unstoppable domains, episode 109, david grider, fundstrat
Defi

The Bridge Between Wall Street and Crypto with David Grider from Fundstrat

Dec 15, 2021

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Host:  Hey everybody.  Welcome back to The Unstoppable Podcast.  I'm your host, Diana Chen, and I'm here today with my co-host, Matthew Gould, co-founder and CEO of Unstoppable Domains and our guest, David Grider.  He's the director of Digital Asset Strategy at Fundstrat Global Advisors.  Welcome, David. Thanks for being here.

David Grider:  Thanks a lot, very happy to be on.

Host:  Awesome.  So to start off, why don't you just take us back to when you first got into crypto; how did you get into crypto in the first place?

David Grider:  Yeah, I think, like a lot of people.  I heard about it from a friend at first.  I had a friend in college mining in his dorm room back in 2013.  I thought that was kind of interesting, but, but kind of silly.  And then, I thought it was kind of speculative and stuff back then.  And you know, I kind of put on the shelf for a little while.  But then in 2015, Chamath Palihapitiya, who you've, you know, many have probably heard of who was the founder of social capital and the first CEO of Facebook, you know I think he's a smart guy, and I was listening to him.  And, he was talking about Bitcoin then and, and I spent quite a bit of time, it was like, okay, if this guy really is into it, you know, he believes–he's smart, there's got to be something here.  So, so I actually have him to thank for that.  Getting in.  So I spent a bit of time researching, studying and took some of the classes online and kind of figured it out and been in ever since.

Host:  I got it.  So 2013, that was still pretty early on what sorts of resources were out there for you to learn more about the space?

David Grider:  You know, that–I think that's, it's the, it’s the crazy thing about the early, early crypto years versus now, right,  Like, I remember, I had to go back and I was reading on Reddit forums, and I'm reading on Bitcoin talk forums.  And like, you can't find a good source of ground truth, right, Like, it's not like back then.  Right?  You couldn't find a good information sources, It's not like, company, you go to the SEC website, and you can find, audited filings and how, how Bitcoin works, or any of these other coins, right?  It's all can you get in the right, chats?  Can you find the right people to talk to?  Can you keep, can  you, can you can use sift through these old, forums, but nowadays, I think it's so much better, right, and 20 by 2015 stuff, there's at least some courses by Princeton stuff, and that was, that was really helpful.  That, that was one of the first things I really took that was really helpful for understanding cryptography.  How, how the technical fundamentals work, really how the technology works at the core, you know.

Host:  For sure, and so for the average person who's listening in, and maybe is very new to the space, do you have any, any chat rooms or Twitter personalities, or blogs that are sort of your go to for learning more about the space?

David Grider:  Yeah, I mean, I think for me, I'm, you know, I'm, you know, I'm kind of in a unique position, which is that I’ve, I'm kind of on the kind of professional, like, I have an inside circle of folks who are kind of, you know, in the industry, and I'm in a number of group chats these days, which is where I just kind of get most of my information from, but I think, you know, what I would do if I was someone who wasn't kind of in these, like private group chats or whatever, I mean, I think Twitter is actually a great a great source, because, you can find good lists of people out there.  And it's like, the internet, right? Information is really just pretty democratized these days. And I think that's a great, great place, you know, but I think some of the smart VCs, I think you should start usually read some of their forums, read some of their blogs.  I read a ton of the Andreessen stuff A16Z, and I read it, like their the YouTube videos that they put out, I think it's really thoughtful because it connects not just crypto, right, which some folks can really be hyper focused on who are in the industry, but connects it with, with, with really the traditional tech world.  And I think that's, that's pretty important.

Host:  For sure.  For you personally, that–I mean, I love asking this question because everybody sort of has their own explanation of it from where they come to this space.  And so from, from your view, how would you explain crypto and Blockchain to a beginner in the space in just a couple of sentences?

David Grider:  It's, you know, I think, I think Blockchain is about fundamentally in crypto–is really about fundamentally changing the way that humans, you know, interact and are it kind of like governed or organize themselves, right, and we do this in many different ways, right, with, you know, in the way that you can we, we, we structured money, money and wealth and how we, how we distribute that and, and then some of these other networks, right, that are more like Dows, right, how we effectively bring human coordination together, right.  So I think that that's kind of the core of what the technology does.  Right, you know, that's why it comes back to people saying it replaces trust, right, and it's, it's a new way to, to have this distributed trust over the internet and create a new, you know, global internet economies.

Matt:  So I always like to ask this for everybody, because I also get different answers, which is, what do you think are the current major challenges to widespread adoption or I guess, like the next leap in adoption for Cryptocurrency?  Or do you think there are any at all?  Do you think it's already happening?  And it's inevitable this next push up here?

David Grider:  Well, you know, I think, the, the–at Fundstrat, we do investment research for many clients, and we'll talk about this in a bit, but we put out a 2021 outlook and the, and the cover, title of the 2021 outlook was actually that I put out was going mainstream.  That was the title that I put out about a month, about a month ago.  And I think right now we're at the point where we are kind of going mainstream.  In terms of the adoption, I think we're in–if I had to compare it to the internet, or it seems to me like this is now about 1998, 99, 2000, right.  And if we think about that, in kind of many terms, right, users kind of UX, UI, use cases, right.  But I, but I think it's also again, like back to that era of the early Internet where, you know things, things were still kind of clunky and unusable, and browsers weren't that great and maybe the connections were slow and stuff.  And I think there's still a lot of stuff getting figured out, right, and what are those things that I think are still getting kind of figured out?  Right, like I was talking to someone at a major news network the other day, and they're doing an article on this, and, you know, some of the things I mentioned, right, which were, you know at least for the payment side, right.  Not a lot are used in payments side, 8 percent, according to one of the chain analysis reports is from Merchant Services, right.  It’s pretty small relative to 85 percent being between exchanges.  And I think it's the volatility and I think it's some of the acceptance of Merchants and Ecommerce in the currency, right.  I think it's changing, I think it's coming with Visa, and I think it's coming with PayPal, and I think it's coming with, with all these merchant services, right.  It’s changing but I think, I think that's true for the payments, I think fees are, are, are things - - scaling.  Some of the UX has been improving greatly, but especially in defied which I think it still needs to be some work to be done.  And I think taxes is an interesting one that people need to figure out with the software just for keeping track of using paying, investing in. It's very, it’s very difficult.  And as the stuff goes mainstream, at least in the current US tax system, it's going to be a nightmare for some folks until it gets really figured out.

Host:  Yeah, so there's, there's a lot to unpack there a lot to dive into, we can dig into the 2021 outlook a little more later.  Why don't you back up and just tell people, for listeners who aren't familiar with, with what Fundstrat is.  Tell people what Fundstrat as a company, what does it do?  Who does it serve?

David Grider:  Yeah, that's right.  So, you know, as I mentioned, I'm the Lead digital asset strategist at Fundstrat.  And Fundstrat is–was originally an, a macro equity research firm, founded by Tom Lee.  Tom Lee is on CNBC all the time, he's actually a commentator on there now, but he was for that the chief equity strategist at JP Morgan.  So, for the entire bank, JP Morgan Chase, he set equity kind of investment strategy for institutional clients across the globe, which is a pretty, pretty important role.  And he founded Fundstrat in 2014.  And, you know, got into crypto in 2017, I joined in, let's call it 20, 2020, and, and have been leading the digital asset research business that we have, and that really consists of three parts.  What we do is–we think of ourselves really as the bridge between Wall Street and crypto.  We're probably the only at this point, at least that might change soon, but the only reputable Wall Street South Side bet firm that does investment research on, you know, not just crypto companies but crypto projects, native crypto assets.  You don't–you won't get that, from, from any of the major banks at this point, may change very soon.  But three parts of our business are we have institutional clients, traditional funds, you know, all the big mutual funds, hedge funds, family offices on the street covers, you know, 70 percent of managed equity assets globally.  Which is very, because, you know, we have a lot of those relationships from before.  And we have, obviously some crypto funds as well, as well as a retail client base, and we also have a consulting business where we work with projects.  Some interesting projects we were talking about before on the show Zilliqa was one; who we work with, who I know did–you guys have done the unstoppable domains auction on their, on their network. Right.  So that's how we knew about you guys it’s another reason.  So in many other projects as well, right, so that's, that's kind of the core of our business and those three buckets right there.

Host:  Got it.  And so are most of your clients across all of those spaces, pretty crypto savvy people right now.  And when you think in the long term, who are the people you're trying to serve, is it everybody in retail, everybody in, in all of those spaces, or talk more about that?

David Grider:  Yeah, again, I think we're the bridge between Wall Street and crypto–I think people mostly come to us to get educated at kind of the base higher level.  And, you know, I think there's really a spectrum of–there's just a gap where there's, there's people on one end that are very crypto, right, I mean, they're very deep into the very deep, deep, deep, like, here's how the super niche part of you know, the small emerging, like dowel network or something will work, right. And then there's, like, you know, there's very much Wall Street, like, you know, like a Blockchain and Bitcoin and like, you know, tech and fintech, and we don't get this stuff.  And then we kind of sit in the middle here, and we try to really be the bridge of really helping people, you know, step back, right and beyond, like, you know, just, you know, we understand these things, right.  But beyond like the, the niche technical things, right, the technical consensus details and all these things, and we understand them, of course, but we help them understand what's the bigger picture of how the tech connects across the trend from the through–the current paradigm, right, like thinking about how cloud computing, right, is going decentralized cloud computing, with these with, with a theorem and it's effectively decentralized cloud network, right to that being kind of the future, right, more so then, and people understanding the bigger picture and understanding how this stuff really works, kind of across the real world, to the crypto world it’s paradigm.

Host:  Got it.  And so I guess, from talking to all of the clients that you have, how long do you think it'll be before, there's almost not a need for this type of education anymore, because everybody just knows about it.

David Grider:  We're so far off.  I still have calls with 16, you know, teams of, six to eight portfolio managers, more traditional money managers.  And, and, and I'm still, we're still talking about some things that are core to, like, how does Bitcoin supply work?  How does mining work?  How does the new issuance work? What stops from being new coins and how these things?  So I mean, I'm not saying that's everybody, right, but 2021 was really the year where I think Wall Street kind of had like, enlarge.  Like, oh, we really need to figure this out moment, and, you know, I think a lot of people thought this was going to go away, after 2017, and said okay.  2018, 2019, okay.  We told you, right.  And then when it came back, kind of like, okay, well, we're behind the curve.  And you guys having been in crypto for a very long time, well, now, there's, there's a huge learning curve, it takes a very long time, right.  Even, even us who've been in it forever.  There's still so many things to, to understand and it's all moving so fast.  All right.  So, you know, imagine you're trying to start day one today, and that's most people.  But these people, but they realize, I think the people, at least that I talked to are who are newer, right.  They realize that this is going to impact their portfolio, whether it's from the payments angle, or whether it's from the Fintech angle, from the internet angle eventually, right.  If it's not today, but just like the internet impacted newspapers eventually, and, TV eventually and everything, I think they realize that.  But, but that's, that's one class, right.  That's, that's one class of our clients, we also have another class of, people who have been in crypto for a while and are some very smart crypto funds, right and crypto, you know, earlier traditional investors and smart crypto retail who asked good questions sometimes too.  So, so it's a mix right.  But I can say that the knowledge is not, the knowledge is not disseminated just yet.

Host:  For sure, give me your prediction in 10 years, where do you see the environment being?  Do you see most people understanding this stuff or–describe your client, what your clientele is going to look like and what their knowledge base is going to be in 10 years if you had to give your prediction?

David Grider:  Oh, I think by in 10 years, yeah, people will definitely be on board, right, like, if you think about going from, 2000’s in the Internet era 2010, right, I think into that 10 year’s time, I think people are now learning, they're now, they're now educating, there's a lot more resources available.  There's people like me available, they can call you, there's a lot more research out there from banks, it's, there's a lot of great shows, like you guys have that help educate people.  And, you know, I definitely think that in 10 years, it'll be, it'll be as ubiquitous as the internet was in 2010.  Right.  And, and that's something I think is just naturally going to evolve.

Matt:  Well, I want to get into a couple of things that you highlighted in your recent report that you actually came out with earlier this year.  And so the things I thought were really interesting.  I would just say, generally, it looks like Fundstrat is very bullish on the space, it, like on your, on your price predictions for ETH, for example, and BTC, among the others, and those keep going up.  Can and–I know you don't have time to walk us through your entire thought process for the space.  But one thing I want to call out is Fundstrat seems to be particularly bullish about Ethereum, I would say at least one of these places, and relative to some of the other assets out there, and you had some pretty interesting comparisons between cloud computing in Ethereum.  And would you be willing to walk us through what's your bull case on these smart contract, you know, compute platforms?  And then kind of how do you guys–how do you guys see that space evolving?

David Grider:  Yeah, I mean, I think–I mean, we're bullish on crypto as a whole, right.  And, you know, we've had a, you know, bullish price target Bitcoin we put out, after the market - - , and we've, we've been raising that.  So, our price target just give people a high level view first, before diving into Ethereum, right, our price target on Bitcoin we will continuing to raise that it's currently 100,000.  And our target on Ethereum is, 10.500, I'll talk about that in a second.  I kind of see that eating the cloud.  We think that also in 2021.  If those two kind of hit, the rest of the market will probably follow given the size and dominance and I think it wouldn't be crazy to see the entire crypto market, right.  Inclusive, the Alts and Ethereum, Bitcoin hit, roughly 5 trillion, which would be about–there's about a trillion when we put that out.  We're about 1.5, now, so we're making good progress, I guess, being about a month from that date.  So, you know, to, to Ethereum–I think the thing that people kind of miss or maybe overlook, when they think about cryptocurrency is that I think it's also, you know, it's important to think about crypto as a new computing platform.  And it's a new kind of cloud network, in my view, or at least the next leg of it.  Because, if you think about what's happened in computing, where you've gone from, from mainframes, centralized, to PCs, decentralized to cloud centralized, and now, maybe this shift is happening, within, to Blockchain cloud, right, decentralized computing.  And, what we're seeing underway is, you know, you can run, you  know, your computer, you can run a Ethereum, node in the network, you can, you know, validate things you can, you can operate smart contracts, right.  And, and I look at that almost like it's like a decentralized cloud network with–you know that could be the next wave of cloud computing, right.  And these shifts have happened in the past before, right, and you've seen, you know, value shift from, from one generation to the next.  And you can see that in some of the public companies, some of the public valuations, and I think we're seeing that underway here today.  And, you know, when you think about kind of the rise of cloud, or cloud, cloud right now is like, roughly a $2 trillion on the market cap, and you know, Blockchain computing, right, if you strip out like Bitcoin or something, and you just think about coming to the platforms, you're probably, maybe you're, 3, 3-400 billion, right, and that's, that's kind of gaining steam, right?  When you think about a Ethereum only launching in 20, 2015, really, with, with their 50 million or whatever it was ICO.  And so I think we're seeing a value shift already.  And I think you're also seeing just now in 2021, and 2020, right, but some real material revenue coming to the Ethereum network.  Which is almost material in terms of like the actual cloud market.  So off top my head, I think a Ethereum did about or at least there's about a billion of total fee revenue, right.  Not, not mining rewards fee revenue.  I think it was 600 million last year, Ethereum did something, something to that number, and right now, I mean, they're probably on pace, 2021, to do you know, maybe 8 billion, right.  And that growth number is actually in line with the five year growth number, right.  They've been growing from a few 100,000 to, to a few million.  I mean, it's been growing it like 1500 percent a year, the year view.  And, you know, so I say, look, if, if, if crypto networks like a Ethereum, I mean, especially this switch to proof of stake, are kind of like decentralized companies, we call them decentralized, the govern networks, right.  New form of technology company, within this organizers networks we talk about, so our research, and you switch to proof of stake, and that changes the economics to being kind of like a company and I talked a bit but and you look at the revenue that they're throwing off, and what that can mean for, you know, the reduction in supply of tokens to the - - right.  And you put a cloud multiple on that growth adjusted.  That's how we kind of got to our number.

Matt:  Got it.  Got it.  Well, I love, I personally love seeing the comp between crypto companies and cloud companies, especially like the top, the crypto network, sorry, and cloud companies. And particularly, I think it's a really good comparison, because the cloud companies are actually the really big Web two companies like they're the people who made trillions of dollars from I would say, somewhere out 2005, when Salesforce really started advertising the cloud all the way till today, 15 years, they had a huge run, absolutely massive market that these guys created.  And inside the crypto space, we always refer to things as web three, when we talk about it.  And so there are a couple other things you said that I wanted to dig into a little bit more that are that are interesting to me.  So cloud companies are very Web two, what do you think about the future of web three?  And then another term you use?  Is edge Blockchains?  I'm kind of interested just to hear, where do you think web three is going?  How's it gonna interact? What did you mean by edge Blockchains?

David Grider:  Yeah, it's great question.  So, I think there's kind of been these different waves of the web, right.  And there's obviously a lot of different ways that people define it, you know, kind of what it is.  But if we kind of think about what, least my understanding what folks in crypto are trying to do with what they call web three, versus the web two paradigm is, it seems like, you know, most folks define it as kind of replacing some of these traditional application layer companies that have been built on top of the internet providing, you know, applications that–whether it's, the fangs of the world, right, and everything that they're doing, right, and replacing those with protocols.  Crypto network protocols, to be specific, right, letting these protocols operate as open source, openly governed, collective internet community owned organizations, right.  And as I said, Blockchains is in the beginning are really core about, changing the dynamics of how humans coordinate, right, and this is new organizational structure these networks going from, platforms, or from companies to platforms to networks, I think is the trend, that you're seeing with these web three.  And I think that that's really in my view, about changing everything, from the way we interact with the internet, from, you know, the way that we own the platforms and the applications themselves, and then make them community owned and governed networks, as opposed to, company control and closed networks that are–you know, you can get platform be thrown, you can get censored, you can get all these different things, to the way that we interact with money and finance and ecommerce and the Internet natively embedding, Fintech, which is defi in crypto payments, right, into the internet with these networks and value to the way that our data is used to the way that we control with things like - - , and the way we control our privacy, the way we permission, our data, we carry our data across platforms, right, don't keep them all with one, web two cloud company, right.  And back to the final one, which you're talking about, which was the, the edge computing.  So the way so the, so the way of the infrastructure that actually supports the network operates, right because right now, you have AWS, right, you have Google Cloud, right you have Tencent, right, they, you know, these guys, are the ones that really have the data centers that control the web.  And if you, even if you decentralize everything else around it, like with–I know, this is a controversial take, but it could be something else.  One of those, the Parler thing with the Trump on that one political site, they got kicked off of AWS.  You know, if you have decentralized infrastructure and I'm not saying I support or don't support that, right, but I'm just saying if it's another thing, right, if, if these cloud platforms can Control what's, what's hosted on servers, right, you kind of, you kind of have monopolies and other things that, that, that are potentially imperfect for society.  And it's just about freedom of the web.  If you put it on, these decentralized hosting networks and you can have computers across the globe. It's kind of a new paradigm for how, how the internet is built, how, we and society interact digitally, globally.

Matt:  Yeah, I agree.  And I like to tell people that it's actually really good for them to have more control over their data online, you're already seeing this pushback in the EU with GDPR, around user consent for accessing this data and permission in.  And if you just dig deep into that, and you try to see like, oh, what's the ultimate solution to preventing all these companies from being hacked, and having user data stolen, and having it misappropriated or used incorrectly.  And the best way to do that is to actually make it so that the users have full control over permissioning who can see their data just like we're getting with finance right now, like cryptocurrency allows you to have 100 percent custody and control over your, your finances, if you want to, if you want to take it all that way.  I’m sure, you can use custody products, and you're still going to be trusting some people.  But I really like that migration from and I do think it's just as big, I think the web three companies and crypto networks are going to be, 10 times, maybe not 10 times, but definitely bigger than these cloud companies that you alluded to.  And with Blockchains–I just think it's interesting, because if you look at the fundamentals, there are so many different ways to win.  There's transaction volume going up on these blockchain networks, there is defi, that's in, that's a huge market for them.  There's a decentralized web, there's all these NFT's that are happening.  And there's also just user growth is another way to evaluate.  So I want to dig in on that, actually.  How do you guys at Fundstrat, how do you guys come up with user numbers?  I mean, it seems like, if I'm looking around on the blockchain, it seems like there may be several 100,000, and maybe a million people interacting with a Blockchain on like a monthly basis or something.  But to me, it seems like the vast majority of people, like 100 million of them are sitting on these centralized exchanges.  Do you see that moving in the future? And then what do you count as a user?  I guess, when you guys are looking at it from a fundamental bottoms up, where the markets go and type, type of methods?

David Grider:  Yeah, I mean, I think you I mean, you touched, touched on a lot of great things.  And I'll actually just add one more point to something you said in beginning just before I switch to the user stuff, which you mentioned about GDPR and all these things.  I think that the reason that the web three crypto networks could actually take share, and it could happen quicker than people think, is these guys are under attack many of these traditional big tech, I mean, you saw them on Capitol Hill, they're getting broken apart politically across the globe.  And I think that that's one reason that these, these new community governed models could really, can take share soon.  And you know, to your question on users, right, I think that's obviously the key, right, because as–actually is a lot of the value of the internet accrued.  It really followed user growth, like as users, internet users grew, internet value fall, and that's something that we pointed out in some of our other research.  There's a lot of ways to measure when it comes to crypto, you know, the numbers that we take, at least in our report, we think, Cambridge had a good study and I think it's mostly based on centralized exchanges.  They found–they did interviews with most of the exchanges, and they found, I believe it was 101 million crypto users, right.  You need crypto users across these exchanges.  And that was, as of, Q3 2020.  So given the bull market, we've probably seen quite a bit of growth, even there.  And we are forecasting, or at least my numbers forecasting is, I think, around 200,000, by, by year in 2021.  So I think we can double.  And that'd be consistent with kind of the growth of the internet over time, and kind of some of the growth we've seen in prior bull market cycles.  But, but again, there's, there's many ways to count a user.  There's, there's the trader, there's someone who's active on chain as an active address.  There's someone, users nowadays could be active smart contracts.  Those could be, like the new business users.  New business users, that's a merchant customer in the new crypto world.  But, but yeah, I mean, I think I think it's, I think it's definitely we're seeing a lot of user growth.  I think it's very exciting.  I think that's going to be key to, to the innovation. 

F0:  Switching gears here a little bit.  David, you mentioned the bull market and crypto cycles and things like that.  I'm just wondering, what are some reasons why, you know, Bitcoin prices go up and go down and, you know, for people that maybe get all of their education from Twitter, just see a lot of people freaking out every time it dips a little bit or goes up a little bit like what causes these dips and booms.  And what's like the big picture important thing for people to know.

David Grider:  Yeah, I mean, I think–it took me a while to understand this.  But I think it's actually a lot more the macro than people understand.  Like the Global Macro Financial system.  Like everything that's happening in the traditional markets.  And I can talk about some of the details of how it all fits together in a minute.  But I think that stuff plays a really heavy influence on, on crypto prices.  And everyone–and I know, everyone likes to say that, Crypto’s uncorrelated, and it is from a mathematical perspective, crypto returns are uncorrelated with any other asset.  But I believe that's really just because, you know, the influence that these macro, macro financial events and flows have on the crypto market is so strong and so pronounced because the market was so small.  All right, crypto, I think is like an emerging digital–emerging market economy, right, and it's, it's been until now a very small digital emerging market economy, right and if you think about it, integrating with the broader world.  It's, it's still susceptible to what happens shocks, the, the interest rates, the currency environments, the equity market environments that happen globally.  And because it was small before, right, if, if you kind of, you kind of had just a little blip in some of the outside markets, it was enough to crash crypto, right, or, you know, if you had, you know, really accommodative policy in the outside markets, it was enough to make crypto go parabolic.  And so, so its things that we've seen historically, that have kind of really influenced the crypto market cycle, have been monetary policy, right, central bank liquidity across the globe.  And, you know, as banks are, you know–with all risk assets, right, we don't think this is just unique to crypto with all risk assets, stocks, you know, things store value assets, real estate, you know, accommodative central bank policies is bullish for crypto.  We've seen that.  And, you know, we've also seen, you know, as rates fall, as interest rates fall, other riskier assets, people are looking for return, things like, high yield bonds, stocks become more attractive, crypto as well.  It's, it's way out on the on the risk spectrum for many folks.  And when people are chasing returns, you know, a little bit of that capital just seeping from, from debt market.  Can have a big impact on crypto prices.  Just given the size of crypto, it's, it's only now a trillion.  Global real estate's like 200 trillion Global bonds are like 85 trillion, 90 trillion, right, that's none, non-government.  Global stocks, I mean, you're like 100 trillion.  So, so I mean, just a few just a few drops liquidity from these larger asset classes, right, they can have big influence in the crypto market.  And, you know, and we think we think crypto is really priced gets priced a lot, a lot like, like tech stocks, in emerging market currencies as well.  So as emerging market capital flows are strong, right, if dollar weakens.  You know, it's just like capital flowing into this new digital emerging market with, you know, a lot of technology, you know, business fundamental trends behind it.  And I think that's kind of the key, that's kind of the longer term, non-cyclical picture is the tech disruption that I think is the one you really can buy into across, across the cycles.

Host:  And so all those things that you just described, those are all of the Mac–those contribute to the macro forces that you alluded to in the beginning, right?

David Grider:  Yeah, that's right.  Those, I think those are kind of some of the macro drivers.  I mean, but I and think, I think kind of more bottoms up - - .  If you think about just supply and demand, too, I think, user growth is really important for that because you just kind of onboard their friends and tell more people to get more people to kind of, invest in the economy to work in the economy to start businesses in the crypto economy, create more crypto economy, productivity.  That's, that's valuable stuff.  That's kind of the long run stuff.  That, that capital investment is, is valuable.  And those are things that we think about for.

Host:  Got it.  And so as we see this industry get more and more regulated.  How do you see this increased regulation affecting these crypto cycles?

David Grider:  Well, I think Bitcoins pretty regulated to, to kind of full extent, I mean, not fullest extent, but it's pretty regulated nowadays.  I think the markets pretty healthy, to be honest, I mean, you know, most countries in the world, you can you can buy crypto and buy Bitcoin, or at least most major economies.  And, and, you know, I think that there's a lot, especially in the US, a lot of oversight of exchanges, I think we have a good handle on kind of markets not being manipulated prices not being pumped down.  But, you know, as much better than possible other earlier cycles, where there is less kind of regulatory oversight, tight.  I'm not saying it's us doesn't happen on the offshore exchanges.  You know, you don't know what happens, Minis bull markets, but I think, I think, you know, I think as regulation comes for crypto, I think it's healthier for capital investment, actually, people were talking about the hosted wall thing with, the Coinbase and Treasury Secretary Minuchin being very bad.  I think it'd be an expense to the exchanges.  And I think, could dampen innovation, potentially.  But I think the other thing you would do and when that came out, I actually thought it was bullish was because I think it would actually be good for institutional capital flows.  And investors being willing to feel there's a lower risk premium to investing in the asset class and lower risk premium means you can buy at higher prices.

Host:  Got it, yeah.  Something else I was thinking about that I'd love to get your take on is crypto index funds, what, what are your views on that, like, for instance, to make it easier for people to buy Bitcoin and that, in their IRA, or stuff like that?

David Grider:  Yeah actually, so one of our clients is actually Bitwise.  And Bitwise, for those who don't know, is very similar to the Grayscale GBTC NETHE products, but they have an index, which is the bitwise 10 Crypto index, and we did a report on them.  And they were the first crypto index fund.  And that gave that exposure to you know, the top 10 assets, in a index methodical way rebalance monthly.  And think it's been a good product, for folks and our clients.  You know, I think I think these products are actually the–really the way most people gain their initial exposure to the space, whether it's buying GBTC, or NHA, or Bitwise, or any other products that they kind of have out there.  And I think I think that those products are, are nice, because folks who just want exposure, they don't have to deal with custody, you know, worrying about losing their keys, or they don't have to, worry about getting hacked.  And they don't have to worry about creating an account in a new exchange where they, Crypto Exchange, or maybe they maybe they haven't done that before, they already have their brokerage account, and they have their IRA, and they can just, kind of click their traditional buttons.  Now, there's tradeoffs with them, though, of course, there's, there's, there's some fees involved, one, one to, let's call 2 to 3 percent, for some of these products, and really, the biggest one is just to worry about the NAV premiums.  And what that means is for folks who kind of don't understand kind of the fundamental financial wrapper mechanics of some of these products, it's–these things aren't exactly at least in the US, they're not they're not ETFs, right.  In Canada, there's what there's true–I think of three true ETFs approved recently.  And those–the difference between these ETFs in Canada and the ones you think about traditional stock market, and, and the ones that are really just, just exchange traded products.  In the US, these crypto ones that aren't ETFs is these things are trusts, which just own the underlying asset, and they issue shares of the trust.  So to company who does one thing don't do underlying asset and sell shares, but the shares can trade at a different price from the underlying assets value.  So you could own $10 a Bitcoin and the shares could trade at $20 or they could trade at nothing.  So premium or discount, but supply and demand on the market.  And that premium discounts the thing people need to understand with investing in these products, you know because like we've seen recently with the recent sell off, from 58,000 to, you know, where we are going with like 44.  And also following the Canadian ETF approval, on this is a couple of reasons why the, the GBTC and ETH, ETHE premiums have actually gone negative.  Or before, they've been as high as 200 percent–2,000 percent for ETHE.  And, if you had bought that even if Ethereum had done well, in the premium have fallen, so far, you've done very bad.  But, but at these, you know, about flat levels, it's much better place to buy definitely within the higher levels.  But, But understand those mechanics is very important.

David Grider:  Yeah, and for people who may not know, when you say negative premium, you actually mean that, that company may have $100 in Ethereum, but the share price is only selling for 98. Yeah.  And then the other way positive premium, you're saying it was surprising selling for 200, but they actually only had $100 in crypto sitting in the bank.  Yeah.  So something to be wary of.  Something you mentioned earlier, I want to get back on, was you actually said that you thought there was a lot of opportunity, or there was at least a reasonable amount of opportunity around taxes and compliance.  So what are you seeing on the, Taxes, Accounting, Treasury side, like for crypto?  Tesla put $1.5 billion of Bitcoin in their balance sheet, like, how do they treat this–What, when you were mentioning that earlier, what are the opportunities you're seeing there?

David Grider:  Well, I think, just in general, keeping track of crypto is very hard, right.  It's, in the US at least, it's, it's capital gain or loss every time you, you trade the asset, right.  And so, you know, you go to your farm, you go to, you go to change trade on an exchange, you go to a stable coin.  You know, you, you collect you collect, some, some–

Matt:  [Interposing] It's a pain.

David Grider:  It's a lot and you got to track it.  You've always - -.  And I don't think anyone's really figured it out from a consumer friendly standpoint yet, like, how to make it easy for consumers to use crypto in that standpoint yet.  And I think, with the IRS guys asking questions on everyone's tax returns.  I think people are probably trying to do their best, but I imagine it's, it’s probably, I imagine they probably have some imperfect documentation if they want to check.

Matt:  And so I was going to say, so do you see it more as a consumer opportunity, or more corporate opportunity I was actually kind of curious which way you thought it was going to go?

David Grider:  I think it's a business opportunity.  We've seen, we saw just yesterday, actually, one, some new tall tech startup Get, get 100 million Series A round, try to solve these problems and you know, we'll see right, can they do it will someone else be able to do it in the scale that's with some technology, that's, that's as efficient and does it but I think that that'll be one thing that, that will have to get figured out.  And it's a big opportunity for some of the business that will–that does do it over the next three years.

Matt:  And then one other thing actually felt bad because we were, I felt like I cut you off a little bit earlier talking about GDPR and web three.  So I just want to go back to that it'd be like, revisiting the web three thesis earlier.  I felt like you maybe had a little bit more there to say, so is there anything else about the web three Rollout?  Like how you, how you look at that, that you'd want to let people know that you think maybe they're missing in the space?

David Grider:  Yeah, I mean, don't, don't feel bad.  You didn't cut me off.  There's so many great things we can talk about on this podcast.  No, I mean, like, I think, I think it just comes down to you know, I think the core premise is like, we as consumers of, of, of products, tech products of crypto users, we can decide, you know, kind of what is the way we kind of want to live in our internet lives.  And I think there's an opportunity right now, with everything being rebuilt, in crypto, to get involved.  Think about how we want to reshape that dynamic, right.  And I think it's just a broader question society that folks should talk about and think about and participate in.

Matt:  And then this one, I just like to ask because I get this pushback from people in my network who are not quite ready to accept Cryptocurrency or Bitcoin or anything.  And I just want to ask, because you had this pretty boldly in your presentations, like, are they going to ban Bitcoin?  Is it, is this actually going to happen?  And I already know your answer on this.  But I'd like to hear you know, if you're, if you're talking to one of those people out there says they're just going to ban it.  I would love to hear your response to that.

David Grider:  Yeah, I mean, you know, that was actually a quote from Brian Brooks, who was the former comptroller of the currency and he was actually at Coinbase before that, but yeah, he just said on the record, no one's want to ban Bitcoin.  And I think it's true, like it's not.  It's a technology, like it's, it's a useful thing.  I think it's recognized in the US and embraced of innovation, that's technology.  You wouldn't ban a new tech stock, you wouldn't ban a new company doing things.  Just because it's decentralized network, it's not going to get banned.  And, and particularly in the US and I think it's already being braced as innovation, it also be too politically negative to ban crypto, I think at this point in the US, right, you have lobbyists in Washington and things like coin center, you have at least you know, 10, 11, 12 percent, I think the US households own crypto, right, your constituency doesn't necessarily want to get rid of it.  I think, I think nowadays especially there's a lot of people in powerful positions, powerful investors, people who probably donate to many political campaigns especially on Wall Street, now these days.  I mean, Black Rocks trading, you know, Bitcoin futures, Goldman's got a trading desk.  I don't think–I'm not saying these are their biggest financial incentives, yet.  These are very small parts of their business.  But even these portfolio managers are big funds, who own crypto, it's, it's here to stay and you don't want to ban it.  Because it's, it's, it's a new, it's a new wave of the internet.  It's a new way of doing in our technology.  It would just be counterproductive to innovation.  And I think regulators recognize that.  But it's just, it's just making sure that it's very, it's, not it's playing within, its traditional rules.  And it's not, you have .034 percent.  I think it was chain analysis said that was illicit transactions on the Bitcoin network, right.  So, is that, is that something worth banning?  You know I think it's like 3.4 percent, or something maybe more in the traditional banking system, so probably not right, especially if it takes the innovation out.  You don't want to the baby with the bathwater.

Host:  Yeah, that's true.  All right.  Well, David, in this next segment, we call this explain your tweet, this is where I go through your Twitter and dig up some tweets that I found to be interesting or cryptic or funny and give you a chance to explain them.  Since we're running low on time, I'm just going to pull out one tweet real quick, and give you a chance to talk about that.  So one that I found, this one is from February 12.  Pretty recently, you tweeted, "most important thing in crypto is understanding the cycle, not the individual coins".  So I guess what you're saying here, obviously, we talked about crypto cycles already and why that's important.  But is what you're saying that it doesn't really matter if you invest in Bitcoin, or Ethereum, or Polkadot, or Dogecoin.  None of that matters.  It's more about understanding the cycle or tell people more what you meant by that tweet.

David Grider:  Yeah, I forget which famous investor it was, but they said the most important decision you can make is to be in and out of the market, and bit, by how much.  And it might have actually been Howard Marks.  And I think that that's true in crypto.  You want to be in and–in or out of the market, right, and by how much?  And because, you know, the market as a whole kind of performs generally together.  And especially if you own kind of a broader basket of crypto.  Right prices are pretty correlated.  As things are going up and you're investing in the cycle.  Obviously, things get periods of crazy outperformance at different stages.  Some of its shorter lives, some of its longer lasting you can find some of the better assets.  But, but broadly speaking, if you just bought Bitcoin or you just bought Ethereum, and just kind of bought any of current of the, you know, any meaning mix of the top assets over the last few years, you've done very well, you didn't really care, you outperformed everything else in the traditional market sense, right, that you could have, you could have done.  If you had a lot of exposure to that, meaning it was a large portion of your portfolio, right, it was 3, 5, 10 percent.  You're, you're relatively outperforming, you know, kind of the macro asset classes so, so I think that's really the key.  And Within that you can be you can be smarter you can get out of by finding the right alt coins at the right times and stuff but, but I think for, for newer crypto investors, it's just understanding, when do you want to be in trying to avoid those kind of market peaks and drawdowns and trying to have to have enough exposure at the bottoms in the right times?

Host:  Got it.  Awesome.  Well, thanks so much, David.  This was a great conversation.  I personally learned a lot I'm sure our listeners will learn a lot from listening to this as well. Thanks so much for being here.  Before you go, just tell people where they can find you if they want to connect with you personally, and also where they can learn more about Fundstrat and what are some of the–how can they get connected with Fundstrat if, that's the sort of stuff I sat there looking for.

David Grider:  Sure.  So you can find me on Twitter at David underscore Grid, G-R-I-D.  And you can find, Fundstrat, you know, for, for institutional clients, fundstrat.com for retail clients, fsinsights.com.  And you can also follow Tom Lee I'd recommend him as well, @fundstrat on Twitter.  He's a great resource as well.

Host:  Awesome.  We will include all that in the show notes so it's easy for you to click through.  Thanks so much, David.  This is great.  Thanks, Matt, for Co-hosting, as always, and thank you all for tuning in.  We'll be back again soon with another episode of The Unstoppable Podcast.

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