When Will $ETH Pump?

Why is everything pumping except for ETH?

ETH got its BlackRock filing for a spot ETH ETF, and then ETH went up 8%, but then Solana went up 25%. You know what else has pumped in the last two weeks? Avalanche, Chainlink, Thor Chain, Illuvium, Polygon.

What's going on in this market? And what does the grayscale ETHE trust have to do with it? I think I've got some answers, Ryan, and I want to share them with you and see if you're seeing.

What I'm seeing. That's what we're gonna start this episode with. What else are we gonna talk about?

Yeah, that's the first take. The second take is uh gonna help you, David, because that sounds like a little bit of cope, my friend. And we've got some uh lessons from Uti for ETH holders like you on how to cope. And then we've got a meta question here.

Well, so the question is are uh Ethereum is the Ethereum community, are we the maxis now? That's the discussion point I want to have with you. Also, a take from me why I think that bull markets are more dangerous than bear markets and what to do about that. All right, David, the first take. Why don't you answer the questions for me? Okay, so why is everything pumping except for ETH right now? What about my bags, David?

I think everyone who is paying attention to markets has noticed some sort of trend. Uh ETH, the Bitcoin ETH ratio is down bad. Like it's ETH down bad versus Bitcoin. Uh, and then a lot of the down the market cap alts have really, really pumped, notably Solana. Uh, and I want to start off this take with a metaphor here of uh have you ever played craps before at Ryan?

Uh I've not played craps. I've I've watched craps being played on uh TV. So like, you know, um

the hangover comes to mind. That's what that's what I'm looking at. I'm looking at a craps table and I'm you know playing with uh Zach Galfinakis at the crap at the craps table.

Yeah.

What what so tell me how this works though?

Okay, so cra Craps is a pretty fun game because you you have chips like all games, um, and your chips can either be on or off the table. And if they are on the table, they are on the table in a specific way. I think of all games in a casino, Craps is probably most like the stock market or the crypto market, where like you can place your chips on like the 10 or the 7 or the what or the four or certain combinations. Um, but they're on the table or they're off the table. And if they're on the table, they are at risk. There are also you can have like gains as well. So if you put your chips on 10 and a 10 gets rolled, you get money. If you put your chips on 10 but a six gets rolled, you don't make any money, but you also don't lose any money. And then there's also like the certain roll of the dice where if you roll the dice and then everyone who has chips on the table, they all lose money. It's a little bit like a stock market, it's a little bit like an economy.

So it's a multiplayer game, it's not just like one

It's a multiplayer game. It's well it's it's it's multiplayer versus the market. So it's players versus market.

Yeah. Now in craps, uh the the house always wins, though, right? Okay.

Casino, the house always wins. Yeah, yeah, yeah, yeah. Okay, so this is kind of my take for what is going on in the market. This is the phase in the market in which players are placing their chips on the table. I think we all have gotten this bullish sentiment in the last two weeks or so, probably sparked by the realization that a spot Bitcoin ETF approval could be imminent. And everyone kind of realizes like, oh, I'm I'm off sides. I have chips off the table, and I need to put chips on the table.

So everybody crowds around the craps table?

Right. Because I think that the at some point the bear market has concluded. People are tired of being bearish and they see the bullish catalysts ahead and they're like, oh, it's time to re-enter the game. Where am I going to place my chips? Am I going to play my chips, place my chips on the four? Am I going to place my chips on the five, on the 10?

Where am I going to place my chips? And I think this accounts for one of the big uh reasons as to why we've seen so much appreciation downstream of the market, sub Bitcoin and Ether, sub the blue chips. And this is where people who have have pulled their stable coins out of the market and are now deploying stable coins, aka chips, into the market, people have decided where they want to place their bets.

Solana is the clear winner here. And I don't mean to say that like, oh, people are just betting on Solana and it's not really it's not really supportive of their fundamentals. Uh no, actually people are placing their bets on Solana because of its fundamentals.

I just put a number. I I've got the screen. This is uh 30 day gainers uh over the last 30 days. Solana number two, it's up a hundred and sixty-four percent.

You're saying a lot of players are putting their uh their chips on the Solana um square right now.

Yeah, that's that's totally right. And if you actually look at the monthly winners here, you actually see a lot of familiar faces from last bull market. ThorChain is number one at up 200%, Solana on the 30-day, up 150%, IMX, 120%, Illuvium, 110%. Remember Pancake Swap on Binance Smart Chain, up 100%, Chainlink, 95%, Avalanche 85%, Polygon 83%. These are familiar faces. You know all of these names. These are names from the 2021 bull market. So my take here is that there's actually no new money coming in. It's people, it's us, crypto people that have been around for the bull bear market who have decided that is now time to take their chips that were off the table and place their chips on the table. And so this is the market telling you of these uh winners here who they think has built the most during the bear market. But it's not new money or new buyers here.

So, so I get that point. So, but this still doesn't answer the question, which is why is everything, why are all of these other things pumping and why isn't ETH pumping? I would have expected it to also be part of the the chips that even the internal uh I guess casino is is is bidding up. And it's not happening. This is this is my meme for you, David. This is David waiting for ETH to pump. This is the classic uh kid in middle school with like the veins popping out, just like holding in a fart or something else. Uh that's what you look like right now, David. In this uh, but like, okay, so

why isn't ETH pumping though? Can you answer that question?

So I have two takes on this. Uh I think Eth

Was a clear winner in the 2022 bear market year where prices were just going down. ETH was a relative winner. It held strong versus Bitcoin. Alts, Avalanche, Solana, Terra Luna all just got decimated versus ETH. And so people who just who decided to leave chips on the table, if they had their chips on ETH, they left it there. And so people who pulled their chips out of the table, one of the like Avalanche, Solana, you know, down 95%, they got their chips pulled. And so when the chips come back, people have, there's less chips to come back to Ether than there are on the downstream alts, right? People went risk off due to high interest rates. So that's what kind of my first take is that like people that had their chips on ETH left them on ETH. And now that we are seeing a uh risk on phase of the market, people are going downstream. That's my first like kind of qualitative argument. But I think Ram Alawalia here, previous bankless guest, has a much more concrete argument, which is again, why is ETH lagging?

Well, actually, because people are buying the Grayscale ETH e Trust before buying Spot ETH. So the Grayscale ETH e Trust traded at like a negative 40%, 30% discount just a few months ago. And that discount is about up to negative 10%. The Grayscale ETH E Trust just absorbed all of this brand new buying pressure

that was actually coming from net new money. This is the these are people that are partly crypto natives who are trying to buy crypto ether at a discount. And also, if it's going to be the Grayscale Trust, it's going to come externally.

And so the as the discount has floated back towards nav, we're like w within striking distance, this just absorbed all of Ether's buy pressure over the last like month or so, where the discount kind of came closer to par.

I sort of get that argument. By the way, I was one of those buyers because it was very clear to me over the summer that um ETHE was underrated relative to the price of Ether. So um this was in retirement accounts, and I purchased uh some of that ETHE. And so I think part of that makes sense, but that is only a temporal for phenomenon. So once the price of ETHE matches nav or exceeds nav, then that excuse goes away, David. And there's a lot of other trust products. Like if you look at Link or like um

Uh Grayscale has a Solana Trust product. These are up like multiple, many multiples overnight. Okay.

Have a huge premium over nav right now, both Solana and Link.

Okay, David. So I get what you're saying because I was actually one of those buyers over the summer. I saw this massive discount of uh ETHE discount to nav. And I was like, I had some retirement accounts with some dry powder in them, and I went in. And that makes sense. But at some point in time, there will be no discount to nav for ETH and it'll level off to 0%. And then it will start climbing. Okay. And so then that excuse kind of evaporates. That excuse for ETH evaporates. And by the way, if you look at some of the other grayscale trusts, like they have a Solana trust, they have a Link Trust, for example, those things are trading at massive multiples over NAV. So I don't know if it tells the full story here, but I'm a patient investor. Okay. Maybe I'm dealing with some cope right now. I don't know if if you are, David, but I'm a patient investor. I know how these markets uh generally play out. But the big question is, because a lot of people are saying, okay, Grandpa ETH, yeah, that was last year's like bull case. Uh it's not going to be the same this year. That was kind of like it's been superseded, right? It's back to our theme from our last takes episode of Ethereum being kind of the buggy. Right. You got uh, you know, the motorized vehicle on the scene. And so Ethereum is legacy tech. Do you think some of this rotates back into ether, or do you think that is cope?

Well, I think this is why I brought up the idea of the craps table at the very beginning. It is, when it's bull market time, it is narrative season. People rotate from six to four to eight. It's rotation time. And so there's going to be different narratives that circulate around the bull market that people are going to try and instill. Some people will try and follow. Some traders will trade. But yes, eventually there will be a grand rotation back into ETH. And then it will go out of ETH. It'll go further back down the market cap stack. Here's a Vance Spencer tweet that I thought was useful where he kind of just said, illustrated the point that I'm trying to illustrate here as well, where he just states it feels like we've come full circle on the narrative. ETH is deflationary, Ethereum NFT activity is picking up, DeFi reflation due to new borrow and supply capital, LST share growing, real world asset narrative in Fuego, ETF and root, with most of crypto Twitter.

Now rotated into shit coins, you'll never guess what happens next. So Vance is saying kind of something that I'm I've been saying is that people that had chips

deployed them down market cap, down into the altcoin.

And no one knew really has allocated their chips towards ETH. And so if we understand that there is like this sloshing around of capital from traders and rotators and narrative players,

Ethereum, that gas tank is empty relative to the sloshing around of capital elsewhere. And so if we look at flows, like if we look at diffusion, there the what I'm identifying and what Vance is identifying is there is a low point of diffusion that a capital will ultimately diffuse to back towards ETH.

Okay, so I've got two comments on that. Number one, the first, the first is this um doesn't this depend very much on what the net new buyers want to actually buy and invest in? And maybe you could make the case that Bitcoin and Ether are going to get uh to ETFs that are institutional grade months, years ahead of everybody else.

Actually.

Okay, so then so then net new buyers will maybe maybe come from there, but it does depend on what the net new buyers actually want to buy. But another, I guess, uh comment I have for you is you know what this reminds me of, David, is actually uh 2020.

Um in the beginning of the last bull market, except last time it was Bitcoin that took the lead and DeFi tokens. And there was like a crypto barbell portfolio strategy at that time, which was in vogue. Uh, a lot of um ETH fading going on. And it was basically all you need are DeFi tokens and Bitcoin. Why? Because you have your store of value asset that is Bitcoin, the hardest money in existence. We love it. It's Bitcoin, Bitcoin, Bitcoin, right? And you have DeFi tokens. And what does that represent? The future of finance. This is the U banking system.

What do you need ETH for? ETH is just gas. Okay. So it reminds me a little bit of that trade, that narrative trade that probably lasted for three to six months, I would say, in 2020. Except this time, it's Bitcoin, which has seen some inflows relative to its market size, some impressive inflows. And it's um Solana taking the lead. Or not just Solana, but it's like good blue chip, I would say, uh tokens. I mean, we saw the list earlier, right?

2021 tokens that made it through the 2022 and three year market.

Still have excited communities, right? And enthusiast communities. So it reminds me of of that um that leg of the the narrative segment. Um, do you think I'm on to something there?

Yeah, I I think that's totally right. People are taking their loose change, their remaining powder, and they're deploying it onto assets that they think are going to be bull market winners.

One of the themes that I'm noticing in like all of these tokens that have pumped recently, right? Uh Solana, Chainlink, Avalanche, Polygon. One of them is like, hey, these are old faces of the last bull market. But also, people are buying block space again. Um, people aren't buying ether, Ethereum, because that block space has already been like purchased, right? That was remained at saturation. So Solana, Polygon, Avalanche, also like optimism is up bigly. People are buying block space, new block space sellers, cheap block space sellers. Because what did we learn last bull market?

So we need block space. We need more block space. And so people are buying cheaper block space and selling expensive block space because that's what we learned last bull market.

So, what conclusions do you have from this take, David?

I have one big conclusion and one big question that I think everyone in the crypto industry needs to ask ourselves. Because this bull market catalyst, the Bitcoin and Ether spot ETF approvals, hopefully approvals that we're assuming approvals, that is awesome. That is great. That's a huge milestone for the industry. That sets in stone a bull market if it does. If it sets in stone a bull market, it will be a very different bull market than all bull markets previously. And I'll get to why.

So, like, let me let me run you through the thought process here.

So with a premature launch of the BTC ETF, crypto investors have reconsidered what it means to be on sides. There was a wake up call to alert the people of a big incoming bullish catalyst. The players look wake up, they look around the board, they start placing their chips on what they seem to be likely bull market activity uh locales, venues, right? Solana was the clear winner here. It pumped earliest and the hardest, some familiar faces as well.

You know, Avalanche, uh, Thorchain, Link, Matic, these are all the risk on players of crypto going down the market cap stack, allocating their chips. Meanwhile, the grayscale and ethio discounts approach par. All the incoming new capital goes into Ether, the ETH, the Grayscale ETH trust and the Bitcoin ETH trust. And everyone who is buying alts that aren't Bitcoin or an Ether,

I think are actually long a traditional crypto bull market that we've seen before and implicitly short.

Incoming ETF flows into the market. Because if you are buying Solana, you are not going to be exposed to the incoming flows of the spot Ether ETF or the Spot Bitcoin ETF. Only Bitcoin and Ether are going to have exposure to those spot ETFs. Everything else downstream won't have that unless we get ETFs for the down, the downstream tokens, which we like TBD. There's no evidence to suggest that we're getting that anytime soon. And so there's people are placing their chips. Some people are placing it on I'm bullish flows. I think the uh ETF approvals are going to bring in so much more capital, and that capital is going to go into Bitcoin or Ether. And then you have the crypto Twitter narrative people who are saying it's a bull market. I'm going to go and speculate down the long tail, down in the avalanche, like Solana uh long tail of assets. My big question that I have is where is the endogenous factor of the crypto bull market? Bitcoin and Ether are going to absorb all the external spot buying pressure because that's what an ETF does, that is the ETF mechanism.

So, where is the external bid going to go towards downstream long tail crypto assets? Where is crypto's internal thermo generation? How do we generate heat internally as a bull market? Like the ICO mania of 2017 was crypto internal thermo generation. We made our own heat. We made our own activity. What was 2020 and 2021? That was DeFi summer and NFT Mania. That was our own bull market.

This incoming bull market catalyst is being triggered by external buying pressure coming for the blue chips, Bitcoin and Ether. So I'm there's a line here between the internal narrative games of Twitter and crypto Twitter and the crypto industry saying, oh, it's a bull market. I'm gonna buy Solana because I know it's gonna bring in a ton of new people and they're gonna want a cheap block space. Or there is it is a Bitcoin and Ether ETF approval.

And those are two, those are the only two uh assets that are going to absorb all the incoming flows.

So, my question is like if we do want this to be a very big bull market, the one that we've seen in the uh in history, where is our internal internal