well said so wall street did not like the the whole crypto anarchist like this is dark net money like uh screwed the central bank screw the government sort of thing yeah i don't i don't think that that i don't think that that pulled weight for a while right and then you know i think it's catching more now that there has just been such you know with kovitz such a massive um change in the monetary regime right um so so i think that was kind of a catalyst that that that kind of brought

the digital gold that narrative stronger right but i think there's still people who still think you know even the currency narrative of crypto is all currencies we're right they're all just going to be currencies and they're not we all know that they're not right we all know that defy is not just it's not currencies we know ethereum is really a cloud network we know a lot of these things can look like you know digital companies and other many digital assets but and i think the confusion around you know thinking there's a thousand currencies of everything um that

happened for a while too right so and then and then i mean i still talked to you know i i was i was talking the other day to someone inside one of the very very very large macro funds and um you know they're they're they're kind of getting in on bitcoin right but but even still they're like i don't get why anything else they haven't even done they hadn't done the work on ethereum um so you know i think you know but but then it depends right some folks are even down they understand more but that's

that's the answer your question so all right cool well let's lay out the case that you guys make because i think you make it very well in your report and and the the first goes back to something that uh you said in in the intro when i ask you the questions like what does wall street make of crypto uh it feels like part of your answer was they know it's not dead and they know it somehow bounced back from you know 2017 2018 to over a trillion so they can't ignore it now i think the first point that you guys make really well

in your report is that bitcoin has been the best performing asset 9 out of 11 of the past years right like so when you look at all of the different asset classes here's a slide that we're showing gold various commodities oil stocks s p bonds treasuries everything up at the top here you see bitcoin and it has not just outperformed but like massively outperformed every single asset class

um almost every year it had two bad years which was like a negative 56 a year and a negative 74 but its good years were real good positive 5 000 growth you know 126 growth over a thousand growth in in 2017. so can you talk about that when when when wall street hears that and sees the data of like hey you can't they they don't they don't like ignoring gains right um so when you make the case and

you say hey the last 11 years if you want to see what the best performing asset class was it's a cryptocurrency and it's called bitcoin what do they say and how does that resonate uh how does that land with them well i mean i think back to you know even one of the the prior things we're just talking about right um you know obviously the everyone wants to make money but then i think on the other side even today i still see like you know a few months ago i saw i think it was you know one very large bulge bracket

bank who came out and said they were just showing the returns of bitcoin and they're saying is it you know the biggest bubble in history right and people see you know the returns and for some reason they think you know high returns like this must mean it's a bubble it's going to crash because they're not used to that type of returns unless it's maybe tesla or something right we know that the the what that created on wall street in terms of the chaos but um and and without in traditional markets but but i think what's happening here is it's not fitting in their existing paradigm box um or at least it wasn't for some time

and um because of the disruptive innovation so you know i think now that people have seen the returns for so many years and we're just at this size of scale if it's in you know if it's of the maturity of the asset class um i think people now understand that it's an investable segment for their portfolio do you think that um do you think that the people expect bitcoin to not have those kind of same levels of returns because it is maturing as an asset or do you think that people

are hoping that at this point in time like bitcoin has been the best performing asset classes in the last nine out of 11 years and therefore they're hoping for you know strong continuation over the next five years where do you think people's heads are with like the the next five years of bitcoin performance do you think it's gonna are are people expecting this to be equally as crazy or do you think people are getting in now because they think that it's finally going to start to behave like something that they are more comfortable with

well it's definitely becoming more integrated with the global traditional economy and traditional asset classes i mean we can see you know that you know when when certain assets you know perform a different way there's a lot of correlations now that we can see that the crypto's gotten so much bigger but i think you know you're seeing a lot of people getting in today because they do still expect a lot of upside from this asset class and you can have strong returns um in crypto if if the tech continues to disrupt again you know we think crypto is like the next wave of the internet um just like internet stocks you know have risen to

create the fangs and and and all the the large um text you know winners that have made a lot of people a lot of money on wall street for a long time uh we think there's still a lot of upside in crypto um you know i don't know that the yearly returns you know we can see that you know cycle over cycle you know bitcoin returns and it's just kind of a law of large numbers thing right you know they're they're slowing down but i think i think people are really getting in today because they do see um you know more upside and you know they're it's interactive to

you know put in their portfolios at this point right it also seems like i mean uh the case that this is like the third market cycle this is the third time really this has happened right so you can kind of get them used to the rhythm of these three four year cycles these boom bust rhythms aren't just one time events this is part of the the cyclical fractal nature of crypto and i love this chart here uh where you just show like uh it just says you know 2017 when we see crypto spiking up towards 1

trillion didn't quite hit that is it a fad nope because we just hit 1 trillion again and we are this is in january of uh 2021 that you guys published this report we are over a trillion now uh decently over a trillion so it just feels like it's the next uh reverberation of that cycle again but i i want to talk about this comparison you make because this is a really interesting lens through which maybe uh wall street can see crypto which is not just as a commodity asset but as an economy and

in in this slide you compared the the top largest nation-state economies on earth you've got the u.s you've got china you've got japan uh you know one two and three and then you compare that with crypto as an asset class and crypto actually places as the 16th largest global public economy can you talk about that framing does that resonate with wall street yeah so that's uh that's a comparison of the stock market capitalization versus

crypto actually nowadays we're probably coming up on canada which is kind of interesting to think about um but i do think about crypto as really um the next wave of the internet in the sense that it gives the internet its own it makes the internet its own emerging market economy right you know you hear koda's law with ethereum and what that enables and it kind of gives the cell sovereignty to the internet and gives you global internet communities right so in that sense you've kind of created countries in the cloud which is

a narrative that i think is is kind of developing and i think what you know is happening is back to the to the boom bus cycles right and you know it's just a small economy a small digital economy very reflexive to capital flows before people saw that as um you know just pure speculation but but what i think it is it's just like you know as any small economy sure is right it grows and i think you know crypto economy i think it has a potential to be as big as the internet economy um and potentially larger because the innovation it could unleash over over the long term so i think that

now that we're at that size you know again it's it's it's like you can't you can't ignore it from an investability standpoint this is another slide that i think is hard to ignore and some data points that are hard to ignore as you guys are painting the picture of this whole crypto thing being as large and on a similar growth trajectory as the early internet so what we see here is the amount of of crypto users over time starting from about 2015 to 2020 and there's another chart on the amount of internet users over time and that chart

spans across the top from 1992 to 1997. and what you guys are reporting out here is there are uh close to it says passing over a hundred million worldwide users of crypto these are all people who are not necessarily using d5 in their everyday lives but i would assume at least have a crypto asset and that would count as as usage of crypto they're using crypto maybe to to store their value and the interesting thing here is it looks like it's a similar trajectory as the internet in terms of

annualized growth but maybe even faster uh by by this comparison so you're sort of charting that out and i i love that people always ask well you know if this is the early internet what year is it and this data point says it's the year 1997 basically of the early internet so like right before the dot-com boom and before this internet thing went mainstream we're still in that sort of early speculative hype uh part of the cycle can you comment on this a little bit yeah i mean i think it really goes back to the cover page that we were talking