📺 SotN #30: DeFi Season | Anthony Sassano

hey bankless nation welcome to another state of the nation episode david how are you doing today absolutely fantastic things are heating up in the crypto ecosystem in the bankless universe so it's once again it is a fun time to be in this industry yeah okay so we are going to talk about tokens today specifically 10 of the top tokens in the d5 pulse index and we brought on somebody who's actually uh in jail right now uh twitter jail i should

clarify twitter jail anthony cesano is um you mocked himself from from twitter sort of a vow of silence until eth goes over 1420 uh but we brought on anthony to talk all about these tokens um can you tell us what discussion we're about to have david yeah so uh this is a little bit this this was my idea to bring anthony on and it was a little bit of a of a claim about how we are about to enter uh alt season or defy season d5 summer 2.0 i think that's ahead of us

and so we wanted to get anthony on the podcast to go through the tokens in the dpi index anthony is an advisor at set protocol which is the company that is part of the index co-op which produces indices the first of which is the dpi indice in partnership with d5 pulse and there are 10 tokens in the dpi and so we want to go through every single one for all the new listeners out there who are looking for ways to understand tokens right tokens are fun

they go up really high they go down really low but it's also they're also really hard to understand and so i think having a conversation with the three of us to understand how we all think of these things how we see value being captured by tokens in different ways and how we analyze these these things i think will be really useful for people coming into this space who you know are excited about investments and but don't know what to do i think this is going to be a conversation to uh tap into our brains and see how we uh model out what we see

it as valuable versus not valuable in this space absolutely so we talk about ave we talk about uni the uni token we talk about balancer a bunch of the top d5 tokens that you know and and really talk about the kind of the value proposition and accrual mechanisms behind them we brought anthony on because what else is he doing right he's off twitter lots of time on his hands david what else is new in the bankless ecosystem we have a fantastic podcast that just came out yesterday on monday with lynn alden can you give a sneak

peek on that yeah lynn alden is the rising star of macro of just macro commentary especially as it relates to bitcoin she's a big bitcoin enthusiast but she's first and foremost a macro expert i got so much value out of that podcast uh what my biggest takeaway was talking about the primacy of the us dollar and how that relates to u.s manufacturing it turns out as there is global demand for dollars uh in order to serve that demand we need to export

dollars as a country and so we've exported our dollars and what what does that mean when you export dollars you import goods but that means we are emphasizing the manufacturing of other countries instead of our own country which i think is part of that social unrest that we've seen in the last few years that social unrest is a result of economic forces and the lack of jobs that we have in america and i think that is kind of the story of 2020 is that the social unrest could be connected to the primacy of the us dollar i thought that

was absolutely crazy connection absolutely fantastic podcast and we just recorded another podcast that is going to come out next week that you've got to check out our first podcast with drake drake yes well should we clarify which drake we're talking about yeah we are talking about justin drake a lead researcher at the ethereum foundation uh justin drake is all about cryptography he's a cryptographer uh and while we were doing our bowl case for ethereum bowl case for

eth he wanted to get in on that because he had a really bull really strong bowl case for cryptography uh so that's what that conversation was all about ryan what were your some of your favorite takeaways oh dude it was just um i i think it was amazing to view sort of how early we are in the evolution of ethereum and and bitcoin and how far we have yet to go it's really like we have just we're in the stone age of this new era of of compute and i think justin really

made that clear a lot of the the challenges that we see today around you know centralization of like medic mask or or private key management cryptography really is the answer to some of these challenges and problems so it's a super unique episode um i don't think i've heard any pod crypto podcast episode uh with this kind of content so make sure you tune into that and catch that and david because it's state of the nation let's begin this by asking you the question i always ask what is the state of the nation today yeah i teased

it a little bit at the beginning of this intro the state of the nation is heating up uh as i put out a funny tweet that i thought it was funny that uh on a three-minute long popcorn bag microwave popcorn bag timer it feels like we're at second 45. we saw mkr pop off go from 500 to 1500 we just saw a dot do something crazy uh things are popping off all right wait so you're saying some of those kernels in the bag like a few of them have popped but if you still got the rest of the bag just only the very early stages of the

popping process yes that's very very very early stages in the popping process and when that comes to a head i think that's what quote unquote all season is or you know defy summer 2.0 uh that you know this time it's defy winter because it's literally winter it's january but d5 summer 2.0 i think that's ahead of us and again that's why we brought anthony cesano on to talk about some of the best tokens in the ecosystem to use for mental models about how to understand and evaluate tokens and you have to be careful just like a

popcorn bag when you take that popcorn bag out of the microwave you don't burn your fingers on the water vapor maybe i'm taking the analogy too far david no that's perfect there's plenty of ways to get hurt by microwave popcorn so long as you uh follow the instructions and play it safe you should be good all right david let's get to the sponsors that made state of the nation possible today gemini is the world's most trusted cryptocurrency exchange i've been a customer of gemini since i first got back into crypto back in 2017 and it has been my main exchange of choice to make

my crypto buys and sells gemini is available in all 50 states and over 50 countries worldwide and on gemini there are markets for over 30 various crypto assets including many of the hot d5 tokens like wi-fi ave uni and also they are one of the few exchanges that has liquid die markets having both the option of logging into the gemiini.com website or instead opening the gemini mobile app has allowed me to be able to access any and all exchange and on or off-ramp services that i've needed to on

a moment's notice with instant deposits and fast withdrawals i'm able to make my money do the things i want it to when i wanted to you can buy crypto safely and securely on gemiini with the peace of mind of knowing that your investments are insured and protected with industry leading cyber security you can open up a free account in under three minutes at gemini.com go bank list and if you trade more than a hundred dollars within the first 30 days after sign up you'll be gifted a free 15 dollar bonus check them out

gemini.com go bankless if you want to live a bankless life you need to get a monolith defy visa card monolith is a one-two punch of both an ethereum smart contract wallet and an accompanying visa card that lets you spend the money that you have in your ethereum wallet everywhere where visa is accepted when you swipe your monolith visa card at the grocery store or at a restaurant it actually makes a transaction on the ethereum blockchain that spends some of the money you hold in your monolith wallet it's insanely

cool and it's one of the best tools out there for living a bankless but still normal life monolith also offers on-ramp services for getting your fiat money into the world of defy so it's trivial to top up your monolith card if you ever need to and your deposited money goes straight into your non-custodial wallet so your money is never held by a centralized intermediary because monolith is native ethereum infrastructure the money you hold in your monolith wallet still has the power of d5 behind it swapping assets on uniswap or earning yield in defy is at

your fingertips go to monolith.xyz and sign up to get your monolith visa card today okay bankless nation we're super excited to do this special state of the nation with anthony cesano of ethub of token set anthony the self jailed how are you doing in there anthony yeah how's it going you've been weaned out there for a while i actually went cold turkey are you how are you holding up yeah yeah i went cold turkey can't post tweets haven't posted a tweet since january 8th i am i'm okay

i am enjoying the memes of course uh they're quite funny um that's keeping me going it's kind of funny how i didn't expect that to happen i i was like well i'm actually getting people talking about me more with me not even tweeting so this is just a bit weird but uh definitely feeling withdrawals because as you said i did it cold turkey i went from like tweeting a lot to nothing um and you know it definitely is like i i i do realize now that i had kind of an addiction to tweeting so maybe it's a good thing to take a break so yeah so for those of you oh go ahead david yeah

for those that don't know anthony has decided to take a self-imposed hiatus until ether breaks its previous all-time high of fourteen hundred and twenty dollars i think that's actually a pretty genius uh marketing move twitter marketing move because anthony you've made yourself synonymous with the eth all time high and so now when the eath breaks all-time high it's also going to be known as the time anthony finally returns back to twitter i think that's a pretty genius move yeah yeah and the funny thing is i didn't plan it to play out like that at

all i was actually in the car uh my fiance was driving and i'm like what if what if i just put out this tweet he said 1300 we're gonna get to all-time high i know we're gonna get there so i put it out and then we we kind of like ranged a little bit went up a little bit and then we crashed like 30 or whatever it was and i'm like okay how long did you think this is gonna go how long did you think this is gonna be a window for a couple of days i really did i mean i was so bullish we were so close

but you know i think uh it's just karma right i mean you know some people are saying oh the whales are conspiring against him they're pushing the price down to maximum pain but who knows i am loving the memes that are coming out of this this is one from dc investor like visualizing what anthony's doing right now that he's legit legit me when i say the price going up i'm just like yes soon soon here's another what i've put out which is a dms i received from anthony that's funny

i found that funny how many people didn't get that this was a as a joke yeah i know it was that was pretty funny it's really amazing so and people are asking how we're going to welcome you back and dc of course says uh let's report his account as soon as he comes back so he's having a lot of fun with this what's your prediction so we are recording this on on january the 15th and the so this is this is friday right it comes out on on a tuesday of next week do you think you're going to be out of twitter jail by then i i hope so i have high hopes for this

weekend you know uh just based on my general kind of bullishness here the senate their sentiment you know we're very close still we're at 1200 around 500 time of recording so yeah i hope so i think so um but i mean i said that last time when i tweeted this thing so i don't know how much my my kind of sentiment my feeling is kind of worth right now yeah well we are pulling for you my friend and of course we are just as excited to see each hit all-time high and to see you get out of twitter jail

if you want to live a bankless life you need to get a monolith defy visa card monolith is a one-two punch of both an ethereum smart contract wallet and an accompanying visa card that lets you spend the money that you have in your ethereum wallet everywhere where visa is accepted when you swipe your monolith visa card at the grocery store or at a restaurant it actually makes a transaction on the ethereum blockchain that spends some of the money you hold in your monolith wallet it's insanely cool and it's one of the best tools out

there for living a bankless but still normal life monolith also offers on-ramp services for getting your fiat money into the world of defy so it's trivial to top up your monolith card if you ever need to and your deposited money goes straight into your non-custodial wallet so your money is never held by a centralized intermediary because monolith is native ethereum infrastructure the money you hold in your monolith wallet still has the power of d5 behind it swapping assets on uniswap or earning yield in d5 is at

your fingertips go to monolith.xyz and sign up to get your monolith visa card today gemini is the world's most trusted cryptocurrency exchange i've been a customer of gemiini since i first got back into crypto back in 2017 and it has been my main exchange of choice to make my crypto buys and sells gemini is available in all 50 states and over 50 countries worldwide and on gemini there are markets for over 30 various crypto assets including many of the hot d5

tokens like wi-fi ave uni and also they are one of the few exchanges that has liquid dye markets having both the option of logging into thegemini.com website or instead opening the gemini mobile app has allowed me to be able to access any and all exchange and on or off-ramp services that i've needed to on a moment's notice with instant deposits and fast withdrawals i'm able to make my money do the things i want it to when i wanted to you can buy crypto safely and securely on gemiini with the peace of

mind of knowing that your investments are insured and protected with industry leading cyber security you can open up a free account in under three minutes at gemiini.com go bank list and if you trade more than a hundred dollars within the first 30 days after sign up you'll be gifted a free bonus check them out gemini.com go bankless let's talk about what we wanted to talk about today and this is kind of a topic as we're entering the bull market that i think is on a lot of listeners

minds right now is how to prepare from an asset from a portfolio perspective so um i got a text just this week from a friend of mine he's like dabbling in in d5 dabbling in cryptic of course and he's wondering like in this bulls cycle um should he start to rotate some of his eth maybe some of his bitcoin as well into into d5 and maybe let's start there right because um some people believe

of course that bitcoin is going to eat everything bitcoin dominance is going to stay in the 70 type range um and it will get the majority of upside and accrualness in this bear market right um others believe that bitcoin might have a you know four to eight x well eth has a five to ten x um while d5 outperforms both like a 10 to 20 x possibly right um that's more along the lines of what i think could happen but but what do you

think could happen anthony what's kind of uh your perspective do you think bitcoin goes higher ethos even higher has more upside and d5 has more upside than both of those asset categories yeah that's that's my general play uh for sure just based on i guess a lot of it is based on market cap for sure it's much harder to move bitcoin and eve as opposed to d5 but at the same time i think d5 is a very broad category right where there's a lot of tokens that fall into that bucket so if you're talking

about you know these tokens that maybe have a really tiny market cap that can be very easily pumped or whatever and the a kind of outperform um you know that's that's just because they're very small right so i guess when we're talking about d5 what i like to think about is the d5 pulse index which is um an index of the top default tokens that we have that we created at set protocol uh to let you track and get exposure to d5 and and that's kind of what i mean when i when i think about d5 and when i'm talking about it to newer people because uh you

know a lot of these newer people taking on the risk of buying like the really low cap coins is just it's not not a great way for them to start in this space because they're so volatile they can fall fifty percent on the day go up fifty percent of the day right and there's so many of them there's so yeah this and then and the pr it's just yeah paralysis of trying to choose which ones to put your money into um and if you're not you know used to the volatility you can very easily just get kind of wrecked trying to trade in and out of them so i know we're going to talk about the d5 pulse index in depth more but that

general kind of you know uh btc uh being outperformed by ethan eth being outperformed by d5 during a bull cycle is definitely uh something i i subscribe to so some listeners who have you know been through market cycles before might uh think of the term alt season which is a little bit what we're talking about here uh there seems to be a general rotation uh and this is a rule of thumb and there's totally examples of when this is invalidated but the the rule of thumb is that btc pumps and

then ether pumps and then all the other tokens pump and so we're kind of getting prepared for perhaps that third leg of the rotation if it does indeed play out and so looking at coin gecko and and it's it's my belief and i'm pretty sure ryan and your belief as well that uh defy is the under served as or the underserved category right it's it's below what it should be and if you look at the market cap of all coins excluding d5 the market cap is over a trillion dollars ryan if you go down to that purple line um in the graph below

uh yeah over a trillion dollars whereas that blue line is just at 30 billion so there's a huge discrepancy here and we believe according to the protocol stinks thesis that a lot of these protocol tokens represent upside potential to d5 and are ready to close that gap that is what my that's where my head is out what do you believe how do you think about that bitcoin ether al altcoins alt season uh cycle and then how do you how do you integrate specifically the defy tokens inside of that category as well

yeah i think uh the thing about the alt-season it also kind of includes all the other coins and stuff out there right it doesn't just cover cover d5 but obviously d5 falls into that from a market perspective and you were just showing that coin gecko kind of uh stats there um and 30 billion being the d5 market cap they actually include chain link in that and chain linked for me and i maybe i'll anger some people by saying this to me it's not a defy token it's a middleware protocol right it's something like the graph it falls into a different category so you can take out chain link

out of that right and lower the d5 market cap even more it probably lowers it to about 20 billion so yeah i mean as you pointed out the total caps over a trillion most so that is bitcoin i think 70 of that is bitcoin almost which is which is a huge amount right um but i don't think it's gonna stay like that uh during this bull market i think as you said there's this rotation that goes on you know people you know coming to bitcoin especially newer people and then they you know bitcoin kind of stagnates and then these newer people think oh okay you know bitcoins going sideways what else can i rotate into um or can i

speculate on and especially traders right traders definitely do this they want volatility they don't they don't want sideways so if they're sideways in bitcoin they'll go to eath right then they'll go down on the list and it's obviously like as the kind of um more more new money floods in and volatility heats up then the lower cap coins which d5 falls into obviously can go up a lot faster and a lot easier than the large cap coins so yeah i mean this as you said there's plenty of evidence of this uh happening during bull markets in bear markets it doesn't

really happen um you know people fly to safety which is obviously cash first and then bitcoin to a certain extent um i think you know last cycle we didn't really see people flowing to eat for safety maybe this cycle we do but yeah it's hard to tell there so yeah definitely that rotation you can see play out on the charts it's pretty obvious so uh but only in bull markets i think so this kind of the the the bankless um portfolios as we call it anthony that we're basically describing here which is you know

a generous helping of crypto monies like ether right and like like bitcoin so you have that in your portfolio and then also you want exposure to this this neo banking layer this default layer so if you want to drop dead simple like bankless portfolio it's basically ether bitcoin and d5 like the dpi the d5 pulse index and that kind of gets you what you need to be positioned for this bull market at least that's kind of what

we think and if your thesis uh if the thesis plays out that we we get the cycle of bitcoin eth and d5 then you have exposure to all of those assets as the as the cycle um as they cycle into one another and out of one another so the great thing about dpi is you can just like put some money in and set it and forget it it's just an index of all of these top 10 d5 protocols but it doesn't do one thing anthony and that that's this it doesn't give you exposure to the the micro caps so

essentially when you're buying uh the dpi you're buying more more so the blue chip uh deep five tokens but you don't have exposure to this micro cap and if we think d5 is going to do something like a a 10 to 20 x like part of the question is does that 10 to 20 x happen in the large blue chip assets or does it happen with these like micro cap uh defy assets at the very bottom and you lose out if you don't have exposure to those micro caps any thought on that

yeah i think with the default pulse index you're you're buying safety right you're buying uh less volatility on both sides the upside and the downside uh because they are as you said more blue chip assets they're supported by more exchanges a lot of them are on coinbase for example um a lot of them are part of projects that have extreme product market fit you know like uni swap uh uh like what uh yearn and things like that so that's kind of the trade-off there whereas if you are investing in the smaller caps right you have a bunch of

different things you have to the small cap d5 you have a bunch of different things you have to take into consideration uh your risk tolerance needs to go way up right you need to be able to stomach you know those 50 in a day drops um and as a new investor i don't think many people can do that i remember when i first got into i i couldn't do it it was just it's something you have to learn and go through and then you try to swing trade it right and you know you get kind of like wrecked because a lot of us have to deal with taxes too so swing trading with taxes and everything and all this

sort of stuff is just it's so hard to speculate on the smaller ones so for that's why i think dpi is perfect even for for for seasoned people in in crypto because they can kind of hedge their their risk with dpi like they do with btc and eth and then use a small part of their stack to go speculate on smaller cap things um but yeah it's all just the kind of like how much risk do you want to take if you don't want to take if you want to be exposed to d fire but don't want to take on a ton of risk don't have to worry about rebalancing out of everything you

know there's an argument to be made that uh that that an index product uh with on built on our infrastructure at set is tax advantage as well um but obviously talk to your own tax uh tax kind of accountant for that but you know there's that argument there if you just want like passive diversified low risk exposure then the dfi pulse index is is basically for you um but you can you can always buy some of the default pulse index and then use some of the money you have left over to go speculate on the smaller cap ones but you do need to realize that your risk your risk

tolerance has to be much higher than it does for the dpi it's almost just like in the in the stock investing world you know people will invest in indices in s p 500 and then they'll also maybe have some money set aside to play with penny stocks and really like small micro that's kind of what we're talking about here yeah exactly exactly and i think you know if you look at the dpi and the performance of it and how it handled the d5 kind of bear market so it actually launched at i think at the top of d5 summer so um it was a bit of a bad time to launch it but it's

rebounded quite well i think it went from 100 as it started at um it dropped down to maybe you know 60 or something like that which is a pretty still a pretty brutal drop but that's a that's crypto right um you're gonna get that volatility and that that was like d5 coming off of a really um you know heated market so that was pretty i think that would be the worst amount of volatility you'd see um yeah there besides maybe the end of a bull market um or a macro bull market so yeah you can see here um that it just like dropped like pretty far down i probably

went under 60 actually yeah 259 something like that um which you can see 50 and then now it's gone up to over 200 right um so it's not like you're you're only getting like 10 percent out of this right you if you bought around the bottom at around like 60 dollars you've gotten a quite a nice gain um you know over a 3x uh since since november so you know you are trading you know you could have got an attendance on something else right but the thing is like could you have picked that something else would you have stayed in that position uh you know could you have prevented yourself from getting wrecked during the

drawdowns uh most people can't and that's why there's also like there's smart contract risk there's rug pool risk there's team risk there's all of these risks at the at the small new project micro cap level that you have to take into account yeah and those those risks are actually commonly understated i think um you know because uh people you know love to get kind of like i guess high on the on the pumps and everything but if you want to look at the perfect example look at what happened to cover right the cover token um that pumped up quite quite highly and it was a very popular kind of low cap

defy token and then they had a bug in their contract which let infinite amounts of tokens be entered and you know a lot of people got got kind of wrecked on so you know and then if i pulse in this he's very strict about what tokens it includes you'll notice that it's all you know high quality projects and high quality tokens it's not it's it's not necessarily excluding like smaller cap tokens because they're smaller caps it's just because they don't meet the criteria that was outlined by default poles and that's to protect people as well right from this kind of thing happening uh you know bugs

and stuff like that here lord that cover chart looks brutal what is that so that actually leads us into the conversation that we wanted to bring you on to have anthony we want to use all of the tokens in the dpi and and go through each individual one and use each one as an example for you know for listeners to understand how you and how we think about these assets on an individual basis using the assets inside the dpi and and like you said the

assets inside the dpi we would consider to be the safer assets that's why they are in there in the first place they're more justifiable they have more usage uh they have stronger value capture and the market tends tends to value them more for that reason things like synthetics ave uniswap maker iron compound these things tend to be the d5 blue chips they're not going to like 100x but they're still going to track d5 very strongly and they're not there it's less likely for them to get like rug pulled and it's easier for it for new people to

you know understand why these things have value and i think if we go through each one and you know explain our mental models with them it's going to be easier for listeners to understand how we think about these assets and be able to extend that to do their own research about you know people like to speculate people like to gamble in like low-cap defy tokens we know that's going to happen and we want to equip people um with learning how we think about our mental models using some of the best examples in the d5 pulse token index so that they can be equipped for that so i think we

should get started let's go down the list in of all the tokens in the d5 pulse index let's start with synthetics as the the token that has the highest weight um anthony can you explain to our listeners what synthetics network is and what the snx token does yeah so basically i mean as the name says synthetics is a synthetic asset network uh you know it does a bunch of different things you can get exposure to a bunch of different synthetic assets on there whether they be crypto assets or

other assets like gold that they have are currencies on there as well like s usd s aud things like that and the snx token is kind of at the heart of that so what the snx token does is it acts as collateral for the system so people will stake their estimates as collateral and they'll be able to generate synthetic assets against that so a lot a lot of people do is they generate susd so the synthetic usd against that because it's it's the safest play um and then you know you might be able to do yield farming with

that susd or use it as like a stable coin within d5 sort of thing and all that sort of stuff um the snx token also gives you uh governance rights as well um over the platform uh i i you know i i mean they have a whole governance system that they're currently building out so i'm not sure how much governance right you get just yet on the platform um i don't think there's any on chatting up binding on enchanting governance yet for synthetics and also it will uh capture it captures fees too so um it's the snx token when you stake it you

actually get paid snx tokens as a reward for that each week but on top of that you also get uh some of the fee revenue that's generated by the synthetics exchange so uh that's not i mean that's still quite small as uh compared to kind of it's like market cap because synthetics has a very high market cap um and i think you know as a top level thing here actually because we're going to be diving into all these assets one thing that actually strikes true for a lot of them is that a lot of them have really the top ones have really powerful narratives really powerful communities