VanEck’s 2024 Crypto Predictions with Matthew Sigel

In today’s episode, Matthew goes over VanEck’s 15 hottest 2024 crypto predictions report. Matthew Sigel is the Head of Digital Assets Research at VanEck and has been since 2021. ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 https://feeds.flightcast.com/%E2%81%A0https:/k.xyz/bankless-pod-q2%20%C2%A0%E2%81%A0 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum ⁠ 👾GMX | V2 IS NOW LIVE https://bankless.cc/GMX 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🦄UNISWAP | ON-CHAIN MARKETPLACE ⁠https://bankless.cc/uniswap ------ TIMESTAMPS 0:00 Intro 4:55 VanEck Predictions Origin 5:53 Recession & Spot BTC ETF 8:06 4th Bitcoin Halving 11:45 BTC All-Time High 14:15 Ethereum Flip Bitcoin? 18:38 Post-EIP-4844 L2 Capture 22:26 NFT Activity Rebound 24:33 Binance 28:05 Stablecoin Market Cap 32:16 DEX’s All-Time Highs 37:17 Bitcoin Yield? 40:49 Blockchain Gaming 43:20 Solana Outperforms ETH 47:15 DePin 53:05 Corporate Holding Upside 56:24 DeFi & KYC 1:03:31 Closing & Disclaimers ------ RESOURCES Matthew Sigel https://twitter.com/matthew_sigel VanEck Predictions Report https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-vanecks-15-crypto-predictions-for-2024/#us-recession-arrival-and-debut-of-spot-bitcoin-etfs VanEck Solana Report https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-vanecks-base-bear-bull-case-solana-valuation-by-2030/ ------ Not financial or tax advice. See our investment disclosures here: https://bankless.com/disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Ryan Sean Adams?

  Bankless Nation, it's just about the end of 2023 and we are entering 2024. It's predictions time. We've got to make our New Year's predictions. We've got 15 of them today with Matt Sigel. He's the head of digital assets at Fanac. Fantastic predictions that span whether we're going to have a recession, talk about Bitcoin, whether we're going to get to all time highs, DeFi, ETH versus Solana, all of the things. David, were you surprised by any of these predictions?

• 0:25David Hoffman?

  Some of them are extremely precise. Not only did we get a Bitcoin all time high prediction, which is safe, but we got the day, the day of the Bitcoin all time high breaking, which is extremely specific. Some predictions for out of left field, some deep in predictions, some predictions about accounting and how that's actually helpful for our bags. And if you are in the middle of the Solana versus Ethereum narrative wars, we've got some predictions here for you as well. So whether you believe these predictions is up to you. They are all entertaining. None of them are financial advice. So let's go ahead and get into all of these predictions from Matthew Sigel. But first, a moment to talk about some of these fantastic sponsors that make this show possible, especially Kraken,

• 1:07David Hoffman?

  our preferred exchange for crypto in 2023 and 2024 is just around the corner. If you not have an account with Kraken, consider clicking the links in the show notes to getting started with Kraken today. Kraken knows crypto. Kraken's been in the crypto game for over a decade. And as one of the largest and most trusted exchanges in the industry, Kraken is on the journey with all of us to see what crypto can be. Human history is a story of progress. It's part of us, hardwired. We're designed to seek change everywhere, to improve, to strive. And if anything can be improved, why not finance? Crypto is a financial system designed with the modern world in mind. Instant, permissionless, and 24/7. It's not perfect and nothing ever will be perfect. But crypto is a world changing technology at a time when the world needs it the most.

• 1:50David Hoffman?

  That's the Kraken mission, to accelerate the global adoption of cryptocurrency so that you and the rest of the world can achieve financial freedom and inclusion. Head on over to kraken.com/bankless to see what crypto can be. Not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to US and US territory customers by Payward Ventures Eek, PVI doing business as Kraken. Arbitrum is the leading Ethereum Scaling solution that is home to hundreds of decentralized applications. Arbitrum's technology allows you to interact with Ethereum at scale with low fees and faster transactions. Arbitrum has the leading DeFi ecosystem, strong infrastructure options, flourishing NFTs, and is quickly becoming the Web3 gaming hub. Explore the ecosystem at portal.arbitrum.io. Are you looking to permissionlessly launch your own Arbitrum Orbit chain?

• 2:32David Hoffman?

  Arbitrum Orbit allows anyone to utilize Arbitrum's secure scaling technology to build your own Orbit chain, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you're a developer, an enterprise, or a user, Arbitrum Orbit lets you take your project to new heights. All of these technologies leverage the security and decentralization of Ethereum. Experience Web3 development the way it was always meant to be: secure, fast, cheap, and friction-free. Visit arbitrum.io and get your journey started in one of the largest Ethereum communities. Cello is the mobile-first, EVM-compatible, carbon-negative blockchain built for the real world. And now, something big is happening. Introducing the Cello Layer 2. It's a game-changing proposal that's going to bring Cello's rapidly-growing ecosystem home to Ethereum.

• 3:15David Hoffman?

  Vitalik has shared its excitement for the Cello Layer 2 on the Cello forum, so has Ben Jones from Optimism. But why? The Cello Layer 2 will bring huge advantages, like a decentralized sequencer, off-chain data availability, and one-block finality. What does all that mean? Rock-solid security, a trustless bridge to Ethereum, and more real-world use cases for Ethereum without compromise. And real-world adoption is happening. Active addresses on Cello have grown over 500% in the last six months. With the Cello Layer 2, gas fees will stay low, and you can even pay for gas using ERC20 tokens. But Cello is a community-governed protocol. This means that Cello needs you to weigh in and make your voice heard. Join the conversation in the Cello forum. Follow @celloorg on Twitter and visit cello.org to shape the future of Ethereum.

• 3:59Ryan Sean Adams?

  Bankless Nation, I hope you are ready for some predictions for 2024. What will the next year bring? Well, we have the perfect person to tell us, Matt Sigel. He's the Head of Digital Asset Research at VanEck. He's been there since 2021. VanEck has been totally doubling down, I would say tripling down, on crypto lately, particularly in the research that they've... Been presenting. We had Matt on the podcast a few months ago. And now he's back again with some of these fantastic predictions. By the way, toward the end of this episode, I think Matt's got some really interesting news for us with respect to the Bitcoin spot ETF. Okay, so that we'll save that as the cherry on top at the end of the episode. First, we're going to get to the predictions. Matt, welcome to Bankless. How you doing?

• 4:43Speaker 02

  Thanks for having me back, guys.

• 4:45Ryan Sean Adams?

  Okay, so let's talk about these predictions. You got 15. Before we get into the first one, we're just going to go go to the order and kind of grill you on each. Where did what? What's the genesis for these predictions? Have you guys done this in previous year? And like, how'd you come up with these things?

• 5:01Speaker 02

  Yeah, we did it last year. I'd say our track record is is mixed on how it all turned out, but it's really helpful for an investor to kind of like lay out a roadmap of how things may develop and then adjust your positioning as the facts change. So Yan asked for predictions and here they are. But, you know, to the little disclaimer is that we're really stepping into the realm of speculation here. But in this asset class, imagination is not a luxury, but a necessary locomotive. So, you know, I understand the skepticism that will surround these predictions. Send your complaints into the arena where I will find them.

• 5:43Ryan Sean Adams?

  Wait, where's the arena? Is that on Twitter?

• 5:45Speaker 02

  We're in it right now.

• 5:45Ryan Sean Adams?

  Complaints go? In the YouTube comments, I guess. Yeah, get mad at Bankless if you're upset at these. Okay, let's talk about the first one. This one was a little upsetting to me. I got to be honest, Matt. So prediction one, the US recession will finally arrive, but so will the first spot Bitcoin ETF. Over 2.4 billion may flow into these ETFs in Q1 2024 to support Bitcoin's price. It's not the second part of that that makes me nervous. It's the first part. So you guys think the US recession will arrive sometime in 2024. Explain that one.

• 6:21Speaker 02

  Yeah, I mean, this may come off as kind of crying wolf as everyone's been calling for a recession for a year now, but when you look at the data, the economic momentum has been slowing for months, and that creates an economy that's more vulnerable to shocks. So, leading indicators are now in recessionary territory. There's been 19 consecutive months of leading indicator declines. That's close to a record. We've got commodities and shares of retailers both struggling. Employment is softening. Corporate bankruptcy filings are back to early COVID levels, and the yield curve is inverted, but steepening in recent weeks. So, these are all very late-cycle dynamics. You can see it with the mentions

• 7:03Speaker 02

  of soft landing in the media, which have spiked, as they often do before an official recession is called. Crypto and Bitcoin have really only experienced one official US recession, Q1 of 2020, during which Bitcoin fell 60%, peak to trough. So, you know, we'll see how much that matters this time. It may be an irrelevant prediction, but, you know, we are prepared for volatility in the first half of the year, and that would line up with some of the price action that surrounded kind of pre-having Bitcoin in previous cycles as well.

• 7:36Ryan Sean Adams?

  So, Matt, if we see that recession, are you predicting the first half or second half? Because, you know, we've got an election going on in the US next year, too, which, you know, makes... There's definitely some political incentive to defer the recession as long as possible.

• 7:49Speaker 02

  I think the recession will be backdated to Q4. They tend to last one to two quarters. So, we're out of it, and spending ad dollars on election ads in Q3 and Q4, that typically lines up with pretty positive markets.

• 8:04David Hoffman?

  All right, going into the next prediction in the list, uneventful fourth Bitcoin having. Of course, the Bitcoin having, not a prediction. We all know exactly where that's coming. But, Matt, tell us about the specific nature of this Bitcoin having. What are the predictions you're making around this Bitcoin having?

• 8:19Speaker 02

  So this is a pretty easy one. The prediction is that the halving will proceed without a major fork or missed blocks in April 2024. And as the new coin issuance gets cut in half, we will see unprofitable miners disconnect. They will cede market share to those with low cost power. And then after a period of digestion, the Bitcoin price should rally sharply. One difference about this cycle than previous cycles that we can, will be able to observe in the markets is that publicly traded Bitcoin miners, so these are the stocks that you can buy like Riot and Marathon, like Phoenix that just went public in Abu Dhabi and is now the biggest Bitcoin miner by market cap in the world.

• 9:04Speaker 02

  These listed miners currently control a record percentage of the hash rate. It's more than 25%. And they, they almost all went bankrupt last year. So they've emerged from bankruptcy with much better balance sheets. There's very little debt among these companies and they should be set up for better performance next year.

• 9:26Ryan Sean Adams?

  Is that why you're saying significant gains for those low cost miners? Those are the miners you're talking about? And why does the, does the halving benefit them? Because it seems like their revenue is getting cut. Are you just saying the, the market for miners are healthier at this point and you're expecting some recovery?

• 9:41Speaker 02

  The overall market for miners is healthier with stronger balance sheets. They should be able to deal with the halving better than in previous cycles. But I think the distinction that we're drawing here is that there's a couple of publicly traded miners, namely CleanSpark and Riot, that have a cost base which is well below other peers. And so the call is, is if we do have a kind of a trickier Q1, then it'll be those guys who have low electricity costs and better balance sheets that will outperform the field. And then after the halving, assuming the Bitcoin price acts as expected, then the, the miners with trickier balance sheets, higher cost electricity may take the lead.

• 10:24David Hoffman?

  The typical meme around the halving is that, well, we have half as much Bitcoin being issued and going to the market, therefore bullish. But that's not a very sophisticated take because there's one more variable in that, which is, well, the miners actually decide when they're going to sell that Bitcoin. And I think over the last year, miners historically are known to be actually pretty good traders, if you like interpret them as like when they decide to sell and when they decide to hold. Is there anything you can add about this nature of Bitcoin coming onto the market that is like miners electing to take on debt in this present moment of the market cycle so that they can hold their Bitcoin to sell it at a higher price later? Is there any indication or information you can share here?

• 11:05Speaker 02

  The investors in the public markets don't want to see these miners take on debt because they all went bankrupt last cycle. So we have seen some large purchases of ASICS. We saw one today, Riot announced a big deal, but their net cash, Riot is, so it's not it's not a debt problem. It's just that being net cash, having low cost power is enabling Riot to hit the pedal on the gas and buy some more machines to try to set up these market share gains that are possible in that post-having period when the higher cost operators may be forced to shut down and stop mining.

• 11:43Ryan Sean Adams?

  Okay, prediction number three, here we go. Bitcoin will make an all-time high, I like those words, in Q4 2024.

• 11:51David Hoffman?

  Pretty narrow timeframe.

• 11:52Ryan Sean Adams?

  Yeah, potentially spurred by political events and regulatory shifts following a US presidential election. So we know we're getting a US presidential election, at least I sincerely hope that's the case. Potentially spurred by political events and regulatory shifts. So all-time high for Bitcoin by Q4 of 2024, and this is despite the recession prediction. Can you explain that one, Matt?

• 12:18Speaker 02

  Yeah, so I think we'll get to the more details around the ETF at the end here. And that should keep the price somewhat supported in Q1. So even if we get a recession, I'm not calling for a dump. But the main call is that in the second half, Bitcoin will climb this presidential-sized wall of worry. The percentage of the global population that will be voting in legislative and presidential elections next year will hit an all-time high. We've got data going back to 1800. Next year, 45% of all humans on the earth will vote in elections. Again, that's an all-time high. With that typically

• 12:58Speaker 02

  comes high volatility and the prospect for significant change. So we see mounting evidence that voters and courts are rejecting the anti-growth agenda of the green lobby. So we expect a combative election, but Donald Trump to prevail with 290 electoral votes, regain the presidency. That will, of course, raise optimism that the SEC's hostile regulatory approach will be dismantled. And maybe I'm being too cute with the timing, but I'm calling for an all-time high for Bitcoin on November 9. That will be exactly three years to the day from its last all-time high. And if you remember, Bitcoin's breakout in November 2020 also came exactly three years to the day from its November 2017 top.

• 13:43Speaker 02

  All right, we're showing it back. Cherry on the top. Cherry on the top. If BTC reaches 100K by December, Satoshi Nakamoto, Time Magazine Man of the Year. Right, I love this.

• 13:54Ryan Sean Adams?

  Wait, is that three predictions there? So Matt, not only did you call a date, you also called Bitcoin high, and you also called Trump as the presidential winner. And then you called the magazine cover of Time. That's like, that's at least three there, my friend.

• 14:10Speaker 02

  Wishlist predictions, you know, they start to blend a little bit when you're fully invested in this asset class.

• 14:16David Hoffman?

  All right. All right. Let's keep this going. Ethereum's market position behind Bitcoin. You are predicting that Ethereum will not flip Bitcoin in 2024. Flipping is not on the menu next year, but still will outperform tech stocks. Unpack this one for us.

• 14:30Speaker 02

  Sure. I remember being on a stage with you, David, a couple of years ago, and we were asked, yeah, that's right. And, you know, will ETH flip Bitcoin? Everyone on the stage raised their hand. And I said, no, I'm going to stick with it. So.

• 14:43David Hoffman?

  That was a flex, David. Or no, it won't soon?

• 14:48Speaker 02

  Not next year. Not next year.

• 14:50David Hoffman?

  Oh, sure. I can get behind that sadly.

• 14:52Ryan Sean Adams?

  Yeah. Matt, David is not wrong yet. Okay. He's not wrong yet.

• 14:57Speaker 02

  You know, my call is that there's, there's more money in TradFi looking to get involved in crypto than there is in crypto that can be recycled. And in the current regulatory regime, Bitcoin's regulatory status is unique and its energy intensity is also unique. And it's the energy intensity that is attracting this interest from quasi-state entities in Latin America, in the Middle East, in Argentina. So we expect Argentina will join El Salvador, the UAE, Oman, and Bhutan as the fifth country to sponsor Bitcoin mining at the state level. We expect Argentina's state-owned energy giant, YPF, will mine digital assets using stranded

• 15:37Speaker 02

  methane and gas. And so similar to past cycles, during a halving year, Bitcoin will lead the market and then post halving, the value will flow into smaller tokens. So ETH will start outperforming Bitcoin post halving. It may outperform for the year, but it's a high hurdle on a flipping. And we also expect ETH will lose market share to other smart contract platforms with less uncertainty surrounding their scalability roadmap like Solana.

• 16:04David Hoffman?

  Okay, hold on. This is not the same sounds that I've heard other people predict, make predictions around the Bitcoin ETF and Ethereum ETF. Ethereum, ESG friendly, ESG approved compared to Bitcoin because of Bitcoin's energy consumption. Also, external like trad investors enjoy Ethereum more because of its similarity to a high-growth tech stock in comparison to Bitcoin. And so what some of the rumblings I've heard is that when we have both a Bitcoin and an Ethereum ETF, Ethereum will have outsized flows versus Bitcoin in relation to its market cap. What would you say to this alternative?

• 16:42Speaker 02

  I'll push back on that. I'll push back on that. First is that I don't believe in ESG. I think the ESG narrative is fading. The courts in Canada have dismantled Trudeau's green agenda. The UK Prime Minister has backed away from their green agenda. South Korea has just reinstituted plastic straws, baby. So that story is going away, right?

• 17:07David Hoffman?

  Bullish carbon use.

• 17:08Speaker 02

  The other wrinkle here is that, especially for these ETFs in the US, it doesn't appear like there will be staking involved in those ETFs because of the regulatory uncertainty. So I'm not sure that the product will have quite the same appeal as the buy-in hodl Bitcoin ETF, at least in the early days.

• 17:28Ryan Sean Adams?

  And Matt, do you think that Ethereum will get an ETF in 2024? Like, what's your over/under on that prediction? It's not one of your 15, I don't think, but I'm curious about that.

• 17:37Speaker 02

  I do. I do. I think the deadlines for the SEC to rule on the spot applications that are pending, which include ours, is May. So there is some time.

• 17:48Ryan Sean Adams?

  So that'll be good for Ethereum, and you're saying that in this prediction, not good enough to flip in Bitcoin, and not good enough to preserve its market share in the face of what you call growing competition from other smart contract platforms. That's the prediction for 2024.

• 18:04Speaker 02

  Precisely.

• 18:05David Hoffman?

  Okay, so that kind of seems to fit under the general sentiment that Ethereum is just squeezed. You got the bigger brother capturing a lot of attention on the trad side of things, and then you have Solana, which is like the shiny new fast toy on the crypto side of things. Are you saying that you're in line with this kind of like vibe of the crypto space in the present moment?

• 18:25Speaker 02

  Yeah, I mean, I think that ETH is going to outperform BTC for next year. I just think that most of that outperformance will come in the second half of the year. And, you know, we can, we can get into with the next one, why that's the case, but there's a lot that has to do with ETH's roadmap.

• 18:39Ryan Sean Adams?

  So prediction number five, post, and this is what I love about this new VanEck that I'm seeing. Maybe you guys were always doing this, but I didn't realize you were going this deep on crypto. It's great to see. Post EIP 4844 implementation, Ethereum Layer 2s will capture the majority of EVM-compatible TVL and trading volume. Of course, as crypto natives, we understand what EIPs are, and we've defined what this is many times. We've got entire episodes on EIP 4844. But tell me about this prediction. So you're saying Ethereum Layer 2s will capture the majority of EVM-compatible TVL, total value locked, so assets under management in these chains, and trading volume. What's, what are the details there?

• 19:21Speaker 02

  Well, as you guys have covered so well, Ethereum will have a fork next year. This fork will reduce transaction fees dramatically and improve scalability for Layer 2 chains like Polygon, Arbitrum, Optimism, and others. So one of the challenges of managing assets in this space, as the L2s have come to market, is that the market share has been super volatile, and investors have just been kind of going where the airdrops will be. And it's hard to allocate capital if you have to change your mind every couple of months, especially when you're managing a decent amount of money and the space is not that liquid. So I'd say my confidence level on this prediction is perhaps lower than the others. But our

• 20:06Speaker 02

  call is that within one year of the Ethereum fork, the upgrade, EIP 4844, Ethereum L2s will consolidate down to two to three dominant players as measured by value and usage. And one of those players will achieve a higher monthly DEX volume and TVL than the ETH mainnet for the first time. And collectively, those chains may accumulate 2X the DEX volume of Ethereum. Right now, that ratio is 0.8X, and 10X the number of transactions. As you know, right now, that ratio is about 5X.

• 20:39David Hoffman?

  So this is predicting that one of Ethereum's Layer 2s will actually be a stronger settlement layer than Ethereum itself, at least in terms of on-chain DEX activity?

• 20:48Ryan Sean Adams?

  I wouldn't say that settlement, because it still settles back to Ethereum.

• 20:52David Hoffman?

  Sure.

• 20:52Speaker 02

  Exactly.

• 20:55Ryan Sean Adams?

  But, but, but, but it does predict, you are predicting more of kind of like power law winners in the layer two space rather than just, we have thousands of chains. And it, you know, like all of these layer twos and the TVL is distributed across these hundreds or thousands of chains.

• 21:08Speaker 02

  Yes, by volume. Now, by users, the long tail may not, you know, by users, there may be still plenty in the long tail, but by assets, we think it'll consolidate.

• 21:22David Hoffman?

  So Matthew, I can tell you about like 10 different layer twos that are very, very different from the optimistic rollups like Arbitrum and Optimism that we know, or even the ZK rollups like Polygon that are coming onto the scene. There's FHE-based layer twos. There is Solana Virtual Machine-based layer twos. There's Privacy layer twos, just like a splattering of new flavors of layer twos. And what you're saying is that the layer two Cambrian explosion of different flavors, nah, no, we're getting consolidation, not growth.

• 21:51Speaker 02

  Yeah, I mean, all that liquidity fragmentation is suboptimal and eventually it, there's no choice but to accelerate the dominance of the winning L2s. And that's already occurred in DEXs, right? Where Uniswap, Pancake, Curve, the three of those are 80% of DEX volumes in 2023. So, you know, we're going to make the call that that same market consolidation will occur across L2s. We think Arbitrum and Optimism are probably the main contenders there.

• 22:19Ryan Sean Adams?

  I can't wait to ask you about power law winners of ETFs, by the way, Matt. But, but again, that's a tease toward, toward the end. We'll get there. Sorry, David. Go ahead. Number six.

• 22:28David Hoffman?

  Number six, NFT activity peaks to new heights. NFTs are coming back, Matthew. I know we've seen a few NFTs pick up in steam, but NFTs across the board, the entire sector's coming back to life. What's this one?

• 22:40Speaker 02

  Yeah, VanEck intern laughed at us about this one, but we are sticking to it. NFT activity will rebound to an all-time high. We think the activity will gravitate towards the top collections on ETH, better crypto games, and importantly, new Bitcoin-based offerings. So if I were to tell you that kind of since inception, the issuance value of NFTs ETH to Bitcoin is a 50 to 1 ratio, 5 0 to 1. In the last month, that ratio is 1 to 1. So we're making a call that for 2024.

• 23:16David Hoffman?

  In terms of quantity or value?

• 23:18Speaker 02

  Value.

• 23:19David Hoffman?

  Value of the NFTs?

• 23:21Speaker 02

  Yep, at the mint. So we're going to make a call that for 2024, that ratio will be 3 to 1 ETH to BTC, which is still enormous progress for Bitcoin.

• 23:31Ryan Sean Adams?

  What the heck? So Bitcoin, the NFT platform, that's what you're saying?

• 23:34David Hoffman?

  Yeah, hang on, I'm calling, I'm calling some flubby weird numbers here. Bitcoin NFT minting is just like a super weird metric to measure. How do we, how do we actually measure the value of these things? Because we're talking about ordinals, right?

• 23:47Speaker 02

  Among others, ordinals, inscriptions. We're using the good folks at Crypto Slam for their data on that number.

• 23:54Ryan Sean Adams?

  I, I don't think that's a weird, like, you can definitely measure the value minted along with like existing value, like both are not comprehensive measurements, but both are definitely measurements.

• 24:07Speaker 02

  So in November, that number was 319 million for Ethereum, 363 million for Bitcoin. So there's, there's a flippin'.

• 24:17Ryan Sean Adams?

  When you say Ethereum, are you talking, are you including the L2s and as well in, in kind of the Ethereum number? Are you just talking about like main net Ethereum when you're, when you're doing a 3 to 1 comparison?

• 24:27Speaker 02

  Incorporates L2s, we might have to.

• 24:29David Hoffman?

  Wow.

• 24:30Speaker 02

  Check that for you.

• 24:30Ryan Sean Adams?

  That's a big, that's a big bull prediction on Bitcoin. Okay, so prediction number seven, let's talk about this. Binance will lose its number one position for spot trading with competitors like OKX, Bybit, Coinbase and BitGet contending for leadership. Coinbase's future market may exceed 1 billion daily volume as red, as regulated index inclusion becomes key. Okay, so Binance without CZ, I guess now everyone knows that, of course, he's, he's no longer the leader of Binance is going to lose its number one position for spot trading. It's maintained that for a number of years, certainly maintained it during the last bull cycle. Explain, explain yourself, Matt.

• 25:08Speaker 02

  This is an easy one. Nobody likes the colonoscopy and Binance is about to have a three-year colonoscopy with the DOJ up their ass, checking all of the data. And we don't think investors are going to be too keen on putting their largest trades on that platform. So we think they'll lose share. The point of that prediction about index inclusion, I just want to spend a minute on. One of the unique dynamics in this Bitcoin ETF battle is that the SEC objects to market manipulation of Bitcoin, right? They think that Binance was using its

• 25:52Speaker 02

  own wholly-owned market makers to wash trade coins back and forth between itself and that that a lot of that volume is fake. And if you look at the underlying indices that the ETF sponsors are using to track the price of Bitcoin, there's CF benchmarks, there's CoinDesk indices, VanEck owns a company called Market Vectors, which is an index manufacturer. Those indices have to decide what prices are they going to use to calculate Bitcoin. And the regulator doesn't want them to use Binance prices. So if you look at the exchanges whose prices are

• 26:32Speaker 02

  included in the feed that constitutes the Bitcoin ETF, no Binance. And we think that, and it's a very small handful of exchanges that are included, because the SEC wants to see these surveillance sharing agreements, data sharing between the listing exchange, call it NASDAQ or CBOE, and the crypto exchange. You know, Binance is not going to be approved for that, and being approved for that is key. That's why Coinbase really sits in the catbird seat among US players.

• 27:01David Hoffman?

  So part of this prediction, I think, is bullish coin, Coinbase stock on the on the public market. And coin, the story of coin has, over the last like six weeks or so, is up 76%. What, where is, how, is this a kind of a one-to-one transfer of value from Binance to Coinbase, would you say? Because like-

• 27:20Speaker 02

  Are you trying to get a bonus prediction here, David, on the price of coin?

• 27:23David Hoffman?

  Yeah, what's the impact on Coinbase's valuation?

• 27:26Speaker 02

  It's bullish for Coinbase. They should be a market. They've been gaining market share all year. They should gain more market share next year. Profitable cash on the balance sheet. They can pay back that debt. They've got the custody business. They're doing the custody for the vast majority of the ETF sponsors. I think it's a pretty clean and obvious story with a lack of other stocks in the market to buy for large cap TradFi PMs. We like Coinbase a lot here.

• 27:56Ryan Sean Adams?

  What I heard from that was all time high Coinbase stock by Q4. What do you think, David? Is that what you heard?

• 28:04David Hoffman?

  Is that in the predictions, Matthew? Not in there.

• 28:06Ryan Sean Adams?

  Not in there. Okay, I'll hold on to it, though.

• 28:09David Hoffman?

  All right, coming up next, stablecoin market cap hits record high with USDC market share recovery. Usually, the sentiment around USDC hasn't been great as USDC has kind of bled into flows into Tether. Like, every dollar that USDC seems to lose, Tether seems to pick up. You're calling for a reversal of this. Unpack this prediction for us, Matt.

• 28:30Speaker 02

  Yep. So, we see total value of stablecoins on-chain reaching an all-time high above $200 billion. It's currently $128 billion. We see a number of regulated stablecoins that will launch in Europe in line with Europe's new MICA regulation. We're seeing a proliferation of yield-bearing stablecoins and the first quarter-over-quarter rebound in stablecoin market cap in a couple of years. So, the more I think that, you know, stablecoins reaching an all-time high, not such a controversial prediction. More controversially is the one that USDC will flip Tether. So, we think there's going to be more institutional adoption

• 29:13Speaker 02

  this year, and those institutions will reveal a preference for USDC that we can already see on some of the newer L2 chains. I'm curious to hear guys' thoughts on that.

• 29:23Ryan Sean Adams?

  Wait, so you think that not only this, because this isn't in the, at least, the Twitter version of these predictions, Matt, you're also saying that USDC will flip Tether?

• 29:31David Hoffman?

  That's a hot prediction. That's a hot take.

• 29:34Ryan Sean Adams?

  That's even more bold.

• 29:36Speaker 02

  Well, there's a catalyst for that, and it involves a three-letter acronym called DOJ.

• 29:46David Hoffman?

  That's another prediction.

• 29:47Ryan Sean Adams?

  There's another one. There's another acronym KYC. You might have heard of that one. So, you know, the lawmakers are asking for the US DOJ to take action against Justin Sun and Tron. You know, that could be a catalyst.

• 30:06Ryan Sean Adams?

  I mean, last week, I mean, we were just talking about this earlier this week.

• 30:10Speaker 02

  Justin Sun is the last big dubious character in crypto that seems to be unscathed.

• 30:18Ryan Sean Adams?

  But Treasury is actually talking about Tether specifically at this point, like specifically. So this is a prediction of kind of some action, I would guess. Like, can I, and you also say in this, in this prediction that emerging layer twos will be a catalyst for USDC. And you certainly see that, like, you can imagine that is, that is part of the reason Coinbase decided to launch its base chain as, as a layer two, to kind of like, you know, push out USDC everywhere. But I want to ask another question, like, part of the reason I think that there's been kind of a vacuuming of liquidity out of stablecoins is because we don't have a tokenized version of a treasury on chain at this point. And so like, I don't necessarily want to keep my funds in, in stablecoins.

• 31:03Ryan Sean Adams?

  If I can go to a mutual fund and get, you know, my yield, I get my five, collect my 5% courtesy of, of the Jerome Powell airdrop. And so to what extent does that factor in here? Do you think USDC will have some sort of treasury product? Or, you know, what do you think about tokenized treasuries? Does that, does that factor in at all?

• 31:22Speaker 02

  Nobody's figured out how to pass along the yield on treasuries to US-based stablecoin holders.

• 31:32Ryan Sean Adams?

  And Thank you, Gary.

• 31:34Speaker 02

  Yeah, that's unlikely to change until he's gone.

• 31:38Speaker 02

  But Circle will be the closest to enabling that. And these kind of quasi KYC L2s that are beginning to emerge are likely to use USDC rather than Tether would be my guess. But it's not, you know, it's not one of our predictions that it's a Circle USDC yield product which catalyzes this market share shift. It's more about on the margin. The institutions are coming this year on the margin. They prefer USDC to Tether and enforcement action versus Tron or Justin Sun might catalyze some Tether market share losses.

• 32:17Ryan Sean Adams?

  Prediction number nine, DEXs will hit all time highs in spot trading market share, driven by fast blockchains like Solana and wallets, enabling automated transactions, promoting on-chain trading and self custody. So this bull market is the bull market of the DEX is what you're saying. All time highs here and part of the catalyst here is really cheap, fast block space. Explain this one for us.

• 32:44Speaker 02

  Well, you can see following the GTO airdrop that Solana just flipped Avalanche in DeFi TVL, optimism and Polygon look next after that Arbitrum. So I think you guys have probably been on the Solana chain and the experience is very pleasant compared to what many people first experienced with ETH three years ago. And with these airdrops that are here and coming, there's going to be more folks that are using specifically Solana. And I think that is what's going to power the DEX's share of spot trading, which peaked

• 33:27Speaker 02

  around 20% in June of this year to make an all time high closer to 25%. You know, yep, go ahead.

• 33:36David Hoffman?

  Oh, I will say, so the first time I touched the Solana chain was in April of this year when I bought a Mad Lad. And then also, I touched it for the first time since then, yesterday. And everyone's like, oh, this Solana UX, it's so good. It's so refreshing. It's so like, feels, it feels like Web 2. And I'll say, it's just like, it feels like optimism. It feels like Arbitrum. I think the whole entire narrative around crypto right now-

• 33:58Speaker 02

  But David, I don't have to bridge. I don't have to, like, go through all this-

• 34:03Ryan Sean Adams?

  David, these are your predictions. These are Matt's predictions. Stop.

• 34:07David Hoffman?

  All right.

• 34:08Ryan Sean Adams?

  No, I want the pushback. But, but you're, this is a general prediction about DEXs, but you're saying specifically DEXs on Solana as well. You're not just saying DEX volume is all time highs. You're saying Solana specifically is a big driver towards those DEX volumes.

• 34:22David Hoffman?

  Correct. You know, putting the entire order book on chain is not possible on ETH mainnet. It is possible on Solana. So the marginal crypto user who's first experience is with Solana is more likely to make an on-chain transaction. Hmm. All right. So that, these are all predictions one through nine. We still have 10 through 15 left to go, which includes more Solana predictions, which I'm just super stoked for. So we're going to get to all of these and more. But first, a moment to talk about some of these fantastic sponsors that make the show possible. Metamask Portfolio is your one-stop shop to navigate the world of DeFi. And now, bridging seamlessly across networks doesn't have to be so daunting anymore. With competitive

• 35:04David Hoffman?

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• 35:49David Hoffman?

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• 36:33David Hoffman?

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• 37:15David Hoffman?

  team in DeFi. Visit app.uniswap.org to get started today. And we're back, starting with more Bitcoin stuff. We'll get to GameFi in a second and then Solana after that. Prediction number 10: Bitcoin yield opportunities driven by remittances in smart contract platforms. I will say, I did not have this one in my bingo card for this episode. Matthew, unpack this one. What is this emergence of Bitcoin staking prediction?

• 37:39Speaker 02

  Yeah, Bitcoin yield will be a thing again in 2024. Remittances will emerge as a killer blockchain use case. They always have been, but easier off ramping and spending of stable coins will make it easier for the recipients to monetize their remittances. And given the use of Bitcoin and Layer 2 Lightning Network in some remittance corridors, Bitcoin staking will become a narrative in 2024. Where does the yield come from in staking? It comes from channel fees, which are low. Staking to Lightning nodes happens today, but it is risky and has low return because your Bitcoin is used for payment settlements on the Lightning Network.

• 38:21Speaker 02

  But there are new protocols that abstract some of the technical nuances of managing these Lightning nodes. There are also federated self custody solutions that are on their way out. So users should be able to participate in the remittance market from cold wallets and earn some yield. That yield may be low and it may be hard to do, but I think that'll be a new narrative for next year. And there's another Bitcoin yield narrative, which is using Bitcoin as a provider of security to proof of stake blockchains like Babylon. You may have seen their capital raise yesterday. That's a Cosmos-based chain that allows Bitcoin holders to earn yield, offering non-custodial staking of POS chains.

• 39:05Speaker 02

  So you are making a prediction on the Bitcoin app layer? No, I mean, that's not. That second one is not. That second one is basically like Babylon is like an Eigenlayer sort of play for Bitcoin. And you're actually using the monetary value of Bitcoin to secure an entire chain. Doesn't necessarily mean kind of the app layer, but. App layer expansively is how I would say that, yeah. Yeah, but what I did here is the year of Lightning for 2024. And I've heard that in so many predictions for a very long time, Matt. Is it finally going to happen? Like, why hasn't Lightning taken off in the past 10 years? I think it's too decentralized and there's been no like VC driven

• 39:49Speaker 02

  driving force to power this thing forward. So everything just kind of takes more time. But I've been pretty impressed with some of the protocols that I've been looking at, like one is Amboss, which basically makes a market for lightning channels so that you can sell your lightning channel and earn a yield and vice versa. These federated self custody solutions like Fediment, you know, it's a slower ramp, but when it takes off, there's going to be a big market for yield on Bitcoin. So this is kind of a sleeper for next year that Bitcoin holders will finally be able to earn some yield and participate in an array of other productive use cases for their Bitcoin from self custody.

• 40:34Ryan Sean Adams?

  That's the key, self custody, because Bitcoin yield was a thing last bull run, if folks remember it, 2021, except in the form of Celsius and BlockFi and it all got rugged. So hopefully Bitcoin holders will learn their lessons this time and only trust the self custodial ones. All right, let's talk about prediction number 11. A breakout blockchain game may surpass 1 million daily players. Immutable X is poised to climb market cap ranks with key releases and the mutable passport, streamlining wallet usage and enabling wider adoption. I think 2024 could be the year of the blockchain game, but it's, you know, games are notoriously

• 41:15Ryan Sean Adams?

  difficult to build. It takes time. But explain this prediction. You think 2024 GameFi could make a resurgence?

• 41:23Speaker 02

  Yeah, so there's been $14 billion of investment into Web3 gaming over the last three years. And the best we have to show for it so far is Alien Worlds, which is a game on the WAX blockchain. Who's heard of that? They claim 400,000 daily unique active wallets. We think the majority of these are probably bots farming the tokens due to the simplicity of the games. So our call is that from this $14 billion in investment, a real breakthrough game will emerge that can surpass 1 million plus daily active users, which is still quite a small

• 42:04Speaker 02

  number in the context of the overall gaming market, which is $200 billion a year. And here, we're just, we're going with the, with the largest player. Immutable has multiple AAA games being built on their platform that implement token models that can't simply be farmed. It's where the games are truly fun to play. So these titles have been building for several years. They have more than $100 million in funding. A number of them are being released next year. We also like their wallet management. They've got this passport that allow you to log into games and manage all your blockchain items through one single sign-on process, which abstracts away all the blockchain interaction. They've got

• 42:47Speaker 02

  distribution partners like Epic Games and GameStop. So the call is that one of those titles becomes a mainstream hit.

• 42:54Ryan Sean Adams?

  Okay. And if one of those titles becomes a mainstream hit, can you tell me what that is bullish for? You're calling out specifically Immutable. So message received there. Is there anything else that, that benefits from this, aside from obviously like the game, the winning GameFi games themselves?

• 43:11Speaker 02

  Well, that would be ETH, sir. I'm ready for it.

• 43:14Ryan Sean Adams?

  ETH? What? The forgotten asset. Okay. I'd be ready for it as well. Speaking of ETH, though, let's get to number 12. David, what's this one?

• 43:22David Hoffman?

  Yeah. Number 12. Solana outperforms Ethereum. Wow. And researching T5 TBL. This analysis perceives Solana becoming a top three blockchain by market cap. And I think it's not far off. I think only one other chain. Binance Smart Chain, I think, is ahead of Solana before it needs to flip Binance to dethrone and get itself into number three. Talk about this prediction.

• 43:46Speaker 02

  XRP, sir. XRP also needs to be flipped.

• 43:48David Hoffman?

  I would be remiss for forgetting XRP, I would say.

• 43:52Ryan Sean Adams?

  How dare you.

• 43:53Speaker 02

  Well, part of this prediction also is that Solana will join the spot ETF battles. We think a number of asset managers may submit filings. That's no comment on our own plans. And one headwind I would highlight to that call is that there is no Solana futures market on the CME. So that problem may have to be fixed before they can be a Solana ETF. But look, the chain continues to take share. We think that the Solana-based Oracle Pith is a better model than Chainlink. There's an out case for Pith flipping Chainlink in total value secured next year.

• 44:36Speaker 02

  Right now, those numbers are 15 billion versus 2 billion. And we think there's a couple of genuine innovations that Pith has brought to the market. The pull architecture, their confidence interval system, the self custody trading experience on Solana just continues to impress us. And we think it's pretty clear that they will take share next year again.

• 44:59Ryan Sean Adams?

  I'm definitely getting a flavor for the VanEck thesis going into 2024. And it's definitely pretty heavy Bitcoin and Solana as a recipient. So do you think, Matthew, that Solana becomes kind of the vanguard of DeFi this cycle rather than Ethereum in the Layer 2 ecosystem? And is it the big winner in terms of the new value unlocked in DeFi?

• 45:23Speaker 02

  Certainly from the marginal flow perspective, yes. We're not making the call that Sol is going to flip ETH either in market cap or in TVL. But it's interesting, when we have these models, right? We came on and talked to you about our ETH price target. We put out a Solana price target. Solana's run quite a bit since then. There's actually the same amount of upside now in our models, both for ETH and Solana. So that would argue for similar position sizes. But one of the interesting things about our model for both of these projects is we have Solana monetizing at one-fifth of the rate of ETH, right? It's a lower cost chain. There's less value flowing through the token. As the transactions pick up, we think Solana could actually raise prices.

• 46:07Speaker 02

  And I guess what I'm saying is that there's more flex to raise our numbers for Solana than there is for ETH right now. And we've got about a 5X return for both, given our current price targets.

• 46:19Ryan Sean Adams?

  Not to go down a rabbit hole, but we will include a link to that report in the show notes. One quick question there. When you guys are thinking about fees generated by Solana, is it primarily through the form of like MEV, like block ordering type sales rather than fees? Or do you also think, you know, I think you just said that fees would go up too, and actual user fees. But is there a higher proportion of like MEV from Solana? Because that's sort of how I think about Solana's eventual value proposition.

• 46:47Speaker 02

  Yeah, we have a higher percentage of the value coming from MEV in Sol than for ETH. But our foundation is that Solana is building from an abundance mindset and keeping prices extremely low at the beginning to catalyze activity. And that will set them up to be able to monetize more fully and raise prices after the activity comes. Whereas ETH is kind of starting from the high price and then looking to cut prices. It's kind of an opposite approach.

• 47:18Ryan Sean Adams?

  Okay, let's talk about prediction number 13. This is a deep in meaningful adoption of deep in networks, especially Hive Mapper and Helium. They'll see increased adoption with Hive Mapper mapping significant distances and Helium's 5G network expanding rapidly, offering cost-effective alternatives to traditional infrastructures. We actually haven't done a lot of content on Bankless about deep in. Could you maybe explain what it is at a high level, Matt, and then get into what you're predicting here?

• 47:46Speaker 02

  Sure. Hive Mapper, in my opinion, is the best example of a decentralized, physical infrastructure network. Basically, they are trying to replicate Google Street View in a bootstrapped, community-owned network. And once the map is built, then anyone can come and license that API, just like a Google Street View customer would license the Google API. And fleet operators like UPS or FedEx who pay Google millions of dollars to embed that mapping API into their like built-for-purpose.

• 48:30Speaker 02

  Delivery apps will end up spending these honey tokens and you've got this virtual cycle. So I bought one of these dash cams right when they came out like 16 months ago. You mount the dash cam in your car as you're driving around, it's mapping all your environment and every week you get these honey tokens that are airdropped to you. There's a curators in the middle who ingest that data, scrub the license plates and other kind of privacy information. They get paid honey tokens for collating and cleaning that data. And then the third side of the network is anyone who wants to license it. And the mapping business is like a $15 billion annual top line industry. It's dominated

• 49:12Speaker 02

  by three players. So it's a oligarchy. They they charge very high rents. And we think that a project like Hive Mapper can offer considerable consumer welfare by giving the same data or even better, because Hive Mapper is going to sell realtime data at a cheaper price. So I just want to disclose, we do have a position in this token in one of our strategies.

• 49:36David Hoffman?

  One thing I was learning when I was diving into the deep end world, Matt, is there's like 30, 40, there's a ton of projects out there. And so I thought there was like a handful of them. And I've heard of helium, I heard of a Hive Mapper. I go in there and like I look around, I was like, there's way more than I thought there were.

• 49:52Speaker 02

  Yeah, there's even a coin market cap segment, there's even a coin market cap sector that they just put on their site to capture that, that ecosystem as well. So, you know, our conviction is mostly with Hive Mapper and with helium. So the specific predictions is that Hive Mapper is going to map its 10 millionth unique kilometer. That would be 15% of all global roads capacity. And as a reminder, they use their native token honey to incentivize these thousands of drivers worldwide to mount dashboard dash cams to their cars and then contribute to that growing database. And for helium, the prediction

• 50:32Speaker 02

  is that the network will reach 100,000 paying subscribers for its nationwide 5G plan, which was just announced yesterday. Yesterday, they currently have 5,000 subscribers. So that would be a 20x growth. And helium hotspots can be set up by anyone. Again, those operators are paid through CryptoRails in the helium native token. So that's a pretty powerful system of incentives. And we think it'll give them some advantages relative to the incumbent wireless infrastructure players.

• 51:02Ryan Sean Adams?

  Matt, I understand the bull case for like deep in this kind of model is basically like, oh, you're using it to bootstrap a network, basically through token incentives. I mean, Chris Dixon has even given this take before. I think the bear case, though, is just like a glorified Ponzi scheme or like a pyramid scheme, which is basically like people are getting paid in these tokens. But the tokens actually aren't tied to any values, not like they're capital assets or anything else. And they're just like going up in price because more people are getting in on the pyramid scheme. And as it goes down, what's your conviction around that kind of a bear case? That this is just inflated expectations that are hyping up tokens?

• 51:45Ryan Sean Adams?

  And it'll go up, of course, and it'll drop back down. And all of the network effects will completely dissipate as the value of the token decreases. What's your take on that?

• 51:54Speaker 02

  I think that's a fair bear case if the demand doesn't materialize. And helium's first IOT network, the demand never materialized. So I call it a failure. And you need to see folks actually sign up for this nationwide 5G plan. And then the other thing I'd say is that some of these deep end projects

• 52:21Speaker 02

  are skating around the edges of what is a security versus a commodity. And that's a risk for a number of these projects.

• 52:31David Hoffman?

  Yeah, the token model for these products do kind of remind me of the 2017 velocity token, utility tokens for their for their projects, which is kind of why I've always like been a little bit skeptical with these whole systems. But sometimes, old ideas just need to become reintroduced in newer times. So and maybe with newer blockchains. When I was looking into these deep in the token models, it did remind me of the 2017 velocity token, utility token model, which is always kind of why I approached these newer projects with skepticism, like I've seen this token model before. But at the same time, sometimes old ideas just need to be rebirthed in newer times with newer infrastructure. So I will remain open to that. Let's go into prediction number 14. Corporate crypto holdings boosted

• 53:15David Hoffman?

  by new accounting standards. This is not a prediction that I would have been able to articulate. That's for sure. Matthew, what's going on here? Yeah, what is this?

• 53:22Speaker 02

  Yeah, so the call here is that Coinbase will become the first publicly traded company to break out and report layer two blockchain revenues in its quarterly filings. And we think that base protocol is going to cross $100 million in annualized revenues and become a meaningful contributor to the business. And one of the tailwinds for Coinbase breaking out that business and perhaps denominating it in Ethereum are changes in the accounting standards, which now allow corporates to book mark to market gains on their crypto. So it used to be the case that if a corporate bought $1 billion in Bitcoin and it went

• 54:03Speaker 02

  down by 50%, they had to take a haircut and mark that Bitcoin down by 50% on their balance sheet. But if it doubled again back to back to $1 billion, they weren't allowed to book the gain. So for a lot of companies, that's just the way it was. Yeah, I don't disagree. Seems dumb. Yep. So that, you know, Tesla and Elon were puking their Bitcoin into the 3AC bankruptcy in Q1 and Q2 of last year, partially for that reason. These new guidelines should make it easier for companies to buy and hodl their crypto. The changes don't take effect until 2025, but they they're they can. Be adopted by corporates earlier if the corporates decide.

• 54:45Speaker 02

  So it also lends some credence to the case that a major non crypto financial entity like a bank or an exchange could announce a quasi-public blockchain like an L2 and then with bridging capability to public blockchains by like regulated authorized participants. That might be a 2025 call, but you can look at SocGen, for example, announcing a stablecoin yesterday in Europe as some evidence that we're on the way. And these FASB accounting guidelines will make life easier for corporates that want to get in the game.

• 55:20Ryan Sean Adams?

  So I think if FASB accounting guidelines sounds really boring to you, Bankless listener, let me also explain that in another way. So what Matt is saying, what he's predicting is basically corporate like upside in crypto that we've not seen before. So in the case with the accounting standards, you know, in previously, previous to 2025, if a company purchased Bitcoin, Ether, some sort of crypto asset on their balance sheet, right? And it goes up, like they can't mark that to market. So it's like, there's not the benefit to them. They also don't have a model for how a layer two like actually works. And so Coinbase is kind of, because it's a publicly traded

• 56:02Ryan Sean Adams?

  company, it's going to start help teaching TradFi and Wall Street how revenue generation can work in the world of DeFi because the base layer two is going to start throwing off some fees. So all of that is basically a predictor of corporate adoption of purchasing crypto assets, but then also maybe using blockchain in a way to produce revenue in the way they haven't previously.

• 56:27David Hoffman?

  Let's get into prediction number 15. This is the final prediction of the report. DeFi's reconciliation with KYC regulations. I already don't like the sound of this. It sounds like we are having to kind of come to terms with the powers of the nation state is the vibe here. Matthew, what's going on?

• 56:45Speaker 02

  Yeah, so the call here is that KYC-enabled and like walled garden applications that use the Ethereum attestation service or Uniswap hooks will gain significant traction and may even approach non-KYC applications in user base and fees. So Uniswap is likely to lead enabling this functionality, and we think that'll drive institutional liquidity and volume to the protocol, and that the additional volume from these KYC gated hooks that Uniswap will enable will significantly bolster protocol fees because they'll allow new entrants to participate in this

• 57:29Speaker 02

  version of DeFi without the fear of interacting with OFAC sanctioned entities. You know, we think that'll probably help Uniswap reinforce its moat and competitiveness, but the main call is that Ethereum attestation service is a functional way now to verify identity and KYC status. Coinbase has already started to build its on-chain verification service on top of this Ethereum attestation service, and that should catalyze some additional institutional participation. You might not want to call it DeFi, but it's at least trading from self custody.

• 58:13David Hoffman?

  Okay, so with this Uniswap hook thing, there are hooks that are being developed that can be a little bit more expressive with allowing permissions as to who can trade and also who can access liquidity. So there's a potential hook out there that somebody adds liquidity into Uniswap from a KYC institution and only allows for other KYC people to leverage that liquidity. And if they are not trading through that Uniswap hook, then they're trading on vanilla Uniswap in the non-KYC fashion, but they're not having access to that liquidity. Is this kind of the model that you're talking about?

• 58:46Speaker 02

  Yeah, that's right. Yeah, so Uniswap hooks allow individual liquidity pools on Uniswap to check a wallet's KYC status before making Trade and that effectively will KYC gate specific liquidity pools. That's launching soon on Uniswap V4. Now, there's a nuance here, which is that Uniswap is permissionless and immutable. So nothing stops anyone from creating a new liquidity pool without the KYC check. And, you know, having those separate KYC pools and non KYC pools could fragment liquidity and lead to worse trade execution for consumers. But we're, you know, it's up to the builders to build hooks.

• 59:29Speaker 02

  You know, there's one that works with WorldCoin ID now. I noticed that in the UK, they may need to scan your eyeballs before you look at porn. Like, do you want that? That story just came out this week. Like, do you want the government scanning your eyeballs? Or do you want, you know, a decentralized protocol scanning your eyeballs? That's, that's a question that people are going to have to make and we're going to have to answer. KYC doesn't have to be government KYC. It can be some other entity that's doing it.

• 59:53David Hoffman?

  And to be clear, there's the idea here is that Uniswap V4 was vanilla and will not impose KYC. It's just that there will be this extra pool of liquidity that I think won't, it won't pull away from current Uniswap liquidity because that's the non KYC source of liquidity. I think what you're saying is that it will, it will actually attract new liquidity that you will have to KYC in order to access. So it'll actually add to Uniswap liquidity because it's a venue for compliant players to provide compliant liquidity per their nation state. And so it's not, I don't want people to walk away seeming like, oh, Uniswap is about to be a KYC app. Is that there's actually going to just be perks. If you choose to KYC, you'll be able to access KYC liquidity.

• 1:00:37Speaker 02

  That is right. And, and those hooks should help the protocol reinforce its moat. And we think that'll drive token appreciation and maybe a catalyst for the Dow to finally turn on the fee switch. Although, you know, we expect those fees to be pretty low.

• 1:00:52Ryan Sean Adams?

  That's another prediction right there that the governance token actually becomes kind of like a more of a capital asset. Just the last thing here. So the prediction number 15 is KYC compliant DeFi apps. I could totally see that happen. One question I have for you is whether that is going to be fully opt in or do you have a take on whether Treasury kind of like comes down on DeFi in the US, for example? I mean, there are some draconian measures that could be put in place, making non KYC DeFi front ends basically illegal. And that could happen in the US. Is that part of that this prediction? Or is that is that something kind of like separate?

• 1:01:31Speaker 02

  Well, we got to go back to what was it prediction number four, which is how this US election is going to shake out. And if things turn the other way, and we have another four years of this administration, then I think it's totally possible that one of these very scary anti crypto provisions that turn miners and validators into financial intermediaries could pass in some type of like defense authorization piece of legislation. Like, there's still a lot of negative tail possibilities on the regulatory front that can happen here in the US. Hopefully, that's not going to be the case.

• 1:02:11Ryan Sean Adams?

  One quick question on that, though, Matthew. My impression has been like, you know, under Trump, Steve Mnuchin, the former Secretary of Treasury, wasn't necessarily any more favorable on crypto than kind of the current Janet Yellen Secretary of Treasury. And I'm a little bit worried that across the aisle, both parties have this kind of like AML KYC enforcement type of streak. And so you might have a like a Trump administration being much more favorable on, you know, like securities and CFTC type regulation. But I'm a little bit worried on AML KYC and the OFAC stuff that they're both of one unified mind. And that is like, get rid of it. Is that concern valid? Or do you have a take here?

• 1:02:53Speaker 02

  I think that concern is valid. I think that the difference between four years ago is that Donald Trump owns $5 million worth of ETH now, which he reported on his

• 1:03:03Ryan Sean Adams?

  NFT sales.

• 1:03:04Speaker 02

  Financial disclosures. He kept the ETH. So I think things might be different in this administration, but what you're highlighting is definitely a risk. Trifine investors care about it. It highlights the fact that Bitcoin is highly differentiated versus all other coins and should be, sorry, this is like heresy on your program, but should still be the largest component of any investor's digital asset exposure.

• 1:03:29Ryan Sean Adams?

  That is heresy on this program, yeah.

• 1:03:33Ryan Sean Adams?

  Matthew, this has been great. I know, so these are all the 15 predictions that you have in your report. Anything else that's floating around in your brain? What's the prediction that you didn't write down? Give me something spicy.

• 1:03:45Speaker 02

  Well, the one that came true today is that filings with the SEC revealed that the ticker for VanEck's proposed spot Bitcoin ETF will be HODL.

• 1:03:57Ryan Sean Adams?

  Here we go. Here we go. So what is this? What is the news?

• 1:04:01Speaker 02

  The news is that our Bitcoin Spot ETF will, if it trades, trade under the ticker HODL. That is by far the best ticker of any of the proposed 12 Bitcoin Spot ETFs, and I look forward to all your support.

• 1:04:15Ryan Sean Adams?

  Is that going to be a power law winner as well, you think?

• 1:04:20Speaker 02

  Historically, ETFs are power law winners, yes.

• 1:04:23Ryan Sean Adams?

  There we go. Let the games begin. Hopefully, those games will begin in January, and looking forward to a successful 2024 for crypto. Matt, these were very concise, I think, well-thought-through predictions. So thank you so much for sharing them with the Bankless Nation today.

• 1:04:38Speaker 02

  Thanks for having me, guys.

• 1:04:39Ryan Sean Adams?

  Guys, we will include a link to both the Twitter version of that and the document form of that on the VanEck website. Got to end with this, of course. None of this has been financial advice. Despite Matt's fantastic predictions, no one can truly see the future, except for David Hoffman, my co-host. He knows what's going to happen. But we're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.