Bitcoin and the Banking Crisis w/ Jeff Dorman

25:02Hey, everyone. We're going to take another quick break and hear a word from our partners. We'll be right back to the Real Vision Crypto Daily Briefing.

25:13Yeah, I mean, I looked at this and I went back and I've seen that London is making a lot of noise about what it wants to do here. And I went back and looked at the history of London as a financial center post the rise of the US as the world reserve currency. And after they left the gold standard, the US had currency restrictions. So the UK started the global FX market, because before then there was no FX market, right? because it was all pinned to gold. London already had the gold market. So then they bring the FX market. It becomes the biggest market the world has ever seen. Then the US restricts liquidity to the global system.

25:52The UK develops the euro dollar market. So the euro dollar market grows out the 70s and explodes in the 80s and 90s. And then the next part of the equation was the global derivative market. The US regulated the banking system and didn't give them red cap abilities to use OTC derivatives. So London took it and exploded, which is why most of us worked part of our careers in London. Half the hedge funds in the world were based in London. And so even like Goldman's headquarters was really London. Because, you know, same with Morgan Stanley, same with JP Morgan, everybody was based in London. And I'm just looking at this again, thinking, well, the US is doing exactly the same thing.

26:33Once it feels its monetary system is under threat, it tries to shut down the borders, and everybody just moves over to London. Or whether it's most likely to be London, and then you have the off-centers of Singapore, Hong Kong, other European centers. So as you said, you can't stamp this out. I mean, this is a global phenomenon. It's a cockroach, and you can't kill it. And you're seeing it, right? I mean, obviously, the big headlines were Coinbase and Gemini opening up their non-U.S. derivatives exchanges this week. But even beyond that, I mean, you know, we have a venture fund here at ARCA in additional to our liquid investing funds.

27:09And every single one of our portfolio companies is thinking about how do they get, how do they move out of the U.S. and into Europe or Asia. And pretty much everything from a new standpoint that we're looking at investing in is overseas now as well. I mean, it is just a, you know, if the U.S. government's goal here was to say, hey, can we get on the same list as Iran and Cuba and North Korea and just be on the do not touch list? Like, congratulations, you succeeded, because that's how it's being treated here. You know, nobody wants to touch the U.S. when it comes to crypto and digital assets. And, you know, that may have worked 50, 60 years ago in a sense, but now it's just too easy to move.

27:47It's too easy to cross borders. And to your point, there's precedence of, you know, just moving out of the U.S. into Europe and other areas as the financial hub. So So you're not really shutting anything down. You're just moving it. That's right. And why the UK works, it's so easy for Coinbase to relocate to London because everybody speaks English. It's a rule of law. It's a very understandable culture that everybody's familiar with. It's like it's no great shakes. I mean, if you went to half the staff at Coinbase and said, hey, do you fancy a three-year stint in London? They'll take it. Yeah, for sure.

28:21So it'll be interesting to see how, I mean, obviously you'll have a new administration potentially. So a lot of what's happening right now could get completely reversed. But we're seeing it and feeling it every day. I mean, there is just complete apathy here in the US and it's the exact opposite everywhere else you go. And how difficult are you finding it with banking? It's, I mean, you know, those four or five days in March were certainly difficult just because it came out of left field. And, you know, I think, you know, we're big enough now that we've had redundancies in place here at ARCA. I think a lot of the other bigger companies have had redundancies as well.

28:54But certainly for smaller companies and funds, it was difficult. I would say that, you know, again, there is pretty much perfect substitutes in everything in this industry, right? There's perfect substitutes for stable coins. There's perfect substitutes for exchanges. And there are perfect substitutes for banks. It may take some time to get a new banking relationship up and running. But there are plenty of banks looking to fill the void of Silvergate and Signature Bank here in the US. And certainly abroad, there's no issues. So it's operationally a headache and certainly time consuming, but it is certainly not a death knell.

29:31The other issue the industry, I think, still faces is the concentration risk of the derivative markets of Binance. I mean, it's like 70 % of the entire marketplace. Now, it's good Coinbase is set up now, you know, setting up and there's a few others, but there's a big gaping hole still after FTX. Are you seeing any movement there yet? Well, you know, this is a big reason why we're invested in DYDX and GMX, which are two of the largest decentralized derivatives exchanges. So if you look at, you know, Uniswap now often does as much spot volume as Coinbase, right? I think in the last two months, they've actually done more than Coinbase, making it the number two biggest exchange, and that's a decentralized exchange just for spot, not for derivatives.

30:14So two years ago, the total decentralized spot volumes was about 1 % of total volumes. Today, it's closer to 15%. Decentralized derivatives is right about 1 % right now in terms of the total amount of derivatives on decentralized exchanges versus Binance and other centralized exchanges. So I think you're going to see the same trajectory, right? In the last two years, spot volumes went from 1 % to 15 % on decentralized exchanges. And I think you're going to see the same thing in derivatives. It's going to start to move towards decentralized exchanges. And DYDX has about 65 % market share. I think GMX has another 15 % or 20%.

30:48So those are the two big horses, in our opinion. So I think there's no question that too much concentration, too much of a monopoly is not a great thing.

31:02that market share up for grabs is going to be there for someone. It's not going to stay at Binance forever. Binance may continue to grow, but its market share overall should go down as other competitors, whether decentralized or centralized, come after that piece of the pie. Yeah, it just makes it an opportunity for everybody. If you're backing the right horse, there's a lot of money to be made because there's a huge imbalance of market share that needs to be addressed. Absolutely. And I think, too, this is sort of a little bit off topic, but I don't know if you saw, it was just yesterday or the day before, there was a huge WIC high.

31:33On Bitfinex, I think Bitcoin traded at$56 ,000. Obviously, that's not representative of the price. But I think that's really interesting as well, that because this is such a global industry with such low barriers to entry, is that you will always see, again, in some of the developed nations, it's much harder to get a license. It's much harder to get up and running. But elsewhere in the world, it's pretty easy, right? It's low barriers to entry, a few lines of code, and all of a sudden you can be up and running. This is always going to be a very fragmented industry. You know, even if you have the Binances or the Coinbases or the Uniswaps or the DYDX is having a majority of the market share, the lower, you know, the other side of it is that you're going to have 50, 60, 100 competitors taking the, you know, bottom five or 10 % market share.

32:13And it really resembles the corporate bond market a lot. You know, if you think about how corporate bonds trade or even, you know, emerging markets, even to some extent treasuries, but really more corporates, or you can put munis in there as well. You have 50, 60, 70 broker dealers all quoting a price. And then all of a sudden, one small bucket shop or third tier bank, all of a sudden, a broker has a different market, right? So maybe there's 50 guys making an 80 bid, 82 offer on a bond. And all of a sudden, one guy has 90 bid, 92 offer. And you're like, wait a minute, is that manipulation or is that price discovery?

32:44And it's the same thing, right? That's what somebody did at Bitfinex the other day. They said, okay, liquidity is really low right now. I'm going to run this up at Bitfinex at$56 ,000, see if I can get some of the ARBs and bots offside and see if I can make other exchanges and other market makers start to raise their prices higher and reset price. And I think most of the people who trade digital assets come from an FX background or come from a commodities background. But realistically, it trades more like the corporate bond market, which is incredibly fragmented liquidity, lots of weird price discrepancies happening in different jurisdictions and different currencies.

33:18And I think that is actually a really good thing. It sort of shows that you're never going to have just a real monopoly because there's just always going to be this fat tail of smaller. And there's also simply not enough hedge fund or primary capital in the space compared to the traditional markets at three trillion. There's just not enough participants to really make the markets efficient yet, which is another huge opportunity. You and I have talked about this. It's another huge opportunity because it's inefficient all over the place. And that void will be filled too. I mean, a lot of the bigger players in the space who were doing a lot of that ARB and a lot of that, quote unquote, fast money type trading to close some of those inefficiencies, a lot of them are the ones that went under, right?

34:05From your Alamedas and there's already big funds across the globe that are starting to fill that void and get into that space. So you'll always see attempts to bring that market efficiency in, but you'll also always see these anomalies and one-offs because of the fragmented global nature of this industry. Moving on, we'll come back to Bitcoin in a bit, but how are you thinking now about the ETH staking yield? I think you and I have talked about this in the past. I think now we've got liquid staking. We've got a liquid money market curve out to a year. I think people don't understand how big a deal this probably is.

34:44I think it's huge. I think it really is a big deal. And it also comes down to understanding kind of investor behavior and workflows, which is why we're so bullish on ETH. Because if you think about it, there's four reasons to hold ETH, right? One is you're holding it on an exchange as collateral for trading futures or options, right? If you're doing that, you're probably, the staking rate isn't going to affect you all that much because you're using that ETH as a productive asset and you need to continue to use it. Number two is you're utilizing it in DeFi applications, again, as collateral. So that's not going to affect too much.

35:15Three is you're keeping it in a wallet just to be used for gas. That's not going to change, right? So the first three usages of ETH are not going to change at all because of staking. But the fourth one does change. And that's anybody who holds it passively as an investment. And that includes funds, that includes individuals. Historically, you've earned zero on that ETH. And now you can earn somewhere between four and 7%, depending on the participation of stakers and how that fluctuates. That basically means that you know the rule of thumb as an asset manager. It's never earn nothing when you can earn something, right?

35:48Not withstanding the risks of who you're staking through and any of the operational risks. But if you can earn something versus earn nothing, you generally try to earn something, right? That's half the entire financial industry is just built on that float concept right there, which is if I can delay payment for even 12 hours, I can earn some yield on that 12 hours. So the right thing to do is not compare ETH staking rates to treasuries because that's not relevant, right? It's not like people are going to take their money out of treasuries to own a volatile asset like ETH just to earn the yield.

36:15But you need to compare it to the passive yield of earning nothing versus earning something. And that basically means that if you look at other proof-of-stake networks, most of them are 50 % to 70 % staked right now, whereas ETH is about 15%. I think that rises to 50%, 60 % over the course of the next couple of years. And when you couple that with what you're saying about the curve and having an actual, whether it's through structured products or just through duration mismatches, this is going to basically be the risk-free rate in crypto. That's how people are going to think about it. Yeah. And I think everything can be benchmarked against it, which helps everybody tremendously because everyone before with Celsius and everything else, they didn't understand the difference in yields.

36:57So this can be, it can be ETH plus as how we price yields, which I think gets really interesting. Yeah, and 100%. And even though the lending market is a shell of what it was, post the events of last year from Celsius to BlockFi to FTX and Genesis, centralized lending is largely dead right now. But decentralized lending on Compound and Aave and Maker is still flourishing. And when you bring to it now this component of a yield curve where it's like, well, what is the difference in a rate between borrowing for three months versus nine months versus 18 months? And is there going to be a curve built in there?

37:33And can you do a little, you know, quasi net interest margin banking with duration mismatches? It's going to get really interesting. And there's a lot of companies and projects out there that are trying to take advantage of it. And, you know, again, you look back two, three years ago at, you know, DeFi was barely off the ground. Stablecoins were barely off the ground. NFTs were barely off the ground. And now those are a staple of what we think about in terms of, you know, the growing industries within digital assets, structured products and rate arbitrage and curves might be where we are two, three years from now.

38:02I mean, this might be a full-fledged financial market in two or three years. Well, you know, having been, you know, I grew up in the derivative market and I look at this and you see an asset that people want to own and you see it has a yield and the volatility is pretty much at its low. So you get the ability to take the yield and buy options. And so you can create guaranteed products or defined risk products or enhanced return products, which was the explosion in the European derivative markets and the Asian derivative markets in the 90s onwards. And I kind of rode part of that wave. And I look at it now and I'm like, in three years time or two years time or one year's time, we'll see a ton of these things.

38:41You know, 80 % guaranteed funds, 90 % guaranteed funds or accelerator funds, all of that stuff. Yeah, I mean, I was one of the earlier traders of credit default swaps back in, you know, 05, 06, 07, 08. And it was the same thing. It was like people didn't really understand them at first. It was a very kind of niche one-off thing. And then, you know, by 08, 09, it was like, you know, everybody was trading them. And everyone understood how to price the curve and, you know, how to think about, you know, the different derivative instruments. So it's the same thing. Like, you know, again, I don't know if it's six months away or six years away.

39:12But there's no question that there's real time money and investor interest in coming up with these different structured products and derivatives around ETH interest rates. Yeah, I mean, I've had lots of people write to me saying, you know, ex-head of all trading at Goldman writes to me and is like, oh, we've setting up a shop. We're going to do some of this stuff. You know, there's a lot of activity of people who are seeing it because they've seen it before. And they're like, oh, yeah, I can make some real margins and real stuff. So it's fascinating. To go on back to Bitcoin, there's another change that's happened, which is ordinals.

39:46How are you thinking through that? I mean, the Bitcoin community was completely split by what? You're using it not for ultrasound money where, you know, it's the hallowed ground. And now people are trading JPEGs on it. Yeah, I mean, so we have a full team here, dedicated entities. And these guys are incredibly smart. And even they don't fully understand and grasp everything that's going on with Bitcoin ordinals yet, just because it's so new. But from my standpoint, more at a higher level, just thinking about markets, thinking about finance, one, it's just amazing. Here's this asset that's been around for 11 years.

40:19It's basically been defined by the fact that there's literally nothing to do. It's just a pet rock. It's just this asset that is a bearer asset that is potential protection against sovereign and banking craziness one day. And all of a sudden, out of nowhere, here come these NFTs and inscriptions. And I was like, that's amazing that an asset that's 11 years old, that basically did nothing new or innovative for the entire time is all of a sudden, this just happens and it becomes a real market. So from that standpoint, it just, to me, it just opens up the creativity again of just how many times this industry has just evolved.

40:54If even Bitcoin can still evolve, It's fascinating. Now, I don't know. I certainly don't have a, I have no issues with Bitcoin having other use cases. I know some of the people in the Bitcoin community are up in arms saying this is not what Bitcoin was meant for. For me, I'm just looking at purely from a creative standpoint. I'm thinking this is awesome. Anytime you can introduce a new variable to something, it increases the value and increases the use cases. So I personally have not, you know, I was certainly understood and was involved personally as well as through our ARCA funds in Ethereum NFTs and through Solana NFTs.

41:30I have not touched the Bitcoin NFTs yet because it's a little too complex for me and I don't quite understand it yet. But I'm fascinated by it. I'm too much of a boomer to try and navigate that. Everyone says it's quite difficult. I'm like, I'll leave it to somebody else. Let it get easier and a little more straightforward before I use it. But I think it's incredible. And I'm excited to see. And also just, you know, little things can snowball, too, right? Just the amount of Bitcoin transactions that are happening as a result of this, even though it's a little bit of a flash in the pan when you see it, it does increase interest in Bitcoin.

42:04It increases developing power in Bitcoin. And so it's like, you know, you see how a little thing like this can then snowball into something much bigger as well, which is also why we're all here, right? We want to see the creativity and the masterminds of developers and how they think about how to use these technologies. So what other layer ones are you interested in? Solana's been a great story from it's completely dead to, you know, one of the best performing assets this year. But what's on your radar screen? What are you looking at that's interesting? For sure. Before I say that, I want to go one back.

42:36One more thing popped in my head in the Bitcoin ordinals is what I'm really interested in is, you know, take a dollar bill, for instance. Dollar bills have serial numbers on them, but you never think about that. Right. You're never like, oh, that one with the five zeros on it is more valuable than the one with the three sixes. You just assume that a dollar is worth a dollar. I do. I am fascinated with what happens with Bitcoin ordinals in the sense that, you know, if some of the lowest the lowest denomination of a Bitcoin is a Satoshi. If some Satoshis have basically an NFT on them through the ordinals and others don't, are you going to start to get to a point where it's like, I'm going to trade you one Bitcoin for one Bitcoin, but I actually think that Bitcoin is more valuable than this one because of what's on there?

43:19Almost like an old Spanish coin that you find in a treasure chest. I'm not sure where that heads, but I think that's fascinating as well. And I think from that standpoint, I do understand why there are some in the Bitcoin community who don't like this. Because if you want to think of Bitcoin as this truly fungible asset, and now all of a sudden maybe there's that hint of something being more valuable than others, it could get really, really, really interesting. Fascinating. I hadn't even thought through that. Yeah, so let's talk about other Layer 1s, Layer 2s. What are you looking at that's interesting to you?

43:49Yeah, so the way that it was described to me by a shout out to Nick Holtz, who's one of our great research analysts here at ARCA. But he always thought about if you think about what a layer one blockchain is, it is in the business of selling block space. That's what it does. So in 2021, when you had the real rise of all these alternative layer ones, it was because there was more activity going on because of DeFi and NFTs than the Ethereum blockchain could handle. Basically, there was more demand for block space than there was supply. And as a result, you need to increase the supply of block space.

44:24And where did that come from? It came from Solana. It came from Avalanche. It came from Phantom, even Terra Luna, you know, prior to exploding. And then you go into 2022 and the opposite happened, which is all of a sudden activity ground to a halt, right? NFTs became less interesting. DeFi rates were no longer as interesting because of the collapse of all the lenders. And all of a sudden there was a dearth, you know, there was a lack of demand for block space and a ton of supply. And that's why basically Ethereum came back to the limelight and the other layer ones kind of fell off. And instead, it gave the Ethereum layer two blockchains a chance to really grow and improve so that the next time we get this big demand for block space, you may not need these alternative layer ones because you have all the capacity you need and all the throughput on Ethereum itself.

45:13So from that standpoint, that's really what we've been looking at is, is there a layer one blockchain out there that doesn't compete with Ethereum, but rather finds a new niche, right? Can Flow become the sports blockchain? Can Chili's become the sports blockchain now that it's converting? Can something like Solana become the NFT blockchain? You look at all these different ones and you think about maybe business development is more important than technology. That's my view as well. It's all about understanding a clear narrative. Exactly. And if ETH is everything, then you need to stand for something to compete.

45:53Right. And we could get to a point where Ethereum just becomes the security layer for everything. But you have these little niche blockchains, especially with things like Cosmos and IBC, when effectively there's no barriers to becoming your own layer one. DYDX, I mentioned earlier, as one of the decentralized derivatives exchanges, they're becoming their own blockchain. They're going to be building on the Cosmos ecosystem and become their own chain. I think eventually that's probably where like a Uniswap heads as they become their own chain. You need to create a value for these tokens. And the way to create value for these tokens is for them to become the gas token and the security token for the network.

46:27So I think because it's so easy to become your own layer one, you're going to see hundreds, if not thousands, of these competitive layer ones. And each of them is going to have to have their own actual niche. Whereas Ethereum is sort of, like you said, has become sort of everything. You know, I tell investors that they're like, you know, five years ago, if you wanted to invest in just blockchain, it was kind of hard to figure out what to do. Should I be invested in Bitcoin or what's this Ripple or Stellar and all these other things? Now it's pretty clear that if you just want to be like a generic, if you want to generically tell someone I'm invested in blockchain, Ethereum is the way to do that.

46:58Yeah, and you get a yield. And you get a yield, right? Ethereum touches NFTs. It touches DeFi. It touches stable coins. It touches pretty much everything, right? If you want to generically have exposure to blockchain, it's not Bitcoin, it's Ethereum. These other layer ones are not going to compete with that. They have to find a niche. It has to be sports or gaming or, you know, Avalanche is trying to corner the gaming market, right? So I think, you know, that's going to be a big thing is which one of these guys wins the business development race to partner with enough developers and studios and whoever who are going to build a specific type of project on their blockchain.

47:30That's why Chili's, you know, I mentioned Chili's to you a couple of years ago. I remember on one of our talks back when it was trading. Yeah, I spoke to Alex Dreyfus quite a lot. You know, I follow that. I mean, that's what's so interesting to me is like you look at all the competition in digital assets. That's the one token and project that has no competition. They just own that space. They own the sports landscape. And now that they're building their own chain, I think it goes live next week with their own Chili's 2.0 chain. Like that could become the layer one blockchain that anybody in sports and entertainment uses.

47:58So we'll see how it all plays out. But that's what I'm looking for. We're looking for the ones that can actually carve out a niche and have some sort of marketing presence more so than a technological presence. Yeah, I think that's right. Because in the end, it's about network adoption. The technology, there's some limits to what we actually need. There'll be some that will have a technological breakthrough and it becomes easier to, let's say, put video files on chain or whatever. OK, fine. There'll be a niche for that. But I think you're right. Right. Looking, you know, I personally think that we're in crypto spring right now and, you know, we can just continue.

48:34It usually is a bit choppy first and then it gets very interesting next year. When you're looking forward, what are the kinds of areas of activity do you think we're going to see a resurgence of? Obviously, we've talked about DeFi and you think there's opportunities there. And actually, the collapse from last summer will have caused more money to be invested into DeFi and solving some of these problems. What else? NFTs feels like it needs a new change of narrative. Yeah, I think NFTs is real, though, but not necessarily in terms of JPEGs and monkey pictures and things like that. I think you're going to start to see the decentralized identities become a big deal.

49:13By the way, when you talk about JPEGs and monkey pictures, that was my bored ape in the background, exactly at the right time. I love it. I love it. I think that's where NFTs really get interesting is, you know, think about gaming, for example. Gaming is obviously trillions of dollars in the Web 2 world. And you have a ton of studios starting to think about a Web 3 component to that. And that all is going to include NFTs, right? The idea of instead of skins on Fortnite actually becoming your own ownable asset that's a tradable asset, that's a huge, huge evolution of where NFTs are going to be headed, right?

49:46I mean, you know, you look at something like Madden, right? that there's a new season of NFL Madden every year. And no matter how much sweat equity you poured into the old season, nothing ports over to the new season. You have to start over. What if you can start porting over some of the teams that you built or some of the players? Or what if I want to put LeBron James in an NFL game? Maybe I build up my NBA 2K and I want to take that asset over to another game. I think there's things like that that are really going to be the next real evolution of NFTs. And on top of that, I think kind of real world NFTs as well, meaning like this is something that I've always thought about is, let's say I go to a doctor for a regular just checkup, right?

50:31And then three weeks later, I get hit by a car and I go to an ER that's a totally different network. They have a totally different idea of who Jeff Dorman is, right? One sees the healthy profile of Jeff Dorman and that, and the other one sees this emergency. What if you could have your health records as an NFT and you can just very easily update them yourselves and you own them and you can give them out as you need? Or what if your on-chain activity becomes your decentralized identification? Instead of walking into a bank to get a loan where immediately they're judging you whether they think they are or not, they're looking at your skin color, they're looking at your ethnicity, they're looking at whether you're male or female, They're looking at whether you're big or small.

51:12I mean, they're looking at everything and making an opinion, whether subconsciously or not, and whether or not to approve a loan. Whereas what if just your activity on chain becomes your identity? And it doesn't matter who you are or where you come from. It's just you have this proof of who you are that just stays with you forever. So I think those kind of NFTs is probably the next wave. Less sexy and less price appreciative, as we've seen in the initial form of NFTs. but certainly much more practical and much more long lasting. Yeah, ticketing is the other big one for me. Yeah, ticketing and coupons too.

51:46I mean, what about your Bed Bath & Beyond 20 % off coupon that you get every week in the mail? I mean, that becomes an NFT. You spend it and you use it and you move on. Yeah, I mean, that whole rise of Web3 loyalty programs using NFTs as a structure, an architecture to do that, I think is, I still speak to a lot of big brands and they're not phased by anything that's happened. all they're seeing is I can get closer to my customer, I can cut out middlemen, and I can create loyalty. Yeah, 100%. And I think it goes beyond corporate brands. I mean, there's been a lot of success stories there, right, from Nike to, you know, Reddit and Starbucks who are doing it.

52:23But I think it even goes beyond corporates. I think the next wave is, and there's a lot more to do in corporates for sure. I mean, you know, everything with airline miles and, you know, anything with subscriptions, things like Netflix, Disney, all that stuff. But I also think you'd probably go beyond that. It's probably universities and municipalities as well. I mean, think about if New York City had a real token where anytime there was a surplus in the New York budget, it could be divinated out to token holders. Anytime you needed a new park or project, you could, you know, instead of doing a general obligation bond or, you know, some other form of fundraising, you could just issue a token to fund a project.

53:00And maybe if you're a token holder, you get better access to the parks or a cheaper fare on the subway or maybe a fast pass at LaGuardia or JFK. There's all kinds of things you can do with that. Universities, too. Think about just the way donors and boosters work at universities. What if I have – my son is 10, my daughter is 6. What if when they were born I could have bought Harvard coin? And if they go to Harvard 18 years later, I could redeem that for tuition. And if they don't, maybe I can trade it for Yale token or Stanford token. I think there's so many things like that that haven't even been thought about yet.

53:37Even your degrees. Yeah. They should be NFTs, right? For sure. Yeah, 100%. And these can be soulbound. Exactly. Yeah. I mean, there's just so many different things that we haven't even scratched the surface on. I think partially just because the regulatory environment has certainly stifled some of the innovation. But also, as you know, there's just not really any investment bankers yet in this space that have found a way to be paid for consulting and coming up with these ideas. I started my career in 2000 on Wall Street, and I sat next to some of the most innovative product designers and creators ever that were all kind of coming up with new ways, just like you talked about the derivatives boom.

54:15There's always people trying to financialize things and think of new ways to do it. But you haven't seen a lot of that yet in kind of corporate and municipalities and universities just because there's nobody who's figured out a way to get paid from that. But eventually they will. You'll find a way and it'll just be an explosion of use cases of NFTs as well as other fungible tokens. So final question for you. I mean, we're both bullish of this space by nature, so that's not helping anybody really. Anything you see on the radar screen that is an underpriced risk? I mean, there's a lot of risk we all know about.

54:49But is there anything you think, you know, people should just pay a little more attention to that? Purely in terms of downside risk or upside risk as well? Both. My upside risk is ETH staking plus burning means that in a bull market, you might end up with no supply, which I think could be a real problem. And I think options, way out of the money options next year, probably wildly mispriced. And the other risk to me is the big Binance option, because the derivative market, if that goes, it takes a while before hedge funds and other participants can spin up new counterparts to absorb it. I think in terms of underpriced upside risk, it's probably the court cases, right?

55:31You have Ripple versus the SEC, you have Grayscale versus the SEC, and you have Coinbase versus the SEC. And I don't think you're going to get summary judgment. I don't think you're going to get settlements in any of these, which means you're going to court at some point. It might be 18 to 24 months away, but you are going to go to court with all these cases. And once it gets into the hands of a court, anything can happen, right? First of all, we don't know if it's going to be a jury trial or if it's going to be a bench. So anything can happen. And I think you could see, I think especially here in the U.S., everything regulatory and legal is just being viewed as worst case scenario.

56:06If you get any sort of a positive upside surprise out of any of these court rulings, I think you could just see an explosion higher. Ripple could be soon, right? I think it looks like the judge is not going to pass summary judgment and therefore it is going to go to a trial. That's our understanding. So I don't think it'll be that soon, but that should be the sooner of all of those three. So I think that's a real upside risk. In terms of downside risk, my biggest one is simply that we're just wrong on the impact of this technology. you know yeah that would be bad that's that's the biggest one to me is that you know it's like I you know I just got back from Italy I was there on on vacation for a week and you know I had a USDC wallet ready to go looking for all these different where places where I would use it and I was like there's just nowhere to use it like people aren't really interested in transacting on a daily basis with something like USDC you know I think we all think eventually T plus one T plus two, T plus three settlement is crazy.

57:04And eventually everything should be T plus zero, which would be a blockchain. But maybe we're wrong. Maybe there's reasons for T plus one, T plus two that these financial institutions just are never going to get to real instantaneous settlement. So I think that's the biggest downside risk is just that this isn't as impactful as we think it is. That would be a multi-trillion dollar error of human judgment. It would be quite weird, But these things, well, I think that will be the largest industry ever to have failed. Yeah, I think so. I mean, again, we're talking about what is, you said what's underpriced.

57:38To me, that would be underpriced. And I guess we would see that by a lack of growth of the ecosystem in this next cycle, let's call it that. So if we're not seeing adoption grow at the rates that we, doesn't have to be past cycles, But if it's disappointing in its growth, then we've got questions to ask. Yeah, exactly. And I think that's, you know, to your point, to your question of what is the risk that isn't priced in. Like, to me, that's just the one that's not priced in. That's what I spend a lot of time thinking about. Like, I'm constantly, I'm just making sure, even if it's just incremental.

58:10I think in 2020, 2021, it was very steep in terms of the adoption, the growth. It's still gradual. It's still happening. I'm looking for anything that makes it look like it's just not happening. I haven't seen it. But to me, that would be the risk that scares me the most. because I don't care if this takes two years or 20 years or 200 years. To me right now, it seems obvious that this is the future, and I don't care about whether or not I was right on the timing necessarily. But if I'm just wrong completely on the thesis, that's something that is a different story. That would be embarrassing. Jeff, fabulous conversation as ever.

58:45Great to see you, and let's see how this next year plays out. It should be an interesting one, I think. Likewise. I always enjoy talking to you. Thanks for having me. Yeah, fabulous. Now, as ever, fabulous conversation with Jeff. So much to catch up on. He's always got great perspectives and how to see the world. I did like his answer to, well, what's the biggest risk is like, well, we're all wrong. And the whole space is not that valuable. I think that's a very honest approach to take. But it was just very interesting to hear Jeff, who's been deep down the rabbit hole of so many other projects, is focusing on Bitcoin, saying, hey, listen, the use case has not gone away and it's proving itself.

59:24I thought it was very interesting. And as ever, Jeff's thoughts about the evolution, how the DeFi markets and new decentralized exchanges are growing, I think that's very interesting. I think there's, as ever, a lot going on in the space. and I think it's going to look vastly different in two years time than it does today. Let's just hope the adoption keeps going up because if not, we've all got it wrong. What's up, revolutionaries? Thanks for tuning in. For more content like this, head over to realvision.com and get unfiltered access to the very best, brightest, and biggest names in finance.