Takeaways from the Coinbase State of Crypto Summit

Transcript

GM good morning welcome to the milk Road Show we're like your favorite pair of jeans comfortable reliable and always there when you need us I'm Jay Hamilton and today we're joined by Yano AKA Jason yanowitz the founder of blockworks to break down the coinbase state of crypto Summit that happened last week which yeno you wrote an awesome thread sharing all your thoughts we had to bring you on to the show this week to share with everybody at milk Road welcome to the podcast y great to have you appreciate you man good to be here okay let's start set the scene for us what is the coinbase state of crypto Summit who's there give us a picture of it yeah so coinbase state of crypto Summit this is

the second year that they've done it it was a one-day event at Casa chiani which if you are familiar with uh New York highbrow venues it was uh it's probably the classiest place that you could host it in all of New York you get the invite uh first off getting the invite it's a it's not a they're not selling tickets to this thing there are no sponsors uh it's an invite only event there were 600 attendees mix of policy makers um Regulators institutions and Founders in crypto uh really clean like just very classy one day event um and yeah it was phenomenal it was great it's a real who's who of not just the onchain side in the crypto World it actually appears

to me to be more of a who's who of who's who's not here yet as well which is what got me really excited it feels like there's a lot of the large institutions and Brands who maybe are here but we don't even know they're here sort of like you know Google we talk them about them a little bit but we don't really know what they're up to is that the is that the feeling you got yeah very much so I mean I ended up having lunch with Rich Whitman at Google who runs uh Google's crypto team and just blown away by actually how much Google is doing in crypto we can talk about that if you're interested but it was definitely a I mean the first panel kicks off with uh it's called Beyond Bitcoin ETFs what's next on the institutional road map it was uh the CF Alicia Hayes uh hos the

CFO of coinbase and Samara Cohen from Black Rock and Samara for those who don't recognize the name is the CIO Chief investment officer of their entire index and ETF business right she controls more capital on Wall Street than I don't know probably probably 10 people who control more Capital than her in the world so yeah Samara there were some other phenomenal conversations about um uh the CIO perspective was a really good one this was bitwise tro price coinbase asset man uh Sebastian who runs coinbase asset management and then the teachers retirement system of Texas which is one of the largest endowments uh or one excuse me one of the largest pensions in the world so really really interesting there was a conversation on payments with PayPal ey Google open Ai and St

judees so yeah all in all some phenomenal conversations after you've attended this event and you've had a chance a weekend to sort of digest all the incredible panels what would you say are your main takeaways what did you really come out of this and maybe actually you know what before I ask what your takeaways are what was the sentiment like give us a uh A vibe check on how the sentiment was there and how everybody was feeling uh sentiment was extremely high and it is probably I actually think this was one of the biggest like I hate the word Alpha but like Alpha things is just seeing the conversations in person and uh and how starkly contrasted they are with the conversations on crypto Twitter I I do

feel like the conversations on crypto Twitter right now are kind of like they're a little dark and people are like kind of upset by the meme coin stuff or celebrities or whatever it is and feels like we're talking in circles and talking past each other uh that was very much not the sentiment in person um a lot of excitement in person and the the actually the my co-founder and I were just talking about this the last time I can remember the uh discrepancy between the what I'd call The inperson Vibes versus the online Vibes the last time I can remember being this strong is probably the 2019 Market it's kind of what it felt like ending 2019 at that time binance iOS were going on like there was a lot of just like despair on Twitter uh but people in person were

really excited about what was coming and defi was actually happening behind the scenes and Unis swap had just gotten built but it wasn't really like people weren't talking about it so anyways The Vibes were really high and it was great but yeah I can talk takeaways I've got a few takeaways for you if you want them yeah let's jump into takeaways uh first takeaway going in was I thought this the conversation was going to be the institutions are here the institutions are very much here we've got black rock on stage and these cios and these big pensions and endowments speaking at this event uh and I think on Twitter that's the conversation as well the the the institutions are here right we finally have Bitcoin ETF it's looking more and more likely that we'll have an an ethereum ETF before we know it uh the

takeaway from some of the actual institutions was the institutions are definitely not here yet they are definitely not here yet which which I think led to a lot of excitement and gave me some excitement for for what the next 12 months could look like and if you actually want to put some data around it uh Samara from Black Rock and then Kathy Wood from Arc both said a nearly identical quote related to both of their ETFs so the arc invest uh Bitcoin ETF as well as the Black Rock ETF both of them said this number 80% and 80% is an important number they said 80% of their Bitcoin ETF volume right now is being driven by self-directed investors buying through their own brokerages you see all this like you

know we we set record flows I think it was net inflows of 12 billion dollar for the Bitcoin ETFs right in three months fastest growing in history uh that is individuals like I don't know your mom or dad or something like who have been scared to buy Bitcoin on coinbase and now that it's in their Fidelity account they can just buy through their brokerage so 80% of the if you think like let's take a round number 10 billion dollar eight of the 10 billion dolls is being driven by they don't like their word retail I also learned but self-directed investors uh that is the first big takeaway I think that also trickled down into uh raas and financial advisors right raas control 40% of the wealth in the United States financial

advisors in ra is 40% of the wealth in the United States they're still recommending there a lot of them are still not even recommending putting it in the portfolio because the wirehouses have not turned on bitcoin uh the Bitcoin ETF yet so you can maybe buy it directly in your brokerage but through the wirehouses you can't yet so the financial advisers are still a little bit worried um and are still a little bit wary so that was um that was probably my first big takeaway is just that it's nice to say the institutions are here because it feels good to say but yeah there's still a a massive Blue Sky opportunity and a huge amount of white space I think coming from these from the institutional crowd I mean that's super exciting to hear like the

fact that we have achieved the fastest growing ETF ever in history and it's been done by I I I got to say I don't like the term self-directed investors it's been done by retail investors like that's wild that this is I think we all thought I remember reading Matt Hogan's tweet who I know was also at this Summit and spoke as well I remember reading his tweet like a few months ago where he said oh 3% is the new 1% and I'm sure you'll bring up that 1% to some people are even talking up to 10% now uh but I remember when I read that I was like okay then financial advisers must be here they must those are the types of people who do that type of allocation who say hey you should you should have 1% of your portfolium Bitcoin or

whatever it might be but if it's all just like it it feels like to me like it's all the I don't even think it's our parents or anything like that I feel like it's the it's the robin herd users of the world the betterment users it's the people who have learned how to invest themselves and have access using these great fintech tools and now they're just saying yeah hey I'm gonna throw a little bit into Bitcoin because I read about Bitcoin I've heard about it and I guess I've seen it enough times now that I trust it so the fact that there's I don't know if you like can we put that into a can we quantify that somehow like how many trillions of dollars is that that could be coming yeah I don't know I think there's two big trends that are happening right now

so there's one Trend which is the institutional crowd which I don't know trillions right there's another Trend which um uh Brett TPO the head of institutional business at coinbase actually started he opened up the event with this so everyone's focused on the institutions he said look the institutions are exciting we'll talk about them that that's great the other big number is 70 trillion 70 trillion is the amount of money that's going to move hands in the next decade or two from the uh this older generation to a younger generation at7 trillion right is moving from maybe Boomers into the hands of Millennials and gen Z and if you actually survey that like coinbase has done if you talk to those people gen Z and Millennials

90% of them are dissolution with the financial system so you've Got7 trillion doll of wealth moving into the hands of a group of people where 90% of them are disillusioned with the financial system I think it was Brian maybe someone else there was a consumer panel that was great as well and they said look in the future you're not going to use a bank account you're there there you're not going to have a bank account your bank account's just going to be in your phone your phone will be synonymous with your bank account which will be synonymous with a with a wallet right it's all one and the same it's not this you're not going to go open up a Bank of America account if you're a 16y old today it's so loud to think of so so we got first takeaway uh almost almost like a bit of

like who's coming there's a lot of people not just institutions institutions aren't here they're coming financial advisors aren't even really recommending this yet and this youth movement is I shouldn't say youth movement but this movement of wealth from the old to the young that is happening is also they're already here I would say a lot of them but if they're not here they're more likely to come as you said so many people will grow up without a bank account I love we had pomp on the podcast uh maybe a month ago and he had this great analogy about time and he just said he was like the thing you got to understand is we just need more time because right now there's a 15-year-old who was born with Bitcoin 15 years from now there's going to be 30-y

olds who were born with just Bitcoin and it's all they'll know a hundred years from now nobody even remember the gold standard it'll just be Bitcoin and it's so it's so true when you break it down that simply okay so first takeaway there's a lot of a lot of exciting movement coming our way second takeaway and the last St I'd put on that is from a uh regulatory perspective it was uh the Black Rock the Samar from blackw and the CFO of coinbase said they think regulatory Clarity will push institutional capital from being comfortable with 1% of their portfolio in Bitcoin and crypto to five to 10 per.

so they said there's a lot of their clients who are sidelined uh because of the lack of regulatory Clarity anyway so takeaway number one I would have for you is institutions are dabbling but they're not as here as people think they are so that's that's first takeway any any idea let me just actually any idea when they're coming I remember one stat that you had was about how everybody had a a working group a dog I think it was called digital asset working group yeah yeah Sebastian from coinbase so Sebastian's a actually ex Olympian rower uh but also a head of the coinbase asset management team he said look we've got a second chance at the institutions institutions meaning the real the real LPS not just the funds but the real LPS the pensions the endowments um the sovereigns the Insurance Groups

so we got a real second chance at them it's not happening in 2024 it will happen in 25 takeaway number two that I'd have for you is learning about coinbase's strategy I was I was actually surprised by how open Brian was so uh takeaway number two is around coinbase's business in the future of coinbase so Bri uh Brian said the three most exciting things at coinbase right now one Bas so base I'm sure most milk Road list know but base is the the L2 uh that that coinbase has been building so that is the most single most exciting thing at the company right now it's not their trading platform it's not the exchange it's not their Prime brokerage business it's not their custody business which custody is onethird of the top 100 hedge

funds actually in the US which is a crazy stat um it is it is base he also said uh number two and number three most exciting things are they derivatives business and then their smart wallet which makes onboarding a whole lot easier so if you think about the three things that the CEO of the largest crypto company maybe outside of binance in the world is excited about it's base and a smart wallet and then derivatives obviously but base and a smart wallet right and that is just like it kind of lined this event lined up with um coinbase's Big Marketing push around like on onchain summer and moving things on chain and that was a big theme of the event is which we'll talk about in the third takeaway is just like yeah just

how how much is actually happening on chain um and the natural question in the room was like well what does this do for your business and the craziest quote of the day was Brian saying and I quote centralized exchanges will be great for a bit but they're just a moment in time it's all going to be peer-to-peer with no intermediaries and and all on chain so you're you're saying that you're going to get disrupted and it was a pretty remarkable remarkable quote and he said look all coinbase products are going to eventually move on chain so I just thought the reason that's so important is um it all trickles down right what what coin coinbase is a you know 50 plus billion dollar public

company or whatever their market cap is today that then trickles down into what other fintechs are doing it trickles down into what other crypto companies are doing if you look at the series D or Series E companies like a circle or a kraken they're paying attention to what coinbase is doing so it all trickles down so coinbase making this huge push on chain is I think indicative of what's going to come in the next 12 to 24 months from other brands it's just incredible to hear a CEO saying he's basically to disrupt his own business like he's saying hey we have this incredible business that's working very well and I got to say kudos to him because I agree I don't do you agree I think centralized exchanges they also longterm place here we need them right now so they serve a great purpose and

they will continue for a while but he's it makes me more bullish on coinbase and the future that they they see because he's he's not he's not missing the Force Through the Trees here money and the flow of money ends up it's like water right it it flows to the path of least resistance and right now centralized exchanges and the current system is actually the path of least resistance it's I find it much easier to use the to use Zen mode than to do something on chain but as things like smart wallets come out and account abstraction and and and other things like that system then becomes the the path of leas resistance for that Capital to flow yeah we talked about the smart wallet last uh was it

last week or the week before can't remember time in crypto is so difficult to keep track of and wrote about it in our wallet in our newsletter as well because it is such a a big um launch that they've done so super excited about that next let's move on to the next takeaway unless there's anything else from uh coin the last piece from from Brian that I would just say is that um uh for the first time ever international business grew faster than the US business so International Group faster than us and q1 and he said the last piece of the this big puzzle for us is international expansion uh today it's 177% of the revenue at coinbase he expects it to continue to get much larger actually uh he said their strategy they've actually hand selected

10 markets to go into they call them internally the go deep markets and they're doing a full force Blitz it's reminded me a lot of when like uber if you ever hear the early stories of uber like they would just pick a market market and just Blitz the hell out of that market it seems like coinbase is about to do that with what they've said are 10 markets so the last thing I'd say last takeaway was um so for those who went last year uh it was very focused on infrastructure right they were they just they rolling out base and people were talking about arbitrum and optimism and Salon was kind of picking up steam but like it was still I mean summer of 23 like we were still just in that first phase of the bull market coming out of this like prolonged bare Market market and um it

was all an infrastructure conversation last year everyone was talking about l1's and l2s and infrastructure there's no mention of applications this convers this conference there was no there there was really no infrastructure conversations it was really all application uh uh conversations and there were a couple really good conversations with pay there was a payments uh panel with Google and PayPal and St Jude's um there was another like onchain panel with pleaser Dow and some other and coinbase smart wallet and some other folks so the third takeaway is like it's if you asked me 12 months ago will this cycle be driven by applications I would say no I think we've I'm I'm sorry I know that people

want that I just think it's going to take too long and that's probably a cycle after but look this I was sitting there watching some of these panels just thinking like so much can happen in 12 months and I think the the number of application conversations about applications has kind of flipped my thinking a little bit and I do think the second I think we're probably halfway through the cycle right now I think the second half of the cycle will be driven by applications and I think there's there's only so much blood you can squeeze from the stone and this like the right the infrastructure Stone has been squeezed pretty dry uh and I think it's at this point like you know probably the most overhyped part of the industry um and so you're starting to see like Bas coinbase is BAS you're probably te like

telegrams blockchain like play is where like they have users and they have distribution like that's going to lead to this whole I I think the first real like application hype cycle in crypto which I feel very excited about was there any conversation about what those applications are or even the categories that they fit into I think the conversations there are the skoric ideas right it's like put the Uber on the blockchain type of thing um where it's like yeah let's take this original this existing idea and move it on chain uh and we tried that a lot in 2017 there were all these ideas we tried doing it in 2017 we tried it again in the last cycle as well but I think the thesis there is like now maybe we have better infrastructure so we can do it I I don't

like those I'm not that excited about those what I think is cool and interesting is the completely new stuff that can that can come from crypto and the way I think that I my mental model works on this is there was no way to predict Uber or SnapChat until you got camera on the phone and a and a GPS embedded inside of the phone right only once you had a GPS eded in the side of the phone could you get maps and only once you had Maps could you get Uber uh and I think that's right now where like there's some skew morphic conversations happening but I think we're trying to push into the more creative unique I think there'll be some marketplaces that get unlocked like marketplaces that have just never been able to exist that can exist because of crypto rail so that's

what I'm trying to pay attention to right now it's so interesting it's like you said it's hard to predict because we don't know and let's be real everybody that's building is definitely building skoric right now and you could argue you know gaming is such a big sector that we've all been talking about for so long nobody's really figured it out yet and mostly it's because they're trying to do it in a very skoric way one thing that um that stood out to me is uh crypto branding problem seemed to be brought up a few times and in particular the issue with the word rwa can you can you explain this to us yeah this is I've heard this from a few folks um so rwa so actually this was brought up on nearly every uh uh panel with someone in

traditional Capital markets they said look crypto's got a branding problem we all know that people don't like crypto FTX SPF all this stuff that's that's fine we'll move past that they said what we're really but we're really shooting ourselves in the foot they said rwa for example is a term that is used every day in the traditional Capital markets World rwa means risk weighted assets right so when crypto people start saying real world assets one it implies that crypto assets aren't real and that we need these real assets over here but two it's like a new industry being created and saying like yeah like SNP it's like we've already got an S&P it's like we need we need a new so risk-rated assets is a term that is the process that is

used to determine the the minimum amount of capital that a bank has to hold in relationship to the risk profile of all of its other assets right and that is that came after the regulations of like 2008 2009 to reduce the risk of insolvency and protect depositors so like rwas is a big thing on Wall Street and we've just kind of co-opted this term like they've already taken it and we're just trying to take it we're just trying to make it our own term and it's not a good thing to do it's not a good so they said you got to Rebrand rwas any any ideas of what we should call it instead don't use the word real world because there are like it implies crypto assets are not real I think I mean something around tokenizing is seems like the thing that has caught on and

has kind of gained it gained acceptance with with Wall Street it's kind of like in 2018 and 19 like everyone hated the word crypto but they like digital assets it's it's like real world assets they don't like but they like tokenization so right okay so tokenized assets or Tok I don't know something like that I want I you make me want to stop saying rwa but I'm like what do I say instead what do you say yeah exactly yeah gotta we got to have a your your don't you have a marketing agency you guys got to work on this or something that's right yeah we we'll get them work on that we'll put out a poll as well and see what uh see what the listeners think maybe we'll we'll go back and forth on this on Twitter okay uh last question before we let you go

you you teased at the beginning that you had a side conversation with uh Rich weinman from Google uh and in your post you you you teased it very well you said damn Google is up to some big things I think people should take them more seriously can you share anything more about what they're up to yeah so I met with rich rich rich is great everyone should go follow him on Twitter um Google has pushed Google has a large crypto team and I don't think anybody realizes this I remember when Google pushed into crypto about two and a half years ago and I said look it's just another big Institute another big Enterprise trying to take advantage of the crypto hype and they now have a not sure I can say the exact number size of the team but it's like uh it's a good dozens of people

working on crypto inside of Google on one cohesive team and they have three very distinct product lines he has a p&l that he runs and it's from the top and there's a he's got a directive and he's building out these three different crypto products um I don't know if I can I think I can I don't I don't want to overstep and say things I can't say but like what what I would say is like what what Google if you think about what Google is world class at they're an infrastructure business and they're a Data Business right so I would expect to see Google Push really heavily into essentially being a full stack data provider in crypto whether that means the the end user is someone like blockworks research right with our dashboards and getting our dashboard

information from someone like Google instead of one of the other node providers all the way to some of the traditional hedge funds right they are the data provider for someone like a CME Group or one of the exchanges like when that exchange wants their crypto data do you think they're going to go to Google or are they going to go to some API provider they're they want to go to Google so that's I think theit that's what I think we'll we'll see Google uh push pretty heavily into it's it's still a lot of the base stuff not the it's not consumer apps or anything would not consumer but what but when you do things like running your own nodes and have validators and all that kind of stuff you can do things like uh Google if you type in an I think an an eth address right now or an ens or

something like that like you can now search the ethereum blockchain inside a Google search so it allows you to do things that are more consumer facing because you have the whole data infrastructure right right which is a theme that you kind of keep bringing is like we need the infrastructure in order to create new use cases which which are certainly coming uh we'll see if they come in this cycle or in the next but as you said things move very fast Yano thank you so much for joining Today's Show before we let you go where can people follow you online if they want to discuss what should we call rwa where can they join in the conversation yeah uh I'm on I'm on Twitter at Yano people can DM me my DMs are open I've also got a little thing for uh milk Road listen

ERS or readers of the newsletter or whoever if you want to send this to which is um we have a big conference that we host with the folks over at bankless called uh permission list which is October 9th through 11th we've got like basically every founder of every L1 L2 Chris Dixon bellagi novag grats whole bunch of big people speaking milk Road should definitely be there and uh if you want to save 50 bucks there's a Code which is just milk so kept it simple for you guys there's a code called milk so just Google permission list conference you guys can see it right on we'll throw a link in the show notes for that uh big fans of blockworks and bankless good friends of us as well so we'll definitely be there and you guys should be there too Yano thanks much for joining today we hope we get you back on

the show some point soon appreciate you in case you missed it tether the issuer of stablecoin usdt the largest stable coin in the world is launching a new category of crypto assets called tethered assets the first asset in this category is alloy that's a l l y goes by the ticker a usdt this is a token pegged to the US dollar and supported by physical gold held in Switzerland also El Salvador has proposed a new bank for private investment BPI for short which is designed specifically for crypto investors now the bank would operate with fewer restrictions than traditional

Banks allowing it to engage more freely with overseas entities and issue larger loans it would cater to investors using both Bitcoin and us aiming to attract foreign investment and stimulate economic growth The Proposal still needs approval from El Salvador's legislature that's all for today thanks for listening in folks and have yourself a wicked awesome day thank you for listening to milk Road radio the easiest path to get smarter about crypto if you like this episode share it and hit subscribe or follow so you don't miss out on the next one there's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game then we'll leave a

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