Bull Trap, or Bull Market? with Vance Spencer

Transcript

bankless Nation we have a special bonus episode for you to today we've got Vance Spencer on we're going to talk about a question that I think has been in our minds has been in the community's mind where are we right now is this a bull trap or a bull market I can't tell and there's debate on both sides the Bulls and the Bears are hashing it out not sure if we've hit the bottom yet and are on the road to recovery or if we've got more bottoms to hit ahead so David what are we talking about today yeah so Ryan I think we're going to try and answer your question are we ever going to get three e three digit eth back uh I mean the bankless listeners will know and that I am just not I don't think that's in the cards I don't buy it but uh just

there's some we're at an interesting inflection point in the market Bitcoin is down 66 from the top but up 50 from the bottom ether also down 66 from the top but up 75 from the bottom Solana down 90 percent currently but is still up 200 percent from the bottom meanwhile the L2 ecosystem is hot op token is at all-time highs RPL is high as in high in East terms Aptos somehow a 16 billion dollar valuation so where the hell are we in the market are we in a bear Market is this a bull trap uh is macro gonna send us a recession and this is the last time to lock in profits before we all die I don't know uh but I want to ask

some of these questions to Vance and just overall get an audit of the market so that's what we're talking about today yeah Advanced Spencer I I think it's somebody who has got a good sense of this that's why he was the number one person who came in to mind right we were asking this question of like uh where are we in the market so guys before we get to events though gotta share some good news for you it's tax news it's crypto tax news look at this headline here if you do choose to sell make sure you put this through the tax calculator all right first of all I gotta say this is from our friends and sponsors at cryptotax calculator and I absolutely love this duel before crypto taxes why because it saved so much time all right look David thinks I like doing taxes I

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those questions are we asking too much of events yet yes and I hope and I think that he knows that and so uh no no human can read the market we don't know if we're going up down left or right uh in the world we're definitely not going to the left we're definitely going to the right because that's how charts work um but I think listeners are really kind of pay attention to like all right how much risk is on the table in 2023 how much exposure do I want to have and like just think about uh positioning as we go into 2023 I think I'm a big fan of uh at the very least 2023 will be volatile um over the year uh and so think about just how how much risk do you feel like taking on this year

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banklist Nation van Spencer is the co-founder of framework Ventures a VC firm that got his claim to fame by sticking around during the 2018-2020 bear market and going all in on D5 before we even had the name defy taking risks and finding gems while everyone else fled the industry uh Vance this is your fourth appearance on Bank list because in being addition to a VC Chad you are also Adept at measuring the markets understanding metas which is what we are looking to do here today Vance welcome back to bankless thanks for having me good to see you guys cheers always always a good time my man and like we've been teasing in the intro and just now we're really just kind of looking to get a lay of the land like what is the meta right now uh like because like I said we're kind of in

this weird Middle Ground of being down bad but up big from the bottom so at just the highest of levels when you look at the global read of the market how are you feeling right now like what's your vibe feeling good uh pretty pretty good vibe I I think we're just ranging you know I don't think we need to like overly classify if it's an echo bubble or a bear Market Rally or if this is the start of the bull new bull run we're just kind of ranging between one and two thousand on Ethan you know 16 000 and about 25 like the psychological level of where three arrows got liquidated and when FTX shut down I think that's kind of the uh the emotional high water mark of of kind

of like you know you need to clear that and put that behind you before you can really go anywhere but we feel pretty good we're kind of doing what we've always done which is you know number one stay alive number two take advantage of opportunities in a market like that and number three you know not get too worried about it because it's going to take a little bit and that's okay all right so let's talk about this ranging idea right um I do think we're probably ranging but let's define what that means so by ranging do you mean we've already seen the bottoms do you think we go back down to the basement that we were in with triple digit eth God knows what was Bitcoin under 15K uh Goblin Town or have we seen the worst um so the bottom was 888 in June for for

youth that's the main asset that I track um and you know to be honest when it when when that weekend happened that was like a weekend in June I think um there was so much for selling that weekend it was blocked by it was Voyager it was all the centralized lending dress desk trying to clear their book and reduce counterparty risk and all the loans were getting called in so people were selling crypto to return loans to these guys you know frankly there's no credit left and so that's not really going to happen again um we've blown up Tara we've you know blown up or they blew themselves up FTX um you know there's Genesis there's Gemini there's dcg there's those but those really aren't you know as big in my mind and so I don't know if we go back to the bottom a lot of it is just

macro dependent um but you know it was interesting to see eth bottom in in June and then all the tech stocks bottom and in kind of the fall uh you know we were the first in and it looks like we might be the first out as well yeah that definitely tracks with the overall Vibe of crypto always just being ahead of the game and and moving faster and just being uh uh faster Canary in the coal mine I think the the thing that's been the most interesting to me is just looking about how the market has reacted to news uh the news that Genesis indeed was going to go through bankruptcy dcgs not in the hottest position uh yet the market uh pumped right after that news as soon as the news that Genesis uh was going to go through bankruptcy the market went up like a global like 20 30

percent uh and so when the market like doesn't react badly to bad news that starts to give me some sort of assurances that the worst is over how do you feel about that take um you know it's uh anything can happen right he thinks it's a mid take David he's trying to be polite here I think um you know again we're just in this range and like you know if we're for over 1400 it's the dawn of a new Bull Run if we're under 1400 you know the bottom might not be in there's really no assurances or guarantees that you can get at these levels but I I don't look a lot at macro I I look

at like a few basic indicators one is have interest rates peaked um and if you think about 2018 the 10-year peaked in November the stock market uh bottomed in January February and and crypto kind of re-bottom then as well if you think a lot of this is driven by interest rates and liquidity you know we're over or at least I think we're over that Hill which is really positive and supportive but the macros is still kind of unknown there's a lot of you know potential uh you know Black Swan scenarios call it and so you really can't you know be too confident but it just depends on how long your time Horizon is if you've got five or ten years or you know in our case up to 15

um these prices we like we've been buying you know this is kind of what we're built for uh it's hard to take a short-term view on crypto and you know if you need guarantees about if the bottom is in and you only have a six month time Horizon I don't feel too badly for you if it doesn't work out because you just need to have a longer term time perspective it just is what it is and you know I've been through this like three or four times now and um you just got a link I mean like totally agree can we just say like look if you're if you're only planning to be in crypto and holding your positions for six months get out and I don't mean this in a mean way it's just like honestly it's just like you're gonna lose money it's kind

of like just like save yourself I mean I've seen so many people blow up including last year you know the biggest freaking hedge funds in crypto blow up with short-term time Horizons and over leverage I I think that's got to be a key message so what you're saying though Vance is that you think maybe interest rates have peaked okay but like you're uncertain of of other macro Events maybe again they haven't peaked I'm I'm going back to I know you were there um back to 2018 though in 2018 and 19 you know the most painful part of that bear market for me wasn't actually hitting the bottoms um although March 2020 is pretty damn painful like what's gonna happen but uh usually wasn't hitting the bottoms it was this just long this ranging period

this whole apathy period of like nothing's happening uh like nothing's getting built you know we'll like at that time it was kind of existential are there any other apps on ethereum that can exist here besides IP uh icos and like you know there's beginnings of D5 but it was so tiny that it really didn't matter are you worried about that kind of ranging that sort of apathy period This Bear Market or do you think this is not analogous to 2018-2019 um the way I think of it is uh do we need something new do we need new apps new use cases new things we haven't even thought of or do we need more of the

same more D5 more nfts more existing use cases and during 2018 it was like new it was you know we needed accidentally something to use these blockchains for because if you went to the conferences back then nobody was building anything and you know anything like I remember uh Civic built a beer vending machine that used on-chain identity and that was this consensus 2018 or something it was yeah I don't know I was like no that's cool it was a real use case of watching um so at that point you needed like a whole industry you needed everything to change right now I mean you look at East it's at like 1500 there's about 2500 3000 each per day you know it's printing

about eight million in Revenue per day that's pretty good like there's traction you just need more of that and if you get back into the cycle of people using nfts and D5 and what that's catalyzed by frankly is like the price of crypto assets going up because with crypto assets price has the ability to fix sentiment in ways that is not you know uh applicable in traditional equities you know when youth goes up in price there's more credit because it's using D5 there's a bigger wealth effect because all the nfts are priced in it you know there's all these things that are cultural people send more if people use more youth like you know that is you know how the cycle bootstraps itself and it's reflexive so we need more of that more of the same and we need you know a surprise we need a game to work we need

you know I I we personally think it'll be games because they have the biggest consumer top of funnel but it'll be a game it'll be maybe something in the content space it'll be something maybe people are building real payment rails built on blockchains like but the path is there you know we're I'm not like scratching my head trying to think of you know how we could use blockchains like I know what they're useful for it's just a matter of can we get the the flywheel to bootstrap itself I think we can at a certain each price threshold it will um and then I think games will pan out and so like I'm not really that worried honestly you know it's just gonna take a little bit but I've got time yeah to talk about uh Ryan's uh uh apathy Market where we just go through

12 16 18 months of just like oh we range and then we just realized that nothing's happened over that period of time there are some things going on in the market which I'm conflicted about is this a short-term meta trade just because things like staking as a service tokens are in Vogue in the moment and that's where attention is or is this something new that we need to pay attention to so for example like RPL is in at all-time highs in ether terms Lido token is at its highs I'm pretty sure almost at its highs uh then Layer Two tokens op is at all-time highs the arbitrum ecosystem is super hot I I know like some of these things can just be a short term like a medium-term trend a medium term like

narrative rotation trade but they also could be like some of the foundations for what ultimately does emerge as a bull market however long this ranging period takes on so like when we watch these try friends again it's taking as a service layer twos actually show up in market prices how are you thinking about that in in the short term are you like okay is there something to keep an eye on or is this Traders just going to trade um so the things I look for are uh number one you know you have a lot of price Discovery in these smaller tokens just because you have like a lot of VC unlocks you have like a lot of liquidity Farm tokens that are coming out uh you know so on and so forth there's a lot of

ability for people to find the right price for these things um and you have all the teams unlocking as well if they had them through the bull market and so it's actually very healthy that you're seeing a lot of volatility and you're seeing a lot of dispersion as well between tokens that have a lot of Revenue and those that don't and you know you've seen that in the price movement of things like lado and Rocket pool and I think that's very healthy um and so it's worth paying attention to that stuff because those will tell you kind of where the crypto native bid really is you know it's really at this point it's hedge funds it's retail and it's a small smattering of Institutions that are buying the majors but you know the signals you get from the crypto natives what they're willing to trade

their stables for in a time you know of a pretty deep bear Market that's a pretty good signal for what might be the next meta or the next narrative um the other thing that I think of and just look for is you know does fully diluted valuation match circulating valuation it's hard for me to make a judgment call on on things that have like 10 circulating just because you're playing this weird low float you know game and and you know like is that the right price is that the wrong price it just depends on you know what the supply of unlocks is going to be in the future and you know it's really hard to forecast that especially if you're thinking about who sells and who doesn't and then the final thing that I look for is you know which tokens are going to break their all-time high first where

circulating match is fully diluted and that is usually a pretty good indicator of where things go next and nobody's really gotten there yet but you know somewhere close you look at Lada you look at things like Matic you look at things like um you know even eth is pretty pretty close like whichever ones break first you know that that usually has a chance of becoming the next meta Vance while we're on the subject here and and you kind of mentioned it briefly is um crypto natives are kind of bi like look at what they're doing um and you said some institutions are buying I want to talk to you about institutions for a minute um do you remember this was another Mantra coming out of 20 2017 it's like the institutions are coming it was a

novocrats thing I'm surprised he didn't get that one tattooed um got something else though but um all right sorry sorry Nova um sincerely sorry um but okay so what about the institutions then are they like are they freaking we don't talk to them as much I mean we probably should from time to time actually we're having Eric Peters on I think um next next month David the podcast I intend to ask him this question but what's your Vantage Point are the institutions like scared shitless about 2022 I mean you had algo stable coins go to zero you had major institutionally safe hedge funds there's Capital collapse you had the number

three exchange maybe number two exchange I don't know what this is suddenly they're missing 15 billion dollars oopsies like are the institutions freaking out about this and heading for the for the hills is that going to cause a bear market like or extend it what do you what do you think about institutional buyers so this this was the real really the first cycle we had institutions and that's lost on on some people the 2017 wave was basically just Ico capital and crypto natives punting around and it was very Bitcoin heavy this was the first cycle where the institutions really got in the blockchain fund of funds got really big um you know everyone got pulled up uh on the institutional side I think the

problem with the institutional side is that a lot of people were sold uh a very specific dream of crypto which was FTX which was gbtc which was putting Bitcoin on you know S P 500 balance sheets which was the nft and metaverse wave and everyone who fought to allocated these crypto institutions now just looks kind of stupid but it's it's not just a crypto thing it's all the fake meat companies you know that are down 99 it's you know Phase Clan stock which is down 99 it's all the car makers which were fraudulent it's all the gross stock funds that have gotten beaten up it's not just crypto it's just the memes it's the near narrative stocks and so like whenever you think about um you know what might the institutions

be thinking think individually think about a 32 year old analyst or associate who's trying to make it to partner who you know put their neck on the table to fight for allocation into FTX and now just got completely buckled and is trying to figure out what they do next oh probably isn't going to be launching another headlong into crypto strategy or fun or allocation those things are just going to take time for people to recover from I think the good news is that Robin Hood's you know the gross tech stocks the fake meat you know companies those just don't have any Tailwinds like they probably may they might not ever hit their all-time highs again like there is just no structural momentum

behind them if you think about what I said earlier where you know crypto was the first into the toilet and maybe it's the first out um the reason is because it has a bunch of progress it has a bunch of applications it has cash flows you can you know evaluate you know in a reasonable manner um and a lot of these other things don't you know Robin Hood no matter how hard how big it gets the payment for order flow business model means that it's really never going to generate a ton of capital at scale and so I I think it's going to take time the institutions aren't all gone it's just you know some made unfortunate decisions to allocate into funds or or you know investment opportunities that didn't pan out but that's just kind of how it goes and it's unfortunate that there isn't any

continuity you know of someone who's just like the crypto guy at uh you know like one of the big endowments um because you know that way it would be better they would allocate during the bear Market they would not just come back and buy the top kind of like they always do but you know that's just life you know they just have pretty bad timing pretty much across every cycle right so so I get that argument I I just want to advance take the devil's argument case for it for a second okay the fake me companies and the meme stocks Etc yeah they're down bad too all right but they didn't have a you know 10 to 15 billion dollar fraud who bribed one-third of all Congress that literally kind of went bankrupt um the biggest fraud Scandal whatever we're calling this thing now

since Enron does that cause a permanent stain on our industry in ways that maybe the other mistakes that were made during the uh like cheap money era um haven't what do you think about that that argument I I so I think first of all uh you know Nicola founder Trevor Milton he's in jail um you know chamoth launched I think 20 specs that have all pretty much gone down 95 uh there's this fair you know amount of blame to be passed around when we're thinking about 2021 and what exactly happened SPF is the biggest fraud of them all um he has funny hair and he looks

strange and so people like to write headlines about him and all the strange things that he does and you know that's just like something that we're going to have to collectively live through throughout the case and that's happening in October so it's not away anytime soon but you know everyone right now is just shocked or or I think they're coming out of the shock they're probably like you know dealing with it now but in the fullness of time I think people will realize that crypto has real use cases has real traction at scale many of these other more speculative companies and projects and ideas did not and conflating them is just a stupid idea because that's how you get sidelined um and so I think right now if you're describing things to know institutional LPS you need to be very honest about

it's not like this metaverse feature that's like 50 or 100 years away we have traction now D5 is better faster cheaper games have a structural Advantage if they're built on blockchain Rails there's many other interesting things that are happening that are generating cash flow you know you just have to leave them back to water but that's okay this kind of has happened for the past two or three Cycles so it's not really anything new to to me at least I think this is just a great sober analysis of like positioning crypto the crypto markets relatively shoulder to shoulder with some other like Frontier technologies that are coming out and say hey like we had a fraud but like there's other there's other frauds too and now our frauds are shoulder to shoulder with their frauds and so like this is all this is all just the way that that

Finance works and I do appreciate the take that at least in comparison to like you know the the plant meat technology crypto rate of innovation is still probably the fastest there is on the planet probably like our iterative cycles and our Innovation that we that we can get inside of a bear Market is unprecedented in advance you talked about just like the difference between fully diluted valuation and and market cap and being able to build our way I think my interpretation what you're saying is like well even when our our valuations might get ahead of us we can still build our way back up to those valuations but I want to put on the on the screen here uh the Aptos chart uh which is currently standing at a 16 a billion dollar Network valuation yeah

that fully diluted 16 billion dollar Network valuation absolute mooning in price at all-time highs when you see the Aptos chart uh what do you see oh sorry to the stream because the division visuals didn't make it up there sorry about that but same question um I'm a realist I just know that it doesn't have any apps built on it there's no ecosystem there's no network and and frankly like I think it's a little embarrassing but you know like I'm not the I'm not the judge jury and executioner of like what gets to go up in price and and me just being you know I think the non-charitable version would be salty about this uh you know I think I could see how people would arrive at that conclusion but

I don't know there's always going to be the speculative excesses of crypto um to see it like totally dominate a market cycle and and pull away from things that have traction I think we just need to get past that at some point and so like let me can I ask you so you know some of our friends some of the people uh Dave and I associate with and kind of that chart that we just showed really triggers them like it it makes me angry it makes them angry it pisses them off um in ways that maybe aren't entirely mentally healthy but like I also feel that I mean like um if you have a blockchain without traction without use cases without selling the thing that

blockchain sell which is block space and it's valued at I mean isn't that what we just went through in 2022 does it does it make you mad at all does it piss you off are you just like kind of Zen about it like whatever I mean the long-term like future will will bear out however however however it does and the short-term kind of things don't matter what's what how do you feel about these things have to take a long queue um you know most of these things eventually correct to the point that they should be valued at but all blockchain assets trade expensive that's the reality of of the situation and they trade expensive because you know we at least think that we're building into

this massive addressable Market that we should be able to capture in the near future um but like it it works for us and it works against us you know ether is a 1670 billion dollar asset right now that's expensive that's that's bigger than most software companies it's but the size of salesforce.com um I think it's you know pretty cheap we've we've certainly you know expressed that position in our our book but um you know if you come to traditional software company I could see those investors being like how could it trade so high this is complete [ __ ] whatever whatever um and so it's a feature in a bug you can't have Aptos trade that high without ethereum being there um sure I think the ratio corrects at some point but I've never really been able to figure it out but you know like

you guys have a lot of most of these blockchains were multi-multi-billion dollar evaluations of the like the long tail oh well l1's and it just happens you know it just is what it is well xrp still hasn't gone to zero of course it's worth still billions although they haven't hit an all-time high in over five years which is kind of interesting whereas you know ethos in the last 400 days or so but um I I guess you know my understanding of framework and and how you've positioned yourself this could be totally wrong I'm not an LP I don't have the inside scoop but um you guys probably missed a lot of the quote unquote alt L1 trade of 2021 and 2022 early 2022 at least I don't know if that'd be fair to say

um certainly like I did uh and a lot in the of people in the bank list community did and to the point where it it felt like I was almost taking like crazy pills if I go rewind January of this year things were much much different and we had Luna mooning and if you would say anything bad or like contrary to sort of the narrative against any of these kind of alt one traits it could be something simple as like I don't think this is worth what the market thinks it is right now something like that you get absolutely pummeled to the but to the point where I felt like I was a little

crazy um what what was the the effect on you like having maybe I don't know if this was your your position too missed some of the alt one trades did you think that you were like wrong for a period of time and how do you kind of deal with that uh yeah explore that with us yeah I mean my job isn't to hit everything it's to hit enough and and be unique enough that you know I produce a portfolio that has really good returns and doesn't look like my my competitors um and you know was I we didn't hit the alt L1 trade you know we were really kind of in the D5 and now gaming kind of

those types of Investments uh you know frankly like in the fullness of time our portfolio did better than if we had allocated to those uh at the time when the fund could have allocated to them uh so I really wasn't that worried I think more of it in terms of like what should I learn for the future you know are the learnings that I should be aping into every alt L1 that I see and and hoping that it you know goes to 16 billion dollars fully diluted and and sell into retail um I don't really think that's learning we've had a lot of opportunities to chase fast money but we've really never taken them we take a long-term view which means protecting the brand and trying to do things that we think have real product Market fit and traction um and so we're happy to kind of you

know let our Theses play out and be proven wrong or right in the fullness of time but I don't think the learning for me was uh you know allocate to all the LL ones I think learning was a lot of them were probably pumped up by Cheap credit and probably customer money um there was a massive you know over inflating of you know what they thought the fundamentals were and you know if I look back and also if I look forward I can tell which ones are generating a lot of Revenue I can tell which ones you know are actually going to be attractive to institutions and I can tell which ones are are frankly going to be the future of the industry I think eventually we're going to see these more speculative l1's tokens Etc die and we've already seen a lot of that so far

um and I think generally the market is tending towards my perspective rather than the opposite one um and yeah you also have to remember that back in the day eth had not transitioned proof of stake eip155 and was not in it had not scaled all the all three things of those were the main motivating factors to launch these LL ones and frankly like those aren't there anymore so let's see and you know if you have something like eigenlayer where you can use eth to secure your Oracle blockchain or middleware why why launch more with tokens it it doesn't make a ton of sense there's a couple more sectors of this conversation that we want to touch on Vance uh the the state of the private markets is something that I want to pick your brain on but also I know that you

you of course pay attention to macro because how can you not uh and there's just always this looming fear of recession on on the earth Horizon so I want to ask you about those uh two things but first a moment to talk about some of these fantastic sponsors that make this show possible uniswap is the largest on-chain Marketplace for self-custody digital assets uniswap is of course a decentralized exchange but you know this because you've been listening to bankless but did you know that the uniswap web app has a shiny new Fiat on-ramp now you could go directly from Fiat in your bank to tokens in defy inside of uniswap not only that but polygon arbitrum and optimism layer twos are supported right out of the gate but that's just D5 uniswap is also an nft

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with Fran Spencer and Vance of course like uh like I said in your bio uh co-founder of framework Ventures hence Venture Capital hence private markets uh the private markets have been volatile just as much as the public markets because they were super over inflated a little bit over a year ago and now are have come down quite a lot at least that's been what I've been seeing Vance uh can you give us an audit of just like the state of the private markets so like how are the supply of deals how are the valuations of those deals uh is is uh framework right in a bunch of checks right now like what's what's overall going on from your neck of the woods uh we're still deploying we announced an investment today we in advance announced another investment last week so like we're certainly doing things

um I think things have just gotten a lot more grounded lower prices more of a focus on Revenue more of a focus on you know what addressable Market are you tackling today versus you know what Market do you need to invent tomorrow um and you know at the sea level which is kind of where we play not a lot has changed like you know things have gone down in price quite significantly but other than that we're still seeing a lot of flow a lot of entrepreneurs et cetera et cetera I think where things have changed the most are at the growth stage you had openc at 13.3 billion valuation you'd Alchemy at 12 you had Circle at nine you know coinbase is worth 12 billion right now so rewrite everything to that and you probably get evaluation for those startups of a few billion you

know if you're being charitable uh and that has is worth more than coinbase right now oh my God on this yeah okay so you know well keep in mind like you know coinbase doesn't have the same concept of like fully diluted and circulating supplies so it can't really like play those types of games sure um and so you know the value of app does who knows what it actually is we it can't be determined but things have come down quite a lot uh we still are waiting for like the class of 2021 to come back and raise because they're going to need to but there's a lot of startups out there and the reality of the game is that it takes a thousand startups to produce one that's good or ten you know more charitably and and we're just seeing

that process play out in real time but we're getting to the 10 like it feels like we know where they're going to be and what the names might be and that feels good fans here uh a framework has really leaned into the whole gaming side of things um but from what I've seen on Reddit uh Gamers hate nfts so how are you fighting that fight so web3 games are uniquely positioned to offend both existing Gamers and crypto people crypto people don't think it's fully decentralized gaming people don't think it's a real game and so like who's gonna play it the answer is a lot of people like there are tens of thousands of people trying eluvium playing you know

it's not even connected to nfts yet but like the game is compelling there's a community forming around it and it's very crypto native and it can scale you know on the on the web 2 side of the web 2 Studios that are coming in you know Stardust has 80 customers right now that are building on top of it that are you know not going to do the full token feedback loop you know reflexive axi game but they're going to put nfts as Shields or swords or you know the virtual currency will be tokens like we're making baby steps and so I don't really expect to get a lot of love from really the crypto people or the gaming people we're just going to create a new market but the good news is I'm being proven right that at a small scale like things like pixels which another game on

Stardust has 40 50 000 monthly active users are scaling it's growing it's more larger blockchain apps on a blockchain you know these things are already happening I just am waiting for it to get from smaller scale to larger scale and then I'll be able to say that you know I was definitively right but that's a this year story David I'm curious have you heard crypto people like hate hate on uh crypto games for for not being decentralized enough uh tell me where that's coming from usually it's the uh the oh it's just a Ponzi scheme with a skin layer on top of it is the the typical critique that I hear yeah or it's or it's not a real on-chain game you know not all of the game is on chain it's like why would we want to put all the game on chain we're not trying to build like the

most on-chain game we're trying to build a game that appeals to people that don't I definitely don't hate it uh Vance if the Vance Spencer the framework thesis for crypto gaming uh is 100 correct can you kind of give us uh the what that looks like over the next one two to five years like how how do games progress uh under your your vision for for crypto gaming it'll feel like when nfts first became popular when all the D5 people were like having fun they thought they were inventing the future it was going to be dominated by D5 and then NFC started happening and people were like that's not right those are dumb those are just jpegs and you know that doesn't involve D5 and

so like how could we be left out that was totally me at first 100 for like two or three months it happens um and and you know then the nft people got rich and it was like these people like how could they do it no time for the elders you know first of all it's happening in the background nobody realizes that people are playing things like lovium or playing things like pixels or you know like a lot of these games are starting to ship their their first iteration um and you're gonna have a couple of days where it just feels like Stephen did where that was like all anybody was doing for like a week and you're like how do I buy the shoes and like should I be doing this like this is stupid and like it's only popular for people in

other countries so I'm not going to do it it'll feel like that and it will happen a few times and then you'll see the burn on on eth or an L2 um and that's when it's going to become real for people and what you're gonna see is that it won't look like the exact same stack some of the walls will be custodial you know that'll offend a lot of people the whole game won't be Unchained you know that will offend a lot of people but it'll bring a lot of new people onto crypto blockchain rails just like the Reddit point system did and that's what I'm looking for more people Advance um D5 has been kind of down only for a while now feels like two years maybe it has been two years I mean there have been sectors there have been tokens that have gone up but overall at down

relative to eth um certainly uh is it going to make a comeback at any point in time I mean like some people are just pointing to you now um broken tokens broken token economics um no like bad governance systems no actual Revenue profit attached to the Token itself uh what do you see the future of D5 tokens even some of the Blue Chip ones which I know you're kind of like you're fundamentally bullish on some of the original D5 types of applications like trading and lending and these types of things but what about the tokens so I think a lot of the D5 use cases are are leveraged to the price of of the

major assets um and so you know those that's a category where you just need more of the same you know you need more speculative interest in crypto you need more people using ether's credit you need more people buying nfts you know those are all defy use cases and those are all largely driven by the price of crypto assets and so you know there is a point where that flywheel gets stronger and stronger it's above a price point where we are today in my opinion but you know that's kind of the Bold case for defy it's it's the most endogenous use case that's on chain you don't need to invent anything new we know it as product Market fit and we know how the tokens connect Revenue there are a lot of broken tokens but those are more of a symptom of not having product Market fit

at scale versus like not being able to hand the revenue over token holders so that that's kind of like one point on D5 um but you see you know even in this market success stories the new number one app on D5 is Lido it is adding you know as of yesterday 65 000 eth per day stake through Lotto that is a lot of ease that is a lot of money there's a lot of fees that can be redirected to the Token so you know people choose to see the thousands of tokens it didn't work instead of the 100 or so that did but we're not in the business of the Thousand tokens we're in the business of picking the winners and you know it just is what it is nobody said this this is going to be easy but there are signs of traction there are signs of Life there

and yeah you know it's all good I we just hold for longer that's my opinion whole thing for longer has been uh facetiously uh optimistic uh good strategy for me it was like oh I'm down I'll just keep on holding and uh I mean a lot that really really worked with ether I don't know how going down the long tail of tokens how much that works out but I mean it's it's worked out prior to this uh and so variance there's one last uh line of question that we I want to talk about which is just macro and recession uh I do know you pay attention to macro I also know that you won't ever give prescriptive advice because you're not so foolish to do so but uh as it relates to just how you think about things and and things in

2023 and Beyond and and what other people should be thinking about as it relates to macro uh what are you thinking about because the banks are laying off people people are talking about that that's a canary in the cold Rhine uh Tech has had massive massive rounds of layoffs uh what are the first thoughts that come to mind when you when you hear the word macro in recession uh I've heard it all before I would say that's probably my my first one I've listened to all the macro podcasts I've heard all the takes they're all you know reasonable uh earnings might go down the recession might be bad um you know there's a lot of evidence which would suggests usually stocks bottom before the economy actually does just because you have people cutting rates

and and doing things like that uh but you know I don't find any of the like macro Doomer predictions too compelling there's a lot of people smart people who thought the world was going to end last year the oil was going to 300 um you know and we were going to be trading like sticks of butter for like wood um but that just didn't come to pass and you know I think now with interest rates you know hopefully having peaked we're on the other side of a market that's driven by liquidity and interest rates and and that's how I think about macro I don't really pay attention to it too much um yeah I mean macro doesn't need to be super favorable it just needs to be like not entirely hostile that's at least my framework right you want to bring up the ratio

Oh I thought you wanted to bring up the ratio yeah I'll bring up the ratio okay this is the last subject and then we'll let you go Vance because I know you got a meeting but uh this is the thing that I've been uh keeping an eye on uh for a while now which is of course the Bitcoin ether ratio that I've now put up on the screen uh I think this is one of the most highest signal charts in crypto uh to me it's the sign of Health uh maybe I'm biased but when ether goes I think you are biister bias when ether goes up versus Bitcoin I think that's kind of healthy uh and ever since eip1559 in proof of stake we've seen a general like uptrend in in the ratio except for the last two days uh Vance when you see the

ratio what kind of signals do you think it tells us um I mean right now if you zoom out like it's uh we've just come out of this massive years-long uh downtrend and it's now kind of reestablished itself at a higher level I think of it is um if you're bullish uh eip1559 the merge uh you know all the flows and the structural uh you know you know basically supply of ethereum uh that won't battle that will matter on the eth USD pair but really what I look for is you know can all of these factors drive eth to flip Bitcoin and I think the answer is probably yes and then once

each does that you know ethusd will be in charge of its own destiny so you know that's kind of how I think about it um I really don't follow this chart other than like very long term time Horizons but I think it looks pretty healthy even flippins Bitcoin uh do you dare to provide a time frame on that one I don't I don't you know it could take years could be sooner than that but um the math is pretty clear and and when you have the math on your side uh in terms of the supply of these assets uh just think of it like um you know you mix a bunch of elements together the lightest ones are going to generally flow to the surface it doesn't really make sense for the heaviest one

to be on top especially when that's getting sold in the market and the miners are down bad so that's kind of how I think about it really just to drive home on that metaphor uh light versus heavy can you unpack that real quick sure so I mean the lightest assets should flow to the top you think about like mixing the salad dressing together you know you generally see the oil float to the top right but why is ether light and why is Bitcoin heavy Bitcoin is heavy because it has uh I believe about 300 350 000 Bitcoins printed per year um and at a current cost of you know 22 23 000 that's like seven eight billion of selling pressure that needs to be absorbed somewhere so call it 500 to 800 million per month of buyers that you

need to go find versus East which has zero Supply being being issued and you don't need to find those buyers and this may sound small uh for a market that has billions and billions of dollars dollars per day but not having the Persona of people who are coming in and selling these coins every single day every single month is actually a very big thing if you've spent any time looking at order books just like all of the pricing is set on the margin the most consistent buyers the most consistent Sellers and one asset having them whereas the other doesn't it's just a massive difference um and so it's heavier it's also bigger in the aggregate you need more buyers anyway to keep it up there uh and so those factors I think will weigh on it and we'll see what happens Michael Taylor can do it

78 billion I expect him to announce something at some point just feels like you know he's been out there maybe buying a few coins so fans it's just not it's not a matter of when it's just a matter of if for ether flipping Bitcoin yeah I mean I think if you're bullish on crypto um you're pretty much bullish on that ratio because if the industry just stays how it has been in the few in the past what are we just gonna be doing Bitcoin again like that that doesn't really hold my attention at least but well what about this question though do you think that the alt layer one thought layer one Wars are over I mean so um every bull market we've had kind of a round of new contenders coming after

ethereum's Throne uh will that happen again yeah of course there's a market for being early to stuff you know people want to be the next youth killer that'll always persist even even when eigenlayer launches and you never ever need to have your own token and like we'll find a reason for one because there's product Market fit to being really for things there's product Market fit for entrepreneurs launching tokens um and so you need to just be cognizant of like you're gonna have things like app does happen every but will you get fewer like I'm wondering if like the the investment opportunities move up the stack a little bit like it will get fewer but you know ethyl and it is still

like the biggest Venture outcome that people can Target right and so you know people aren't launching a lot of D5 protocols right now because they don't think the opportunity is there the opportunity is 100 x larger to launch a base layer if you can become the size of ethereum still it's still yeah it's gonna be like that foreign you know it is what it is but uh no need to be upset I like the Zen attitude uh Vance has towards these uh towards these markets do you have any other um thoughts for us any any kind of advice so what should we what should we expect in 2020 23 what should we uh get busy doing we're not no advice of any sort um

don't leave read try to stay involved try to you know support entrepreneurs um it'll take longer than you think but it'll kind of happen sooner than you expect you know it'll happen all at once so I would just say enjoy the time where it's not super crazy and and you can afford to take a Beat there's still 100x opportunities out there somewhere question [Laughter] uh I hope they are David you have anything else for Advance before we close this thing out no that's it Vance thank you so much for for coming on and just showing your thoughts I think everyone just got a little bit wiser on the Stream thanks guys always a pleasure appreciate it gotta remind everyone of course none of what we just talked about was

Financial advice uh purely entertainment it always is on Bank list risks and disclaimers gotta let you know as well crypto is risky if you didn't know now you know so is D5 you could lose what you put in we are headed west though this is the frontier it's not for everyone but we're glad you're with us on the bankless journey thanks a lot