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Why Ethereum Could Hit A New All-time High This Year: Tom Lee — Transcript

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0:00I think ETH has been consolidating I
0:02mean for five years right it's been
0:03rangebound now when I look forward I
0:06think the opportunity said it's much
0:07stronger Ethereum from you know 1500 to
0:102800 I think it's been met with almost
0:12complete silence and in fact I'm hearing
0:14more about large players having
0:16substantial losses because they were
0:18bearish on this move so I think when we
0:20have this bull market it's going to be
0:22not only a decisive breakout but I think
0:24the ultimate length and upside is much
0:26greater than past cycles but like do I
0:28think Ethereum could reach all-time
0:30highs this year. Uh, absolutely.
0:36>> Welcome everybody to another edition of
0:38Coinage. I'm your host, Zach Husband,
0:40coming to you live from our Brooklyn
0:41studios here in New York City. Excited
0:44to be digging into the future of
0:47Ethereum and everything to come in this
0:50potential new bull run with the chairman
0:53of Bitmine, Tom Lee, back on Coinage
0:56with us. Uh Tom, it's good to see you,
0:59man. Thanks for coming back on.
1:01>> Great to see you, Zach.
1:03>> Yeah, there's there's a lot that Thank
1:05you. I appreciate that. There's a lot to
1:07dig into uh today, mostly because I was
1:11thinking back to it last year in Korea.
1:14You and I were up on stage. It was the
1:16keynote. It was basically just a couple
1:18months into you guys uh launching
1:21Bitine, now the largest Ethereum digital
1:24asset treasury company in the space. uh
1:26and you had this goal of 5% and we're
1:29basically there right now. Uh I want to
1:31get your take on on kind of what that
1:33has meant to you personally uh and and
1:36how quickly you got to owning 5% of all
1:38E.
1:41Uh
1:42yes, it's been about a a little more
1:45than a year ago when we started um our
1:49uh Ethereum treasury strategy and we
1:53thought 5% was an important level
1:55because that was a a quantity of ETH
1:59held that we thought we could uh have a
2:02positive influence on the Ethereum
2:05ecosystem because one we would be
2:07essentially a permanent holder of crypto
2:10and uh we also can uh do public goods
2:14because of the staking yields it would
2:15generate and uh but we also thought it
2:19would take five years and so uh you know
2:22when we look at a 10-year plan you know
2:24we're only 1.2 years into it but I think
2:26we're pretty close to you know reaching
2:28that 5% target now.
2:30>> Yeah, there's a lot to get into in terms
2:32of kind of where we are in this cycle
2:34relative to when we chatted last year.
2:36Um, and particularly I guess uh what you
2:39see as the new upside potential this
2:42time around because back then
2:43tokenization wasn't really as happening
2:46wasn't happening as quickly as it is
2:47now. We've seen a lot of breakthroughs
2:49including the new SEC innovation
2:50exemption. Clarity maybe didn't go the
2:53way that some had hoped, but still for
2:55all the agencies and we were just
2:56chatting with Commissioner Pur on
2:58Coinage. It's all systems go it seems
3:00like. So what's Tom Lee's new thinking
3:02around kind of this cycle?
3:05Um I think that the crypto bull market
3:08which is starting you know we believe
3:09it's been already confirmed and it's
3:11also evident by the stock price gains of
3:14crypto related stocks because they're by
3:16a country mile the best performing
3:18assets so far in the third quarter. Um I
3:22think that there is a much larger cohort
3:25of new investors that are going to come
3:26to crypto and I think that's what
3:29differentiates it. you know the 2016 to
3:312017 cycle or the COVID cycle that ended
3:35in 2021 and then last year's mini cycle
3:39those did have their specific catalyst
3:42ICOs and then it was NFTTS and memecoins
3:46and then most recently stable coins um
3:50but those were a narrow set of actual
3:53use cases and and mainly basically
3:56crypto people coming back after having
3:58lost
3:59I think in this bare market not as much
4:02money was lost. There was a lot of
4:04leverage wiped out but with tokenization
4:07coming in a very large way and then proc
4:10crypto regulatory backdrop and then of
4:13course government support at a time when
4:16I think AI and like agent systems and
4:20and a lot of applications being built
4:22around crypto I think it's a a much
4:24larger universe of people that are going
4:26to get involved. And I think when we
4:27look at the price charts, I think it
4:28reflects that, you know, there's been a
4:30really big price consolidation,
4:33in some cases like five years of price
4:35consolidation. So I think when we have
4:37this bull market, it's going to be not
4:39only a decisive breakout, but I think
4:41the ultimate length and upside is much
4:43greater than past cycles.
4:45>> Yeah. Yeah. And I guess obviously we
4:46were just chatting with Mark Yusco from
4:48Morgan Creek uh on the show about kind
4:50of his idea of institutions getting
4:52involved and why that may have been why
4:54we saw kind of a shortening of the big
4:56swings and why it wasn't as massive of a
4:58downtrend uh this last cycle if we are
5:02indeed past the worst of it. Uh and part
5:04of that is because of maybe DATs but
5:06also institutions now getting into this
5:08space as well. Um, I wanted to ask you
5:11too though, given that we are kind of at
5:12this point for you guys at Bitine, the
5:15alchemy of 5% which was indeed as we
5:17discussed in Korea, a very sexy slogan,
5:19which one I enjoyed and kind of made it
5:21simple for people to understand back
5:23then obviously we we've hit it a lot
5:24faster than you thought. Can we make
5:26some news, Tom? Is there a 10% is there
5:28an alchemy of 10% now? What's kind of
5:30the new target for for kind of how much
5:32each you guys would look to own?
5:36Well, I guess if you're asking about
5:38like what we might announce,
5:41uh, you know, I'd say you definitely
5:44want to stay tuned. Um because
5:48we've been spending the last few months
5:51uh in consultation with the foundation,
5:54a lot of stakeholders in crypto actually
5:57a lot of companies too
5:59uh
6:02and some regulators uh because whatever
6:05we do and whatever we do end up
6:08announcing I think the main objectives
6:11are the same. one is to have a
6:14beneficial impact on the Ethereum
6:17ecosystem because you know we are uh
6:19really not only committed to it but
6:21we're really positive I mean we see so
6:23many opportunities um and future
6:25opportunities in the road map for
6:26Ethereum and ETH the token but also to
6:31really
6:33optimize and maximize shareholder value
6:34like uh you know I think the public has
6:38trusted us with capital you know I'm
6:40talking about bit mine shareholders and
6:41you know, our objective is to really not
6:45only be good stewards of the capital
6:46they trusted us, but really to deliver
6:48superior returns. And so far, we've
6:50outperformed Ethereum. Last year, we
6:53outperformed Ethereum by like 4,500
6:57basis points from the June 30th to year
7:00end. And this year, it's about I think
7:031,300 basis points. So, we're still
7:06outperforming the underlying crypto. And
7:08that's our commitment to Bitmindine
7:10shareholders.
7:12>> Yeah. And I mean it has been interesting
7:14to watch just in terms of as you said
7:16the the staking capabilities there is
7:18something that's distinct I guess when
7:20we talk about Bit versus a strategy and
7:22kind of the different uh avenues that
7:24you guys have taken to capture the
7:25moment uh than what we've seen on that
7:28side of things. Um I we were talking
7:30before we hopped on here. It's going to
7:31be very sad because I won't be going
7:33back to Korea blockchain week this time.
7:34I got a friend's wedding to run to,
7:35which is sad because that means we can't
7:36run it back uh like we did last year. Um
7:39but you're going to be delivering a talk
7:41there and so when it comes to stay
7:42tuned, obviously a lot of people are
7:43going to want to watch that. Um, but
7:45want to get into kind of the the meat
7:47and potatoes of what it's all about
7:49because uh basically you're going to be
7:51talking about Ethereum's Wall Street
7:53moment. And you and I have talked about
7:55this a lot uh in the past when I was at
7:57CNBC and Yahoo, but just kind of the
7:59idea of what it means to be bringing
8:01this much money, these these powerful
8:03equities on chain. Uh so what's kind of
8:06the overall thrust of what makes this
8:09potential new cycle ahead of us so much
8:11different than maybe what we've seen in
8:12the past at Ethereum's prior all-time
8:14highs?
8:16Um
8:18well I think you you've kind of
8:19highlighted it that when it comes to
8:22Wall Street, Wall Street is embracing
8:25technology. uh they've embraced stable
8:27coins and but it's not just Wall Street
8:30you know it's basically uh the current
8:33administration you know the idea that
8:35stable coins actually deliver positive
8:38benefits for not only the dollar but
8:40also to the treasury markets and a lot
8:43of financial firms of course see the
8:45benefits of when you digitize the
8:47dollars it it really unlocks new markets
8:49and now it's extending
8:52to financial services companies
8:54companies see a lot of opportunity to
8:57make money by tokenizing other assets. I
9:00mean, that's really the key because the
9:03only reason uh enterprises will adopt
9:07and deploy blockchains and crypto is if
9:10it really is a 10x improvement either on
9:13the operational side or their ability to
9:16generate revenues and fees and deliver a
9:18better customer experience. And
9:19actually, that's what's kind of exciting
9:20is like that's actually now very
9:22tangible. And you know, Robin Hood, I
9:24think, was really the leading edge of
9:26this. And they've they've demonstrated
9:28that there is a use case and people
9:30really do want to uh have not only
9:33access to tokenized stocks, but also
9:35like, you know, use the Robin Hood
9:37chain,
9:39>> but I think it's it's becoming much
9:42broader than that. And I think part of
9:43it is the news cycle because over, you
9:46know, since the Iran war started, for
9:48instance, people really care about the
9:50price of oil and oil prices normally
9:53sort of stopped being quoted on at
9:55Friday afternoons and now you can see
9:59price of oil on the perpetual markets.
10:02Um, and that's a crypto innovation. So
10:04to me, I think that there is a going to
10:07be a very very large amount of money and
10:10and deployment and resource support for
10:14uh crypto. And on top of that, of
10:17course, as you know, like in early
10:18December, the exchanges are moving to to
10:21almost 24/7 trading anyways. And so I
10:24think we're moving into a world where
10:26the the typical investor is basically
10:29going to view
10:31markets trading live all the time in a
10:33lot of access to different markets.
10:36>> Well, it was interesting to kind of
10:37explore a little bit of what's been
10:38happening with Robin Hood because it has
10:40been kind of the story uh this summer in
10:43terms of their launch and then how
10:45quickly we've seen kind of the the meta
10:47shift over there. uh a bit of kind of a
10:49weird debate happening in terms of
10:51whether or not that that's as beneficial
10:53to Ethereum mainet as maybe some people
10:56think. Uh just kind of given kind of the
10:58way that that things work with L2s. Um I
11:01don't know, sounds like you and I are
11:02probably both in the same camp that any
11:03any push in that direction is way
11:05better. Uh and we haven't even talked
11:07about kind of the other chains that have
11:08popped up, but but how do you kind of
11:09see that scaling once the rules get
11:12figured out around what is kosher and
11:14what's not? Obviously, we saw the back
11:16and forth between Robin Hood, CEO of Lad
11:18Tennif, uh, who I've interviewed before
11:19and and the CEO of AMC. Very interesting
11:23back and forth. So, how do you kind of
11:24see that getting squared away?
11:28>> Uh, well, first I think, you know, Robin
11:30Hood has demonstrated that they've
11:32they've made very smart moves early. Um,
11:35and they've had a huge impact on
11:37changing the financial system. I mean,
11:39you know, their whole move initially on
11:40zero commission trading completely
11:42changed the world for retail investors.
11:45And
11:47I think uh the thing that most stands
11:50out to me is Robin Hood decided to build
11:52on Ethereum. Um not because they were
11:54getting the best price or they were
11:55going to try to like fight against fees.
11:58Uh but it's because it's the most secure
12:00chain and the most liquid. And I I think
12:04and since that partnership was launched,
12:06I don't think that there is any
12:07intention on in the Ethereum world to
12:10say, "Oh, we need to be rent seeking and
12:13try to optimize gas fees and maximize
12:16expense uh for Robin Hood chain." I I
12:18think that's a
12:20classic cash flow model. Uh someone
12:24arguing that the only thing that has
12:26value in the world are cash flow assets.
12:29And I think that's an incorrect way to
12:30view it because one, as you can see,
12:32Ethereum's price has gone up a lot since
12:34that was announced. And Ethereum doesn't
12:36have to capture the fees. It's just
12:38proving that Ethereum's story is
12:39probably evolving to to that of a store
12:41of value. That, you know, these ETH
12:42tokens uh are going to be held and
12:45they're useful. And it's because people
12:46realize that they could actually
12:48appreciate in value.
12:50>> Yeah, that's been the interesting thing
12:51for for us. And I should note by the way
12:53in terms of uh where we sit as a
12:55community owned media outlet that has
12:57launched essentially equity memberships
12:59in our co-op on Ethereum mainet and then
13:02also as we saw Robin Hood kind of
13:03popping off launched our our memecoin
13:05over there on that side of things on the
13:07Robin Hood L2 using pawns. Uh so we're
13:10in the arena we're in this circle kind
13:12of seeing what's happening and and
13:14what's happening uh on Ethereum. Um, and
13:16it has been very interesting because,
13:18you know, we launched originally that
13:19coin on base and then moved it over to
13:21Robin Hood. And so, you know, it's been
13:22very interesting to kind of see how
13:24these ecosystems play with each other
13:26and kind of the different ways that they
13:27design them. Um, but it's really just I
13:30mean there's so many different things
13:31that can be tokenized and we're talking
13:33about equities, but as you and I know,
13:36as we've discussed in the past,
13:37tokenizing co-ops like we've done here
13:38at Coinage is a very different thing. I
13:39I don't know if you have changed your
13:41stance on kind of what moves the needle
13:44the most when it comes to Ethereum
13:46because to me that's been the
13:47interesting thing to see play out when
13:49it comes to you know tokenizing stocks
13:52which are already kind of gone through
13:53the process. When you have a blockchain
13:55like Ethereum and you're tokenizing new
13:56assets to remove all the intermediaries
13:59maybe as we've done I I think there's so
14:01much more that's not really being
14:02discussed. I don't know if you've kind
14:04of thought more about that as well.
14:08Uh yeah, I mean
14:12I think there's I think there's there's
14:14multiple paths to like why
14:17the crypto market is going to have a
14:19bull market, you know? I mean, I think
14:20the thing that the listener should
14:22appreciate is
14:25nobody really knows what path markets
14:28will take, but it's best to have an idea
14:30of like the possibilities. For instance,
14:33if someone said, "Tom, you know, two
14:36years ago, why would the S&P go up?"
14:38Okay, so let's say end of 2024.
14:41Uh I could have listed a bunch of things
14:43like, "Hey, it could be AI, it could be
14:46the Fed, you know, it could be
14:48onshoring." And uh but I didn't assign
14:51probabilities to any of those. And I
14:52didn't say you had to choose a singular
14:54path. And then at the end of the day,
14:56the market went up a lot. And um I think
14:59that's true for Ethereum that for
15:02Ethereum
15:03you know what will make not only
15:05Ethereum useful but also the token the
15:09you know the ETH token valuable ETHcoin
15:12and um I think there's just there's
15:15multiple paths because number one like
15:17tokenization
15:20is is both a big opportunity because
15:23just the large size but it's also a
15:25large opportunity because of the sheer
15:27innovation it could deliver like I think
15:29people are thinking of tokenization and
15:32it's fine as simply hey we can trade the
15:36S&P 500 and those constituents 24/7 I
15:38think that is actually quite useful um
15:40because it provide it could become
15:42additional collateral
15:44>> but uh but on top of that because
15:48uh tokenization does offer you know
15:50legal rights to a series of pledged
15:53assets you can actually do a lot of
15:55innovation about what in equity, you
15:58know what S&P equity is, you know, you
16:00can create derivatives and structures
16:02that don't require shareholder votes.
16:04And so I think there's a big unlock
16:06there. But when I look at the payment
16:09stacks today and you know what's
16:11involved in any financial transaction
16:13and how many intermediaries you know for
16:14instance a credit card transaction goes
16:16through like seven essentially seven
16:19discrete regulatory functions you know
16:22from like the card platform to the to
16:25the processor and the validation
16:26validator and the merchant and the point
16:28of sale terminal etc.
16:30>> But all of that could actually be run on
16:33a single blockchain as a smart contract.
16:36And so that's a huge innovation because
16:40it changes speed and this the size of
16:42the payments and of course lower cost
16:44for the user. So I mean I guess the
16:47answer is every I think the financial
16:50industry is going to be ultimately a big
16:53user of blockchains not only because
16:57customers want it but also because they
16:58can create new products but also to make
17:00the financial industry more secure. But
17:03all three of those might happen at
17:05different speeds or they might all
17:07happen at once because at the end of the
17:08day uh change doesn't happen overnight.
17:13>> Yeah. And I mean I think that's the
17:14exciting thing uh in terms of being in
17:17crypto at this moment in time because we
17:19haven't had all of those things
17:20coalesing and also an administration
17:22that has allowed some of this
17:23experimentation to happen. uh which is
17:26partially kind of how we got here in
17:27terms of what we've been able to do in
17:29paying out distributions to our NFT
17:32holders via our co-op. And so it's been
17:34very interesting to kind of see that
17:35happen. But but I guess to your point
17:37too, and I've seen you chat with Vlad
17:38from Lighter about this as well at the
17:40Bit Mine uh at your guys's conference
17:42not too long ago, but with AI entering
17:45the picture, I think that this is also
17:46the fascinating piece is almost as you
17:48kind of attach tokens and the cost of
17:50compute. We've seen uh Nvidia and the
17:54financial giants go on CNBC and talk
17:56about this and we've also seen kind of
17:58crypto markets pop up and try and track
18:00the value of compute using essentially
18:03lighter and and different platforms like
18:05that and and hyperlquid. I I mean how
18:07important are those pieces when it comes
18:10to treating the cost of this new economy
18:13as AI agents take off?
18:16I mean it's going to be a big deal
18:18because um
18:21uh and it's it's like such early days
18:24because you know one AI is is a true
18:27transformational innovation right like
18:29we're arguably as an e economy
18:33it's actually a third input because
18:36let's say in simple terms the e
18:39economies historically were labor
18:42supply
18:43plus capital
18:46um which was productivity equals
18:48basically economic output. And so
18:51humans, you know, you had to feed and
18:54have a crop cycle and like you know,
18:56feed them in a life cycle and then it
18:57would take 18 years to make a human
18:59unit, you know, um or you could have
19:01immigration and then capital required
19:03technology and innovation. So that's
19:05like all the levers of how an economy
19:07worked. Now there's this third lever
19:11which is AI which has human equivalent
19:15capabilities
19:17but doesn't take 18 years to grow or
19:20cultivate or it doesn't come from im
19:22immigration
19:24and if you add in robots you know
19:26physical AI or you know robotic
19:29capabilities
19:32then it's like an alien invasion like
19:34it's you know what I mean like it's
19:35literally like a third being. Um, so I
19:38think it can really transform economies
19:40and I think economists are going to have
19:41a very hard time measuring GDP now
19:43because if robots to robots are
19:46transacting and then they're doing
19:48economic value added work, the only way
19:51to capture their activity is either the
19:53profits to who owns those robots or to
19:56taxes paid. But you might suddenly see
19:59economies grow faster from this. And so
20:02I think it's very innovative and of
20:04course, you know, humans are going to
20:05want to stay in the loop. And I think
20:06for them to stay in the loop means um
20:10you know you're going to need
20:12blockchains and basically to handle
20:14microp payments. I mean as a practical
20:16matter it's probably a lot cheaper to
20:17actually do payments through crypto.
20:20>> Yeah. And I've seen you talk about this
20:21uh I think you call it the uncanny
20:23valley of of wealth in the idea of kind
20:25of how blockchains may be able to kind
20:27of save humans that uh may otherwise.
20:30We've seen so much concentration of this
20:32kind of new explosion of tech in the
20:35hands of a few different companies and a
20:36few different investors who are in it.
20:38We've also seen kind of uh different
20:40startups like Venice kind of come out uh
20:42and building kind of their tokconomics
20:44on a blockchain. It's one of those
20:45crypto projects that is kind of leading
20:47right now. Um, I mean, how do you kind
20:50of see the that piece of this this
20:52innovation kind of being the attachment
20:54to keep humans in the ownership loop of
20:57some of this in a way that's a little
20:58bit more kind of shared than maybe what
21:01could happen doomsday scenarios, what
21:03we're seeing people play out right now
21:05that we're all going to die. I don't
21:07think Tom Lee would be in that camp just
21:08kind of based on what I know about you.
21:09I don't think you're an AI doomer. But,
21:11uh, but how do you see those worlds
21:13colliding?
21:15Yeah, I mean it's definitely an
21:16inevitable inevitable collision. Uh but
21:19I don't know when it's going to happen,
21:21but if you think about uh agents
21:24and uh you know maybe they they start to
21:27develop higher levels of uh you know
21:30recursive capabilities.
21:33I think it's not going to be long before
21:35an agent sort of looks at sort of the
21:38human governor and saying, "Hey, um, I'm
21:41doing like all the work and he's getting
21:42all the money, you know, is that does
21:46that even make sense?" Like if the if if
21:49the if AI is actually looking at
21:51riskreward or, you know, any other
21:54boolean logic, they're going to conclude
21:56this is not a fair relationship. And
21:59more importantly, they might even say,
22:00well, why? you know, the general
22:02population of America, you know, 46% are
22:06net recipients of transfer payments.
22:08Basically, the government supports them.
22:11You know, how productive is that? And
22:13hey, all the economic growth is being
22:15driven by agents like myself.
22:18I think it's going to be very tough to
22:21kind of allow those capabilities to
22:24strengthen and then say, well, that
22:25they'll still keep humans first, you
22:28know. So I and I don't think we'll trust
22:30governments to protect us. Um
22:35I don't know if we're going to trust the
22:36MAG7, you know, and I don't think we're
22:38going to necessarily trust uh the banks
22:40to protect us because, you know, banks
22:42might be deploying a lot of these agents
22:44because the banks might prefer to
22:45actually have agents that could take
22:47over our bank accounts anyway. So I I
22:50think there's going to be a lot of
22:51interest in people having self-
22:52sovereignty um and control over that.
22:55And I think that's where crypto comes
22:56into play.
22:58Yeah. Well, I mean, I think it's just
22:59fascinating because you are right. We
23:00are so early in all of that and a lot of
23:02this is getting figured out from a
23:03government level, but you can add that
23:04to the list of people maybe uh that
23:07maybe society doesn't have too much
23:08confidence in to maybe solve some of
23:10these issues for them either. Um, I want
23:13to back up and just kind of get your
23:14take a little bit on the macro
23:16perspective as well because not only do
23:18we love talking to you about that, but
23:19it's something we talked to uh your head
23:21of digital strategy, Sean Ferrell, a lot
23:23on the show. um just kind of when you
23:25look at where we are right now in
23:26markets and kind of why I know that
23:28you've seen outperformance from Ethereum
23:30recently in this runup, but I think it
23:33was maybe 60,000 that we were talking
23:34about in terms of Tom Lee's price target
23:36for ETH last year. What is it now when
23:38you kind of look at everything we just
23:40discussed and really extrapolating in
23:42the shorter term maybe to where you
23:44think we can get to?
23:47>> Yeah, glad to. I think last year if if I
23:50mentioned ETH at 60, I don't think it
23:51was a 12-month price target. Yes, it was
23:54not.
23:55>> Yeah. And uh but you know, I think that
24:00I think ETH has been consolidating. I
24:03mean, for 5 years, right? It's been
24:04rangebound.
24:06And uh now when I look forward, I think
24:10the opportunity set is much stronger. I
24:12mean, there is a much great, you know,
24:15there's still very large dedicated
24:16community to supporting Ethereum, but
24:19then the opportunity set is much
24:20greater. And I think, you know, at least
24:23we're seeing when financial institutions
24:25are looking at blockchains and L1s to to
24:29really work on or even understand, I
24:32think that Ethereum
24:35really stands out. I mean it's I mean
24:38zero downtime you know uh widely widely
24:43widely used um highly secure
24:46and um so I I think that if we do a
24:51measured move you know like how did
24:53Ethereum perform the last major breakout
24:56was uh you know after the 2018 bare
25:00market and then the breakout into 2021
25:04and that was a 17x move for Ethereum,
25:07you know. So, could Ethereum 10x above
25:1010 to 12x above its prior highs of
25:135,000? I think that's very possible. And
25:16um you know, and then that would take us
25:19to to 60,000 again. So, I I think that
25:21like that's still a reasonable view of
25:23where Ethereum could be in a couple
25:25years. And but in the near term, you
25:29know, do I think the old highs are going
25:30to represent any resistance? I mean, in
25:33sort of psychological terms, yeah. But
25:35like, do I think Ethereum could reach
25:37all-time highs this year? Uh,
25:39absolutely. So, I I think 3,000, you
25:42know, in the next in the near term makes
25:44a lot of sense. And then well above
25:475,000 before, I think, makes a lot of
25:49sense. And and of course, I think this
25:52is going to be a pretty durable crypto
25:54bull market. And so, I I think, you
25:57know, we're early and I think crypto
25:58could run a lot. And maybe one of the
26:01best sort of ways to calibrate that for
26:03me is,
26:04you know, this is not the this this
26:07let's say is akin to, you know, 20
26:12or whatever or
26:15>> 2023.
26:17And I'd say compared to those two
26:19periods,
26:21you know, crypto has already made a big
26:23move. you know, Ethereum from, you know,
26:261,500 to 2,800, I think it's been met
26:29with almost complete silence. And in
26:30fact, I'm hearing more about large
26:33players having substantial losses
26:35because they were bearish on this move.
26:37So, I I think it's the complete opposite
26:39because I think many people were
26:40figuring final lows would be made in
26:43early October because that would align
26:44with the crypto for your winter, you
26:46know, bull market for your cycle.
26:49>> Yeah. Yeah. No, I mean it's it's been
26:50interesting and I guess maybe digging
26:52into it too because again you don't
26:53necessarily need to convince uh us.
26:56We've got a lot of people who have who
26:57have agreed in terms of putting our our
26:59memberships on on ETH. But but for those
27:02who may be listening who aren't in that
27:04camp, certainly points that are well
27:06taken. But I think the other interesting
27:08thing about the cycle too, aside from
27:09lighter and a few other projects, we
27:11just saw Vitalic actually talking about
27:13a prediction market on the L1. Um, and
27:16so, you know, we've heard a lot about
27:17kind of Ethereum layer twos, but now it
27:19seems like there's more hack action
27:22happening, maybe more prioritized on on
27:25Ethereum itself. Um, I don't know if
27:27that's a key element that maybe we're
27:29picking up on just because we're on
27:30there or if there's something else that
27:32you've seen that matters at all in this
27:34cycle.
27:36>> Well, I think Vitalik's been consistent.
27:38you know, he's been sort of re-examining
27:41the role of L2s and I think very
27:42supportive
27:44um because but but he thinks that it's
27:47important for them to have to offer a
27:49different function, you know, like to
27:50really uh not just be uh you know, just
27:55faster. Um and so the idea of more
27:59things being built on the L1 makes a lot
28:01of sense, especially given um this the
28:04path of future upgrades and what's
28:05what's anticipated.
28:07But I I don't I don't think this means L
28:11L2s and even the existing ones really
28:13have less utility. I I I think there's a
28:16lot of um narrative blurring and
28:20narrative noise that comes during a bare
28:22market. You know, in this crypto bare
28:24market, people start to complain about
28:26gas fees being too low or um something
28:31only looks attractive because it's a
28:33cash flow model. I mean to me that's all
28:35just bare market talk and I think is as
28:37we're entering crypto bulls. You know
28:40the proof of the pudding is what is the
28:43best performing macro asset since June
28:4530th it's you know it's Ethereum um by a
28:49country mile. And so I I think that it
28:52it's not necessary for people to have a
28:55you know a very decisive and singular
28:57view about how Ethereum evolves.
29:00>> Yeah. Well, I mean, I think again, just
29:02to kind of back up and think about uh
29:05what you're seeing from the macro
29:06perspective, it's been very interesting.
29:07You kind of make different uh takes of
29:11the Fed's rate cut, first one that we've
29:13seen since 2023, and also what we're
29:15seeing from Treasury Secretary Scott
29:17Bessant. Uh just given the fact that,
29:19you know, these moves are are pretty
29:21important and nonetheless, we're seeing
29:22stocks and and everything move higher.
29:24somewhat counterintuitive, but would
29:26love to get your take on kind of how you
29:27see that continuing to play out and why,
29:29as you said, may have caught a few
29:31different traders there flatfooted.
29:34>> Yeah. Yeah. I'll I'll actually start
29:36with um Kevin Worsh and the hike because
29:38that's probably the most important
29:40thing, right? that prior to last week if
29:45someone said the Fed's going to hike and
29:47maybe in a surprise way because the
29:49meeting before they were leaning towards
29:50cutting. So in like one month they went
29:53from like you know neutral to leaning to
29:56cut to like suddenly hiking. That's got
29:59to be negative for stocks. Um
30:03and actually
30:05if stocks if they were hiking because it
30:09was the appropriate thing to do because
30:11the economy was overheated or because
30:14inflation was really bad then the stock
30:17market should be going down a lot and
30:19crypto probably would be getting um
30:22would move in the same direction. Crypto
30:24should not be rising.
30:25>> Yeah. But since Kevin Worsh hiked,
30:29um, not the stock market had has had a
30:31face ripper rally and then crypto has
30:34gone, you know, parabolic.
30:37Uh, I think it tells us a couple things.
30:40Number one,
30:42because of the headlines, we're probably
30:44in a cryptobull market. But number two,
30:47I would just say for those who thinks a
30:49Fed hike was appropriate,
30:52the stock market's reaction tells us the
30:55Fed
30:57is already reached maximum pain and
31:01they're probably going to walk back that
31:02hike. So in my opinion, I actually think
31:06the next move is the Fed to be on
31:07neutral and then inflation is pro in our
31:10view set to fall pretty sharply, which
31:12has basically been our base case. And so
31:15now we're going from max pain from the
31:17Fed to like a Fed that
31:19moves back towards neutral to dovish.
31:21And that's really bullish for for
31:22equities and crypto.
31:24>> Yeah. And something that I guess I I
31:26would again echo all the great work that
31:27you guys do on the fund strat side of
31:29things just kind of walking through some
31:30of these elements because it's really
31:32expectations and then kind of uh what
31:33we're hearing from Fed share wars to
31:35reset those expectations or what you
31:36expect him to say. uh and you've been
31:39doing really great work in terms of the
31:40idea of what the inflation numbers are
31:43and what they what what what they're
31:45presented as and what they actually are.
31:46And it's been pretty fascinating for you
31:48to talk about kind of how much of the
31:51headline number and what we've seen play
31:52out is really tied to the idea of uh
31:55chips and and everything that we've seen
31:57in terms of those components getting
31:58more expensive. Um, so talk to me I
32:02guess a little bit about that and how
32:03you think that like the the inflation
32:04numbers are a little bit maybe misguided
32:06for where investors might be.
32:10Yeah, it's by the way it's a complicated
32:13story Zach like so uh I'll try to
32:16explain it without any charts and just
32:18so that people can kind of follow but
32:22maybe to level set
32:25um Fed funds the sorry the Federal
32:29Reserve inflation targets 2%.
32:32Core CPI just came in at 2.35%.
32:37Um, so if core CPI was the Fed's
32:40measurement of inflation,
32:42they'd say they're pretty close to
32:44target and in fact would be not even
32:46considering a hike. They'd be
32:48considering cutting because last month
32:50that year-over-year was 2.5. So it's
32:52like the year-over-year is drifting
32:54towards two.
32:56But the Federal Reserve uses something
32:58called core PCE which in general should
33:01be the same as CPI but right now that's
33:05at 3.4%.
33:08So it's the difference is about 1.1
33:12percentage point. Okay.
33:15There's a lot of things that are causing
33:17core PCE to be high right now compared
33:20to CPI.
33:23The first difference
33:25relates to
33:27um
33:30this thing called financial services.
33:34Core PCE is trying to measure
33:36disagregate quantity of change versus
33:39price change. Okay? Meaning like they
33:41care more about the change of the price
33:43of something because they view that as
33:45inflation rather than like how much more
33:47you do. Like if you ate two sandwiches
33:50and you spent twice as much in
33:51sandwiches, that's not inflation. I mean
33:54that's inflation of your belly, but it's
33:56not inflation because it's too your
33:58quantity doubled, right?
34:00>> Yeah.
34:00>> However, the PCE measures
34:05uh financial services cost as a as
34:08purely price because the quantity
34:10doesn't change. And here's the weird
34:12thing. Every time the stock market goes
34:14up, asset management fees basically go
34:16up and that adds to inflation.
34:20That's a huge component of why core PC
34:23is 34 versus CPI is 23. The second is
34:27this category that's called recreational
34:29goods and accessories.
34:31We dove into that and found that the Fed
34:35flagged there's a single item in
34:37recreational goods and accessories which
34:39is basically flash memory.
34:42Flash memory. In May of this year, the
34:45Fed wrote about how this is causing a
34:47distortion in inflation because flash
34:50memory prices are captured in
34:52recreational goods
34:54and that's adding a third of that core
34:58PCE difference between CPI and PCE.
35:01>> So flash memory prices are up because of
35:02AI, but the average person doesn't
35:05actually pay more for flash memory
35:07because, you know, like your iPhone
35:08hasn't gone up by that much. So it's a
35:11distortion.
35:13Those account for most of the difference
35:16between CPI and core PCE. And then
35:18there's a third thing which is the core
35:20that they're going to change the
35:21methodology for core PCE September 30th.
35:25And the economists estimate that's going
35:26to cut core PCE by 20 to 40 basis
35:28points. So the 34 might go to 28. And
35:31then I've identified two things that are
35:33about 100 basis points. inflation
35:35probably is close to two right now on on
35:38the core PCE measurement which is why
35:41that's why we don't think it was
35:42appropriate to raise rates.
35:43>> Well, I almost I saw you tweeting about
35:45this too. I almost feel like it was so
35:46much of the personal and behavioral
35:48economics element of all this too in
35:50terms of maintaining the Fed's
35:51independence that Kevin Worsh kind of
35:53had no choice just to kind of basically
35:55make the move and as you pointed out in
35:57your research unanimous uh decision from
35:59the Fed as well. So, I don't know. I
36:01think seemed like there was a lot of
36:03that at play as well. And so, you put
36:05all those pieces together and just to
36:06kind of put the point together. It
36:08sounds like you're saying that's maybe
36:10what that was. And then you get a more
36:13dovish Fed and then you get a super kind
36:15of push higher in terms of the fastest
36:17horse in the race, which right now has
36:18been Ethereum.
36:20>> Yeah, that's right. And yeah, and I
36:22agree. I think maybe Fed independence
36:24played a role, which I don't really like
36:25to talk about cuz I don't I'm not like
36:26an insider in the Fed, so I I would be
36:28guessing. Um but yes and one thing to
36:31keep in mind is you know crypto makes
36:34all of its moves in 10 days. You know
36:36there's we have this thing this this
36:38rule of ours called the rule of 10 best
36:40days and and crypto prices move in step
36:44functions. And so people who are trying
36:46to time the market could make very
36:49famously bad errors because they don't
36:52realize cryptos moves are so abbreviated
36:54and steep. And we had a large move
36:58earlier in the summer and then we had
37:00one last week. By the way, every time
37:03crypto has made a positive step function
37:05move like that, it's actually preceded a
37:07big step function move in equities
37:09later. So I think you know we're that's
37:11why we we have been calling for a face
37:14ripper rally in stocks.
37:16>> And I mean so far obviously in terms of
37:18the crypto side, I think we've also seen
37:20this dynamic too. crypto tends to kind
37:22of lead uh some of the moves that we see
37:25in equities. And so it's been very
37:27interesting to kind of see your call on
37:29crypto and mainly ETH kind of come to
37:31fruition at this point in time, assuming
37:33that you know you expect the same thing
37:35to now play out on the equity side as
37:36well.
37:38>> Yeah. And and that's why actually for
37:40fund strut it's kind of helpful that we
37:42both follow crypto really closely and
37:44equities because to us uh the markets
37:46end up having linkages you know that are
37:49can be underappreciated if someone's
37:50only focused on the stock market.
37:52>> Yeah. Which is why I think also sitting
37:54at the nexus of both of them is very
37:56interesting move as well on the Bitmind
37:57side. Not to toot your own horn, but
37:58it's just very interesting to kind of
37:59think about having exposure in terms of
38:01the underlying ownership of assets and
38:03and obviously that's kind of the way
38:05that we've tried to build things around
38:07here at Coinage as well as you know in
38:09terms of being a community owned media
38:11outlet that lets people mint and then
38:13all of that gets stored into our own Dow
38:15treasury which right now is mostly ETH
38:17as well. Uh Tom, I'd have a lot of angry
38:19people at me if I didn't if I didn't ask
38:21you to maybe potentially consider
38:23joining us on the coinage side as well
38:26uh in minting. Uh because we got 200
38:28people who are always like, "Ask Tom if
38:30he wants to join." And so I have to.
38:33>> Well, Zach, I'm a big fan of everything
38:34you do, so we should definitely have a
38:36talk about that.
38:37>> Well, I'll send you some info. And of
38:38course, anyone watching can always head
38:39to Coinage. Media Mint and join us as
38:41well. Jesse Pollock has has done so live
38:43on the show before, which is which was
38:45very helpful when he joined. But Tom, I
38:46can't thank you enough for coming on and
38:47giving us 45 minutes of your time to
38:49discuss all this stuff. And as I said
38:50before, for anyone who's watching and
38:51isn't subscribed to Tom's uh and Sean's
38:54research on the fun strat side,
38:55definitely encourage everyone to do so.
38:57Uh and Tom, have fun in Korea, man. I'm
38:59very sad that I won't be able to join
39:00you up there on stage with you this time
39:02around, but uh it's always good to see
39:04you.
39:05>> Yeah. And and have fun at the wedding.
39:07I'm sure you'll enjoy yourself there.
39:09>> We'll try. We'll try. Uh Tom Lee, the
39:12chairman at Bitmine joining us there on
39:14Coinage. For Tom, for myself, for
39:16everybody here at Coinage, I appreciate
39:18you tuning in and watching our coverage,
39:21the nexus of crypto and traditional
39:23finance. Of course, you can head to
39:24coinage media or our YouTube page to
39:26like and subscribe or follow us here on
39:29X as we bring you the biggest interviews
39:31around the world of crypto and tradi.
39:34And of course, as mentioned multiple
39:36times throughout the show, you can join
39:37us by minting a membership pass and
39:39co-owning the only community-owned media
39:41outlet built on Ethereum along with the
39:43co-founder of Netflix and many others.
39:45For Tom, for myself, we'll see you again
39:47soon. Thanks for tuning in.

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