Good afternoon and welcome to the coin based institutional markets call it's October 10th here in New York and we're excited to bring you the latest random news from the crypto space this week we welcome back Sid who's been out for a couple of weeks I think you a littleUnder the weather and also a conference are you you you back on top form Sid yeah yeah glad to be back yeah we're looking forward to hearing about your Insight from the conferences that you were at um today we also have a special guest Cosmo Jang portfolio manager at Penta CapitalWhere he's responsible for their liquid token strategies um Cosmo has spent 12 years in Trad fight across a number of really interesting roles from m&a to PE to Longshore Equity strategies and is now in crypto So Co Cosmo welcome to the show looking forward to hearing more from youLater great thanks for having me Ben yeah super super excited to hear from you and then the rest of the team we have as usual David Greg George and as mentioned Sid covering what else has been going on this week we're going to be go going through positioning important dates around the grayscaleAppeal which is coming up this week eth versus BTC um some of the macro dates to dates and times to look out for flows fch ARB and so much more so a lot to cover we'll get right into it but before we do one quick piece of housekeeping ifYou are watching the call on YouTube don't forget to scan the Q code to view David and the team's fantastic research uh if you are listening on podcast that information will be in the show notes and no matter what platform you're on please don't forget to like AndSubscribe that's how we go up the ratings and more people can learn about the content that the guys putting together but without further Ado George let's kick off with you with a bit of a market update of what's been happening in the last seven days yeah sure thing thanks Ben soOverall say markets were mostly trading in a sideways fashion with relatively contained volatility although we started trading in a more riskof mode with the um conflict escalating obviously in the Middle East uh over the weekend and and yesterday as well which saw altcoins underperform in particular yesterday umEquities if you look across the trafi being under pressure and US government bonds in demand as a safe haven and uh as typical for riskof situations within crypto uh we have seen a consolidation of BTC with BTC dominance rising to uh just a little bit above 51% as well now outsideOf that um still struggling a little bit with a couple of key technical levels across the space so again looking at BTC there were some attempts um over the end of last week to rise above the 100 day moving average it's just a little bit above $28,000 which so far have failedBut having said that um I think there was a lot of talk recently about a a local bottom in uh us equities um after the correction and uh cor with correlations Rising between crypto and and equities recently uh some talk about a potential squeeze higher in cryptoAlthough uh in light of the increased geopolitical risk uh I'd probably be more careful with that interesting and I guess George eth versus BTC um has been pretty interesting one a lot of client commenting on that at the moment it's ether's generally underperformed staking rates uh returns rather are alsoReducing like why why is that and how should we be thinking about that yeah 100% so so eth over the last week has been down almost 4 and a half% BTC more or less flish very marginally up like 3% up over the last seven days IThink um sort of looking at the big picture there's a couple of reasons um the main one I think is in my opinion positioning e was U and probably still is one of the biggest consensus themes this year going all the way back to to January and February so I thinkPositioning in E Visa other crypto assets has been relatively heavy um and Bitcoin with the ETF theme since the summer uh was in relative terms uh gaining some more popularity again versus e um and I think that that has definitely um sort of created this thisBackdrop um on the one hand and then if you look at the so that's sort of the macro picture and then the micro picture is um last week I think the week uh e Futures ETF launch and if you go to the uh next slide um so um just just lookingUm you know at the uh 30-day 25 Delta spread between BDC and eth um and one particular thing that was interesting uh and noticeable since the eth future cpf launch so essentially what we're looking at here is um basically relatively speaking if implied walls are higher forPuts um versus calls for for eth and for BDC and you can see that typically implied WS are higher for puts and for calls especially in the current environment which is more uncertain um so um for individually for both eth and BTC we are uh in in the positiveTerritory um with with these lines there um but if you look at the spread you can actually see especially over the last week since that e future C has launched eut um demand and implied vaults have been um going up by by quite a bit uhWhich to me suggests that uh there has suddenly been a pretty drastic increase in uh demand for downside protection in E uh versus Bitcoin um just on the back of that um let's face it relatively lukewarm ETF launch interesting and we' love to bring you in here Greg uh obviously George hasGiven us um perspective from a v perspective but what about Futures what are we what are we seeing there and also transactions on chain yeah so I mean Futures I think we talked about it last week in eth um front month has been trading uh below spot from time to timeWhich suggests there are shorts in the name um I think you know eth has it's in a bit of a tough spot here because it's shaping up to be a rather attractive short um the crypto native folks will look at it and say you know transactions are down it's goneInflationary uh and uh that's why you know I want to either drisk or possibly be short it um and meanwhile the more traditional asset managers will look at it and say well now we're in a you know a much higher rate environment we had 10Year at at almost 5% uh not long ago um I want to be short you know super long duration risk assets eth is one of those um those same people people likely don't want to be short Bitcoin just because of all of the uh ETF catalysts so I think that's whyYou're seeing um ethereum under pressure like it's been uh the past couple weeks so um you know until something changes either on uh the risk front or uh with the protocol itself maybe transactions um tick up we could see it continue to be under pressure great thanks Greg cosoWe' love to bring you in here um if we kind of at this from the perspective of kind of fundamental valuations and uh cash flows coming from that as a result of things that happening on chain curious how do you think about eth as an as an asset yeah look I think ethereumIs probably one of the most clear uh one of the most clear tokens I found product Market fit in crypto uh right you think of it as a global Computing platform on which most decentralized applications in crypto uh and uh and data transfer or uh Ledger updates are done and so that'sThat's pretty powerful they are you know the way it Crews value uh is that it's I like to think of ethereum as blockchain's tollkeeper in the sense that anytime you want to interact with an application or anytime you want to uh transfer transfer funds uh you are usingEthereum and you are paying a transaction fee denominated e uh and so in that way they're a gatekeeper and collect a fee every time someone uses blockchain uh about 90 95% activity in crypto happens on ethereum or evm related ecosystems uh relating that to to valueAnd where we see it today I mean ethereum has pulled back meaningfully from the highs uh even though adoption Contin to be trending upwards uh relative to trough uh and uh and so we're contining to see pretty strong uh fee growth you know the ethereum CR now is annualizing about$2 billion do of annualized Revenue of which flows through to token holders via BuyBacks uh and uh you know that's uh you could argue that that's pretty expensive relative to current valuation you know it's about mean implies that ethereum is trading at about a 100 times its buyback but for something that'sGrowing extremely fast and has a lot of potential and on a mid You could argue on a midcycle basis you know ethereum Peak at call it $22 billion of fees um so on a midcycle basis take the average of peak and today you're looking at about 1010 billion of fees and 20 timesEarnings all of a sudden becomes very very interesting and very attractive uh so you know I continue to be very bullish onne although there are certainly uh the pros and cons uh related to you know whether this will be whe How much this will continue to grow and certainly some some worries aboutActivity not not growing that quickly at the current moment so that's super interesting I love the way that you just broke down the valuation um from like where we are in the current cycle and Peak cycle and and kind of got to a somewhat persuasive figure if you kind of take the theAverage of that which is always good I'm curious how do you think about l2s and the potential for them to obviously improve transaction times reduce fees but then also maybe take some of those fees away from E L1 yeah for sure uh well look I think taking a step back I think it'sImportant to realize that the main criticism of ethereum to date has been that it is expensive and slow I let's just you know be honest with ourselves uh and that's because of underlying limits on transaction throughput and it's auction-based transaction fee mechanism that scales exponentially withUsage um that's really why l2s uh such as art petrum and optimism and and coin bases base have really come to play you know their key value proposition is that for users it's pretty simple uh it's faster transaction times and lower transaction cost and so if you canExecute or reach finality 40 times faster than on ethereum and do it for 20 times cheaper than ethereum you're going to do it uh and that's why the l2s have seen such tremendous uh growth in usage and adoption throughout the year as they've launched um I think this isReally important uh on the ethereum scaling road map and that's why they exist uh because ethereum at at its current state can't grow on its own without these l2s uh and so any growth in ethereum like almost necessarily has to be on Via the migration activity ontoThe l2s um you know as far as how you think about uh you cannibalization of activity on ethereum there certainly is some uh I would say that the goal here is that if if L2 is enable you know call it 20 30 times transaction throughput that uh that all that block spaceActually gets used and if it does it actually the net net should be that fees on ethereum go up over time but in the near term you are seeing that um as more my as more transactions migrate onto the l2s that ethereum fees aren't uh are getting compressed a little bit becauseOf that auction based mechanism uh but uh you know none of us are really valuing ethereum on today's fees anyway like I said it's 100 times today's fees but uh but if you really look out forward and you think about the growth of the total Pi uh you start it canStart to get really interesting numbers as the L2 scale um and uh you know their batched transactions obviously on a PR transaction basis are worth a lot more to ethereum than any single transaction yeah Cosmo I'm really sympathetic to your view and you know we've certainly seen that in this kindOf period of weaker activity certainly the idea that we need all this block space has you know from all these alternative L1 relative to ethereum I think that idea has kind of gone down um certainly I think we're transitioned away from that flat protocol thesis that we had back in2021 where I think it was a very short bet to kind of look at the infrastructure of the stuff where's this stuff sitting in terms of applications but we are now past that point right I think in a lot of ways we've kind of built at least sufficient infrastructureSo that if we actually have the users we can accommodate them now we're looking forward to what is the like super app that's going to take us away from this Chasm of like early adopters into General usage and I'm not GNA ask you that the common question you knowEveryone wants to know like hey what do you think that app is going to be I I don't think any of us really kind of know but like how do you kind of navigate that space with that in mind because if we're in a new regime whereWe're trying to trade the apps um you know what what are the things that you're looking at in order to kind of make that happen yeah look I I I'd say that uh uh again St starting at a high level I think it's really I come from a consumerInternet investing background and and something I've learned over the last uh you know many years being an investor is that you never know where the big uh hot consumer app will come from it always sort of comes out of nowhere like a stroke of lightning no expected SnapchatTo take off no one expected door Dash to take off uh and uh but when it strikes and when it really starts to resonate with consumers adoption can be pretty dramatic uh and and very fast um so all that is to say that uh you know what aThe job of a consumer investor is to really look for signs of initial product Market fit or inklings that this this application may have caught on uh and then track the fundamentals very closely whether it's kind of onchain activity uh or basic things that come from trafiLike going to Google Trends or censer Tower or appids data really tracking that closely to make sure that you are starting to see that exponential curve grow um so that that's sort of how I think about it at a high level I think more specifically today where are weSeeing exciting activity um look I think right now the most uh applications I found product Market fit in crypto are primarily a few areas right one is um one is just block space uh we talked about that where the l1's you know to transact on a blockchain you areEffectively paying for paying for Block space and so the l1s and l2s like ethereum and arbitrum and optimism have generated very meaningful fees um and that is users actually paying to use something so our argue that is actually a consumer application uh the second is is probably trading uh you knowThe I think this is a very core uh trading or or you know more cynically gambling is a very core human attribute that's been around or a core human instinct that's been around from Millennia uh and so the fact that people like to trade and the fact that peopleLike to transact is is natural and actually a very large and growing t uh and something that's not going away and it just so happens that the most frequently used blockchain apps today are trading related whether it's on centralized exchanges like coinbase yourselves or decentralized exchanges umAnd so you know you're still seeing these trading venues generate very meaningful Revenue uh whether it's on centralized exchange or decentralized exchange uh and then third area that's really found uh product Market fit is probably stable coins um you know just the the the need for micro payments andThe demand for storing and transferring value primarily denominated in USD has been very critical to the Financial Plumbing across crypto and just emerging markets in particular with less stable governments and currencies and uh a lot of stable coin issues are effectively Banks so something like a maker isEffectively a bank that issues a stable coin and earns a yield on that stable coin uh and uh and those have turned to be you know banks are good businesses and Rising rate environments and those have turned out to be pretty good businesses and generating a lot ofRevenue this year um so those are sort of areas I I see a lot of product Market fit today I think looking forward I I'd love to see more uh or I anticipate seeing more probably in two main areas one is uh certainly gaming and Defi andOr gaming and nfts uh you know it to me it makes as a former gameer it just makes so much sense that uh online game economies should live on chain uh and that uh Global or gaming communities are Global businesses and so it makes a lot of sense to migrate that activity uhOnchain in a digital native way and then the second area is really a dpin or decentralized structure networks which I found to be uh really interesting you know I think it's really interest it's really important to point out that uh everyone ask like you know what is thePurpose of crypto and why does it exist um uh I think deepin is a perfect encapsulation of what's like uniquely enabled by blockchain uh I think uh the superpower of crypto is that tokens are a powerful incentive mechanism to bootstrap adoption uh so what that means is like tokens uh tokens elegantlyAddress the Dilemma of the cold start problem that a lot of networks have right like if you have demand supply network it's really hard to build up both sides of the network first um but once you get it going it's a really powerful Network business has a positiveFlywheel and tokens sort of jump start that by giving incentives to early adopters uh to participate in the network and so you're seeing a lot of really interesting uh deepin projects really start to take off and I think we could see meaningful adoption next year yeah wow a lot to unpack there umDefinitely want to dive into the deep inside of things um and also gaming nfts I want to just go back a little bit though and kind of talk about l2s again and I'm curious for your perspective like what do they need to do to improve that user experience and and I kind ofGive you this as an example I've in crypto have been for a little while and I was at an event recently with some other people in crypto and we just wanted to send some dollars to one another and you kind of had that moment of like bridging to One Network and thenMaking sure you had enough e so you could Bridge and then you could fund it and all that sort of stuff so for for me I think huge experience still needs to improve a little bit but I'm curious your thoughts and and what else maybe we should be thinking about from thatPerspective yeah look uh I I sympathize with that view and even me having been in uh crypto for a long time the UI still uh still needs a lot of work um and you know one of the main one of the things that has gone uh one of the majorUpgrades to ethereum that's sort of uh an unsung win that people haven't focused on is is account extraction which was enabled earlier this year but effectively what that does is uh you know you don't you no longer have to create a wallet to interact with the blockchain and then you no longer haveTo have pre fund with gas to interact with uh interact with block well ethereum specifically and uh and that's really powerful right like right now the uh today in order to or prior to account abstraction uh in order for my mom or whoever to use to buy an nft on ethereumIt's a whole ordeal you have to set up a metamask wallet you have to save a private key you have to uh then onboard onto coinbase or another on-ramp and then move that into your metamask wallet and then uh enable permissions and then buy the token or buy the nft that youWant that's just a lot of steps uh and uh what account oftion does is enables service providers to provide a much more seamless web2 like experience for users who want to on board and don't need to know the complexities of how the blockchain of how blockchain transactions work and so I thinkAnything we can do to continue to abstract away uh the fact that you are I don't in the future I see a world where people don't realize they're interacting with blockchain networks just like people don't realize they're interacting with the complicated wiring that goes behind the internet uh it's really justThey see applications they use it those transactions happen to live on the blockchain and uh you know they go about their daily lives and I think the more and more we see infrastructure providers or wallet providers enable that the better and that's certainly step one abstracting away the userComplexity I really like that um and I completely agree I think that when we get to that world where you don't even know that you're using blockchain like that's really the big unlock um you know when we're talking about l2s though another big issue that arises is becauseSo much activity is sitting on individual l2s we create a lot of fragmented liquidity and I was wondering how you think about that and kind of a related topic it's a little bit different to this is it kind of goes back to the whole modular versus monolithic thesis you know like we'reSeeing right now that on l2s there's the building out of kind of developments like Eclipse which is kind of taking the best of all worlds right they're saying like hey let's rely on like salana for it's virtual machine ethereum for settlement Celestia for data availability um I mean how does thatAlso play into that user experience you're talking about because if we're we're really kind of just optimizing everywhere now like um how will that kind of change things in your your worldview yeah look I think there will be multi mulle states of the or there will be multiple blockchains in theFuture that we use and different blockchains will be better suited for different applications so I do see uh in particular I see a state of the world where there needs to be an evm or there will be an evm e system that is pretty modular in its nature whether it'sSeparating execution from data availability uh from consensus uh but there will also be a universe uh or a set of transactions and application that live on monolithic blockchains that are uh that are not modular that are single blockchain and sort of everything encapsulated one that are extremely highThroughput um the benefits of of the ebm ecosystem are frankly just that they have built up this massive network of users and and capital and so that is a pretty strong Network effect I think is hard to displace uh I think if we were to start over you might argue whetherThe whether that's uh the best place to start uh but you know this is sort of where we are uh in the evolution of blockchain and that's where the liquidity lives they're also better decentral ization guarantees by built that ethereum has versus monolithic blockchains such as salana and so thereIs a need for for both in the future I'd say um as far as like how I see the evm ecosystem shaking out uh I do think this is these are network businesses and I would expect uh I would expect the market share to Aggregate andConcentrate in a few players um you know that's ethereum but under them there'll probably only be a handful of l2s maybe three uh that really scale quickly enough and and survive into the future um and then below that there might be a lot of l3s or app chain specific L3 appChain app chains that get built on these l2s but to your point we can't have liquidity fragment infinitely um that just doesn't make sense even if cross chain messaging gets extremely good uh and easy it still is uh less convenient than just everything living on the sameChain and so I would expect there to be pretty meaningful Network effects within just a few l2s the evm system and then perhaps another um monolithic blockchain system amazing I love I love that I love that breakdown just want to move and to another topic now and talk about gamingAnd nfts now I think a lot of people talk about gaming having not been Gamers necessarily um it sounds like you were a gamer so we'd love to hear a bit about that first but how do you think about gaming nfts and what are some of theGreen shoots you're looking for there in terms of early signs of traction yeah look I I I think at a high level what the reason why gaming is so attractive as an End Market is that uh for blockchain technology to really be adopted we need to onboard theNext billions of users and the fastest growing uh segment with the highest engagement from users is gaming um they're already digitally native they're spending hours a day the average user spends hours a day uh and uh you know increasingly gaming is effectively the new form of social media for a lot for aLot of people and especially in younger cohorts um so so that's why this is so important to get right and and such an interesting growth area I would say that uh next I would say that it's it's uh it has been disappointing so far the levelOf traction that we've gotten in in web 3 gaming I think the idea of frictionless payment rails and frictionless economy makes it and a frictionless decentralized economy where you own your own assets is very compelling um the problem is that there just haven't been any games yet thatHave been released that are very fun to to play and that's that's only what it comes down to you uh for a game economy to work effectively you need you need the game economy to make money and so what that means you need more inputs or more Capital coming in the capitalComing out which means people have to be playing the game to play the game and generate utility uh and and be willing to pay to play as opposed to be just playing to earn and taking money out of the system um you know I'm I'm going back to that Trope about consumerInvesting you never know when games are going going to break out or consumer apps going to break out I'm pretty confident that there are a ton of teams with a lot of capital uh developing games are developing quote unquote triaa or maybe double A games that will uhThat will be released next year um and so I'm hopeful that one of them will hit but it's really hard to know beforehand which of those games uh will hit so when I talk to a lot of um game developers at least on the web threeSide you know one of the challenges of course is trying to find that balance between Network work effects and financialization um I don't think there's any consensus on this other than axi infinity wasn't a good model to follow uh you know people thought thatIt was good in order to kind of open up the space but other than that everyone's trying to come up with something new have you seen any economic model that you think is sustainable in this space uh well so I think it really comes back to uh I think all the tools areThere so I don't know that there needs to be a new economic model that's created right if you again if you just go back to existing games let's say as an example so World of Warcraft uh at Peak it was about a 800 million GDP uh business right it was an economy thatGenerated about 800 million transactions across its Network on an annual basis that's pretty interesting um what is that what that and that's excluding the uh the dollars that were spent on World of Warcraft subscriptions um which you know 10 million users times call it $120 a year is another billion dollars ofRevenue um uh and so uh there actually is there actually are massive in-game economies that exist today they just haven't been Unleashed in a web three way uh or they just haven't been built on the blockchain and so they haven't been really Unleashed um you know ifAnything the wow economy was held back because uh blizzard and act Activision Blizzard and and other game developers like them didn't like the fact that there was money leakage in their game and that there were in fact a huge economy of put what Farmers I mean theyCalled them Farmers back then just like farmers in in web 3 games but like Farmers effectively mining whatever kind of resource they want to use in the game whether that's uh whether that's gold or or ore or or pelts um and uh there already existed a massive economy ofPeople that played the game to make money and then they sold their goods to people who played the game to have fun uh and that was a massive economy and so it all comes back to the tools I guess basically going back to the fact that the tools already exist um it's reallyJust creating a game that's actually fun so that we can have the inputs be greater than the outputs that's great and back to my I guess my my first question what was the game that you were playing when you were uh when you were gaming a lot yeah I wasA I was a big Starcraft player and then uh and then the Dota or defense of the Ancients and I played a little bit of wow during during uh Co very very cool very cool so I guess if you're playing those games and you have some in-gameItems which may or may not have value today and is that kind way you see nfts coming in yeah that's exactly right I think the uh the the I think the real benefit of enties is twofold one is that they are a digital representation of your good and so you can actually verifyThat you own those assets on chain um and two is that they're immutable um I think there's some debate on whether nfts need to be immutable and I'm okay with Dynamic nfts versus immutable nfts but uh you know the the fact that you own an item you know what it's going toDo into perpetuities is pretty powerful and incentivizes you as a gamer to spend more on that item uh you know if I if I knew that uh my item belonged to me I'd be willing to pay more for it uh that's just that that's just how it goes andAnd uh uh I do think that you know whe in-game items whether it's uh in-game resources maybe are more like tokens or currency and then in-game items like weapons or armor are more like nfts that are immutable I think that's a very interesting way to to digitize uhDigitize and put block put gaming assets on chain that makes a ton of sense now moving on to deep in um I have to say I kind of agree with you it's anara that I'm I'm pretty excited by um seeing the hive mapper stats recently they'veMapped 8% of the world's roads in eight months and like that there's questions around quality of data and what it's used for and demand and stuff like that but like to your point about an incentive within a network for me that's that's huge so so curious where whereAre you most excited within the Deep ins SP yeah uh look I have to emphasize again it's really all about the superpower of crypto is is that tokens are powerful incentive mechanisms um and so exactly stuff like Hive mapper is extremely interesting where drivers install cameras on their cars to map the worldAround them effectively building a a competitor Google Maps and they're in token incentives for applying that mapping data to networks you know hopefully uh in theory in the future as they build out a more dense Network or better mapping data they can sell that mapping data to Enterprises who want toBuy who who need a mapping data um I think another area that's particularly topical right now uh and we're I think we're about to see a lot of adoption is is decentralized compute uh you know an interesting way to use token incentives is to uh tie those token incentives toReal world work um and the most Su successful examples of that so far using what is effectively excess capacity that otherwise would be hard to coordinate so in the hi mapper case you're already driving driv your car why not have a camera on your car also map data asYou're driving um something another area that that uh people have found or you know entrepreneurs have found is ex their exists excess capacity is actually in gpus uh right now as I'm sure everyone knows there is a massive GPU shortage uh and a supply demand imbalance with uh in the GPU MarketBecause of the huge rise in a and usage for AI um gpus are are particularly good for AI training and inference and therefore their usage and demand for gpus has gone up massively this year I you see this in nvidia's earnings beating raising 20 30% both of the lastCouple quarters uh and so it's very clear that there's a need for increased GPU capacity there are really interesting uh GPU networks being spun decentralized GPU networks being spun up today such as render and aosh uh which are effectively uh which are effectively providing a marketplace where GPU providers whether that's uh whetherThat's small hobbyists or uh or guys with just gaming computers that that have really strong gpus or hobbyists with small small data centers or even you know sneakily some of the larger data center providers supplying their excess GPU capacity onto these networks and on the demand side uh you know itWhether it's uh academics or or or scientists or even end end use computer uh consumer AI inference models they are accessing these decentralized GPU uh marketplaces like render and aosh to actually do their AI training and inference um so this is all really exciting uh because I think this is aPerfect example of how token incentives are uniquely used to tap into ex's capacity that lives in a very decentralized Network it's these These gpus are coming from across the world uh and they're coordinating them to actually be used to do real world work uh and uh it happens to be very timelyJust because we do have such an acute Supply demand and balance and AI compute right now amazing that's um yeah certainly a ton of very very exciting projects there and and I feel like these things take a long time to to build up um I'm curiousSalana is is kind of involved in that space and it's been around a little bit longer it's often seen as a bit of a hedge against eth and l2s in terms of the way that they um they operate I'm curious kind of how you connect the dotsThere between DPN and Sal and how you think about that in reference to ethereum as well yeah uh I think what we've seen is that salana has been kind of a sneaky winner in all of this a lot of the deepin projects uh whether that'sHelium or or render uh have moved on to Solana uh recently because they've realized that they need a they need a blockchain network that can support High throughput um and salana happens to be one of the best options out there it also helps that you know they share aLot of the same investor base and so everyone is really incentivized to both grow the salana network as well as the these specific dpin projects um you know the uh I think this really goes back to like why do monolithic blockchains need to exist and the reality is thatSomething like a salana or other monolithic blockchains really do enable quicker throughput or faster throughput today um and and these these projects you know want to grow today and so they're finding a lot of success migrating over um D next I want to move on againSo we've both spoken about one of the areas that's got product Market fit is trading we've spoken about the value of decentralized networks kind of want to put those two together now and just talk about some of the decentralized trading platforms perhaps specifically um it's not an area that we're particularlyClose to so I'm curious for your thoughts and how how they're growing what their volume is like relative to centralized and I guess what you you see for the future of those types of platforms and products yeah um so so decentralized perss or decentralized Perpetual Futures contracts uh have become have been someOf the fastest growing and most money making applications in crypto uh in defi today uh why is that derivatives and in particular Perpetual Futures contracts have become the main way that crypto is traded uh you know derivative trading volume is about 3x out of spot volumes on centralized exchanges and so that isClearly where people choose to trade it why the answer is pretty straightforward which is that you know Futures are a much more Capital efficient product to trade uh than spot and so it's no it's no wonder that derivative trading volume has really taken off and I would expectThat to continue in the you know in the traditional financial markets derivative markets are 10x or 10x or more the size of spot markets um the uh at least in in notional trading value so uh the reason why decentralized perose exchanges are interesting is or the why theseExchanges need to exist in defi is there are a couple reasons one is that um you know a big appeal of defi is that you get to the the whole concept of uh you know your keys your coin that the fact that you actually have continue to haveCustody of your funds on chain this is particularly relevant after last year's famous industry blowups um that where a lot of users realize they actually didn't own their money they were just a ledger and a balance sheet uh and that they do not have claim to their or they unsecured creditorsEffectively to these exchanges um that's uh these are you know the the the shadier exchanges not coin bases of the world but the fact is a lot of exchanges are like that and so the the ability to have custody of your assets on chain which a lot of people take for grantedIn tripart custodial agreements and CI is not so obvious in crypto so that's one the second is just that defi you know the promise of defi is permissionless what does that mean it's a more convenient way for Global audience to access these assets U youKnow you it's much easier to get get uh get spun up and start trading on something like a dydx or GMX or Unis swap than it is to open a new exchange account and so that's very interesting and and easy for a lot of people to moveFunds in and out um you know what we we' seen a lot of success then is in uh uh is in the growth of perks exchanges and then defi purpose exchanges as a result the the first purpose exchange I would say um is in defi was dydx which has a very dominantYou know 60% market share today and then other there are other large contenders like GMX and and synthetics who continue to exhibit pretty meaningful growth as well amazing cosm thank you so so much for for all of that I have like another 25 questions I could literally continueTo ask and ask and ask and ask but um we uh atas we we better move on I know you're busy but we will keep you um involved throughout the call if there's anything you want to add throughout the call then please just jump in but thankYou thank you for that that was super insightful um and as I said I'm sure I have followups for you offline as well um George back back to you for uh the rest of the market news please uh yeah sure thanks definitely been a couple of interesting headlines over the last weekUm obviously a lot of uh interest in the ongoing um FTX trial from the crypto Community um one of the um most interesting headlines I saw among other things was uh Gary Wang saying that the Insurance Fund was number was essentially uh made up which is interesting and then um Caroline AllisonSpeaking next so um we'll probably hear a couple of other interesting insights there um onto more positive things coin shares reported the largest uh week inflows uh since July into crypto ETP products it was about $78 Million last week um actually mostly into U Bitcoin related products and um you were talking aboutUm real world asset uh related uh projects earlier Ben um so crypto company backed has issued a tokenized security product on base which is a very exciting to see and it tracks essentially a short-term uh us treasury bond ETF and uh is collateralized by the uh underlying um bills a couple of otherThings to watch out for um which I'm sure David will touch on as well we have the US CPI coming up on Thursday this week um the grayscale appeal deadline on October 13th and um there's a binance sec hearing scheduled for Thursday October 12th as well so uh definitely watch outFor any headlines there thanks George yeah reading this headlines around FTX and that number how it was created was just like head inand stuff it was uh un unreal um but anyway as you said moving on greaty coin you're seeing decent inflows there um and then on real worldAssets I know I think s is going to touch on it later there was a um something happened on one of the platforms there which you want to cover as well but thank you very much for that George um David uh macro what what areYou uh what are you focusing on at the moment yeah so I think the interesting thing about about macro is that macro is definitely having more of an impact on what's going on in the crypto world and that's kind of been a regime shift that uh hasn't previously been there over theLast few months now that said the correlation between something like Bitcoin returns and S&P or n asset returns is still fairly low to the point where they we can consider them uncorrelated uh but it has been rising over the last few weeks so directionally we think that there are chances of themMoving more in tandem is actually increasing um but what we have seen driving the picture has been high yields in the long end of bond curves and that's not just the US Treasury curve but that's pretty much across all like Global Sovereign Bond curves um but something has changed uh we have forExample come full circle on rate hikes so I think that a week ago the consensus that were the higher rates were just Unstoppable here at least through the quarter um and it was just decoupling from traditional indicators like the toer to gold ratio now there are twoThings that are kind of changing that number one uh there was the conflict in Israel that you know people have been kind of retrenching back into safe havens uh so Bond markets are kind of seeing that the yields coming down because of that um and also because uhYou know just glob like Financial conditions at least National Financial conditions in the US have tightened so much over the course of the last month in part because yields have been rising so much the FED has kind of stepped back from the commentary they previously had um just on Friday when non forignPayrolls kind of beat so much to the upside you know I actually thought I was like wow it seems inevitable now that the fed's going to need to kind of step in here and Hike rates in November quite the opposite in fact the odds of a FedHike are now down to around 12% um because the commentary coming out of a lot of board members has been that actually because Financial conditions have tightened so much um they don't actually think they need to do anything so it's it's going to be interesting come November because I think uhPreviously I had a lot of conviction that you know because the Fed was going to stay put you know very likely we would see things kind of rally but just now so many things are going on like you know because of this uh you know war andIn Israel for example um you know maybe Global growth might be more suppressed uh generally equity and risk assets really like growth so if that's going to come sooner like I I thought that wouldn't happen until there was this kind of natural easing into the first quarter of 2024 now these kinds ofGeopolitical stress points have kind of moved that somewhat forward um but for the time being it seems that what is dominating the performance of these assets is just this huge imbalance of market supply and demand so that tends to be the name of the game um probablyThe next big thing to kind of materialize at least from the macro standpoint is what's going to happen with us CPI as as George kind of pointed out if that kind of surprises again to the downside and you know markets are expecting that core CPI is going to uhYou know come down to around 4.1% if that Trend stays put then maybe we will get this kind of environment where the FED isn't going to do anything in November and maybe like I think things could still materialized to a rally for crypto into year end but certainly myConviction on that which was very strong uh you know just even a week or two ago has moderated somewhat but I still believe that rally is going to be in place go thanks David and I guess like some of the crypto specific data points that might affect that rally um isAround grayscale and ETF so we'd love to to bring Greg in here as well like David you first how are you thinking about um that kind of gray scale uh timeline and another ETF timeline as well so the interesting thing was I think we uh sawThere was a headline from a black a former Black Rock executive who is saying that the most likely scenario now is that uh we won't just get one uh Bitcoin spot ETF but very likely we'll get a grouping of Bitcoin spot ETFs and I think already markets were kind ofMoving that direction I think for the most part a lot of pundit were arguing that that was the going to be the most likely scenario the timeline I think has in fact been moved up because of the de deferments that the SEC did so you know we saw right before the questions aboutThe US shutdown were going to appear that uh you know a lot of these decisions were postponed until early January so around that those dates between like January 3rd to January 10th is where like uh you know we think the SEC would would have the final deadlineTo actually confirm or you know approve or deny these applications but because that would kind of run into the beginning of the year I think a lot of people believe that that would happen probably within uh Q4 so I think that's something that uh it's more importantNow to kind of establish whether that's going to be the case or not g and Greg from from your perspective how are you thinking about it and and how are clients uh talking about it typically yeah I think David's uh right on the timing we have you knowFriday the 13th coming up uh October 13th is the day uh we're going to find out whether or not the SEC um appeals the grayscale case that's going to be you know big news and will inform the timing but uh assuming there's no appeal um yeah I mean it's anytime between youKnow uh just after then and uh early January and likely to come in uh late Q4 so um you know lots to look forward to later this week and are you Greg are you seeing people positioning or is that positioning being done like are people lining the load a little bit like howAre people thinking about it and specifically to the GBC and eth products as well yeah so in both of those products the discounts have remained about in line um with where they've been you know we've talked about it on past shows so that's you know call it 18% inGbtc 30% in eth e um as far as positioning in spot markets I would say you know absolutely people are either positioned for it or they don't want to miss it which means they don't have a full position on but they're there um and the reason you know we think that isBitcoin has really had this persistent bid um really since late August um and it's had this bid in the face of you know weaker risk assets weaker um you know overall crypto markets um so for sure I would say you know Traders are there and um you know betting on aPositive outcome Friday and and later this year awesome thank you thanks so much guys um David appreciate your your update on the macro there that was fantastic Greg going to stick with you here in terms of flows what else have you been seeing on the on the desk yeahSo volumes have you know settled in and remained pretty stable you know I have to say you know listening to Cosmo earlier in the show you got me all bowled up um which is a great feeling after some of the drisking we've seen in the past week especially in the longerTail assets um again you know bitcoin's held up really well um because of that ETF uh bid and Catalyst but also more recently it's had a bit of a flight to Quality um move where we've seen people rotate out of you know even eth and intoBitcoin um but also the some of the longer taale assets so it'll be something to keep a close eye on to see if that continues now one other thing from a technical standpoint and we talked about this last week as well I think we have a chart on this if we wantTo bring it up is um you know Bitcoin has been rejected at this $28,000 level several times uh George mentioned it earlier in the show today that is where the 100 day and 200 day moving averages um kind of converge and it's something that we're watchingVery closely because I think if we do get positive news uh on Friday and we trade up but aren't able to you know retake that level I think that should give um a lot of us some pause as we move into the you know later well notThe later half oh my God it's a the into Q4 and uh the end of 2023 well so it feels like we have a lot of writing uh on on Friday so um tough question but is there a particular time that we expect to hear that that theseThings will come out or is it like close of business is no news is good news type thing um you know I don't know the answer to that um in the past you know we've heard we've sometimes heard that morning uh We've sometimes heard the day before um but IDon't know if there's a firm deadline I would imagine there is um you know because it's the the US court system but um yeah that's a that's a good question that I don't know the answer to cool let's we'll look into that one and uh and come back um cool thank you veryMuch Greg I appreciate that as always and Sid welcome back hey you you there's been been a lot going on I know you've been been very active in fch looking forward to an update there um but maybe let's kick off with with arbitrum I think there wasSome some news out there that's worth talking about yeah definitely um I know we touched on l2s a little bit earlier in the call uh obviously arbitrum probably one of the biggest l2s out there in terms of tvl and and the sheer number of protocols deployed on thereHad a pretty big update this week where um there was a governance proposal out to allocate uh ARB token incentives to protocols on on the layer 2 um you know there there was a bit of if folks remember there's a bit of Scandal earlier in this year when uh theArbitrum Dow kind of arbitrarily had a proposal to uh allocate a certain prop proportion of the token to for incentives without governance voting and folks were kind of in uproar about that so they they rescinded that but now this is up for governance it's on the governance forums in fact it's it's it'sSo so geared towards governance that there are like 97 different um projects looking to get ARB incentives and a flurry of activity on the governance forums about this there's a snapshot vote live um it's running until you know Thursday October 12th uh this week and uh yeah loads of projects you knowGetting positive voting that we're seeing from the initial you know results so far um overall there's there allocating around uh you know 50 million ARB uh tokens for incentives um and you know projects are kind of just angling to get a portion of that for their individual use cases and and voters whoAre our token holders are are the ones kind of deciding the fate of this so that it should be a positive for the ecosystem because historically other L l2s and l1s who' have had these kind of programs have generally spurred activity and users bridging over to the chain andUsing these apps to you know get a portion of these in incentives so we'll see how arbitrum reacts yeah it's definitely a competitive space out there um Cosmo would love to bring you back um obviously we spoke about l2s um we've spoken about I guess in general more broadly kind of howCompetitive the space is and how you've really got to compete to get users to to transfer across to your your L2 or your L1 or whatever it might be I'm curious with with this one specifically how are you thinking uh about the situation yeah uh I I'd say I'm very bullish onL2s in general but in particular arbitrum on the back of this news uh I mean for those who have been following the ecosystem for a while it's been known that uh you know arbitrum does have a lot of capital in its Treasury and it has been wanting to deploy thatTo incentivize people but it's gone through the hard work of getting uh of coordinating people and decentralized in a DA to uh to actually make a decision and and get this program in place uh in the meantime this whole they've been competing against a lot of other l2sThat have been pretty aggressive about using uh using incentives and so I do see this as like and despite the despite arbitrum not really having incentive program since launch uh its activity is by far the most uh most active on an organic basis uh and so that's that'sVery exciting and now they get to just step on the gas uh by adding these incentives and you know the the applications that are going to so arbitrum itself I think it will be very interesting because you are going to start to see a real inflection in growthAnd them start to gain market share again where some critics or or or or the Bears on arbitrum have said that they've been share losers when the reality is I think that's misinterpreting the data and certainly will be wrong going forward uh and then uh from a within theEcosystem there are a lot of interesting ways to play this Beyond just arbitrum uh clearly the largest uh the largest applications on arbitrum are going to receive pretty large grants so whether that's someone like a GMX which is a decentralized purpose exchange similar to what we talked about before or GrailWhich is another decentralized spot exchange uh they are getting very large grants and uh you know I would expect to see and they are fee earning they return fees to their token holders and I do see them uh outperforming over the next uh over the next stretch as these as theseGrants get rolled out interesting so Cosmo you're saying that the grants get rewarded to GMX and they then in turn reward it to their users uh it's a little bit less direct than that the so GMX is going to get this arbitrum Grant and um what is likely to happen is theyAre going to use that in in a few different incentive programs one is to bootstrap more liquidity so in incentivize liquidity providers to come to to GMX and uh increase uh increase liquidity which increases trading depth and enables greater volumes the second is they will uh they will to a SLSlightly smaller extent incentivize trading activity right uh by lowering effective trading costs to be more competitive with uh centralized exchanges uh and in that Way Drive more onto the exchange very very cool very cool um so one to to to watch there instead what is the the actual date that that this isGoing to be distributed uh unclear yet I mean first this governance has to go through um but within the next few weeks uh the the snapshot proposal ends on Thursday and then after that there's a few more stages got it okay fantastic um back toUh back to we're moving on to frch um what is the latest here I know you're you're still very active what's going on there yeah yeah I mean speaking of protocols and daps right I mean that's the Holy Grail where you know where crypto uh you know is looking for dapsThat can drive user activity and and retention um a lot of these incentives are for that and uh fch was one of these apps that kind of sparked folks imagination it was launched on base uh this and spawned a new category of of social F right um and so last week youKnow it breached the tvl breached $50 million it's sitting at around 43 million now um but uh what it really inspired was a bunch of different clones and copies uh of frch across different chains there's there was one on arbitrum U early this last week we also saw oneOn Avalanche called Stars Arena uh unfortunately Stars Arena you know suffered an exploit of $3 million and they eventually managed to plug the hole but you know still confidence was a bit shaken and generally speaking I mean the the the the topic of security was has been a conversation topic amongstFriendtech you know for the past few weeks especially as folks have been piling more and more eth into it um you know it's using kind of a relatively new dap architecture with with this privy and then um Progressive web apps which is kind of living on on the phone umBypassing the app stores and uh and folks are wondering how secure is it especially when they're logging in using their Twitter credentials and you know phone number and things like that and some folks had been swim Sim swapped and attacked on frch so recently this last week frch announced um you know theAbility to add like a tofa password and like add and remove login methods as well so some improvements to the security um and you know in contrast to some of these other clones where you know exploits are happening so it's a positive for the original FR TechEcosystem for sure but uh again it will remains to be seen how Lindy and how resilient this the core codebase is as time goes on and have they improved any of the kind of early concerns around toomics and how many people can can hold a key given the theKind of the curve the bonding curve yeah so the bonding curve Remains the Same it's actually hard to change that one um but uh they did uh you know his every week basically for context for for listeners um the frch has been airdropping these these points on usersUh the points have no material value at this point but uh you know um potentially they do uh down the line and that's been hinted at by the frch team and uh historically users were getting points just based on the amount of um uh the value of their portfolios and soUsers figured out that they could just buy themselves quite a lot quite a lot uh to have this total value locked metric and then kind of game the point system and the French team seems to have uh cut down on that so people who are self buyers don't actually get the sameEquivalent number of points as people who spread out their buys across other people other Keys um so we're seeing more distribution of ke keys on the network and uh you know just trying to incentivize more organic Behavior so we'll see we'll see how that plays out fantastic very very cool as as CosmoSaid earlier on some of these things with green shoots the ones to keep an eye on so thank you for for doing that Sid um and then uh what else have you looking at I know RW was an area that I think there was something you uh you sawThere yeah yeah yeah I was at at a conference last week in in London called CC data conference uh for crypto compare the data company a lot of the conversation was around rwas uh and specifically on maker where the the total rwa portfolio is over $3.1 billionDollar now um and uh you know with D Supply steadily increasing you know and obviously us interest rates um that's still a pretty dominant source of Revenue and one of the leading Revenue generating protocols in all of crypto um and you know on the flip side also thisPast week saw some slightly negative news in terms of uh you know the space in general there's a protocol called Goldfinch um where you know it specializes in like real world Landing pools they have you know several different baskets where folks can deploy Capital which is then deployed to RealWorld Companies so they like baskets like uh you know a carbon reduction pool an African Innovation pool and so on and so forth and uh this past week they had like a $20 million loan that they had lent out to several Real World Companies kind of go bad uh just because you knowThe the companies didn't do so so great um and so the the pro the company behind Goldfinch called War blow labs they they've stated that they will actually back stop this but also highlight some risks in terms of you know onchain credit and this association with realWorld assets you know the how resilient these loans are is is a subject of you know concern we'll see how that you know plays out and do we have any sense of how much they're getting back on the dollar is it is it zero on the dollar or50 cents on the dollar for this 20 million loan that went bad uh no they they charge pretty high interest rates um so basically I mean the each of these pools that like capital is kind of allocated into these pools uh and then from these pools it's allocated to several different companiesUh by different borrowers uh so in this case there's a borrower called Stratos Asset Management um and so the pool itself as a whole has you know API PR ranging from like 7 to 10% depending on the pool um and then so there's like the the base kind of interest rate and thenOn top of that depending on the risk taken by the pool perfect and for this $20 million that loan has defaulted entirely partially uh and uh you know and then some of it is getting clawed back Etc and then warbler Labs itself is back stopping as well so they'll get theFull amount but unclear what the Delta is between what um naturally comes back versus what warbler Labs has to has to cover yeah interesting interesting um great fantastic and in terms of um fantastic K Cosmo just put something in the chat let's bring you in here so these claimsAre trading on chain Cosmo yeah it's actually kind of interesting I mean part of what's really cool about goldfinch and these other real world asset or I mean they're effectively credit Underwriters right loan Originators is that they actually tokenize their their loans and they put them on chain so umYou are starting to I mean you can trade these claims or you can trade these loans on chain and you are start you're starting to see some activity there I think uh there was another Goldfinch loan that uh that uh that defaulted a little while back and those are tradingAt about 70 cents on the dollar um you know people are hoping that recoveries are closer to 90 and uh I haven't looked at this one this most recent uh default specifically but I think you know it's about a $7 million loan as part of the20 million clo is product is is what's what defaulted and so uh we should you can definitely go on chain and start to play these claims if you have a differentiated view on how the recoveries will work out very cool yeah I I love um how that's suddenly available I just doing aBit of a bit of Googling so one of them was a decentralized lending protocol in Kenya um I don't I don't have a person much of an edge there so I may leave that one alone but um it's interesting at least to have the ability to do sayUm cool awesome well I think that's that's it for this week Cosmo thank you so much for joining that was a lot of fun uh and really insightful uh thank you Sid George Greg and David fantastic as always um and thank you all for listening we will see you next week take care