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The Report: Zach Pandl & Sam Badawi
Recorded: March 3, 2026 Duration: 0:46:19Space Recording
Full Transcription
Good afternoon and welcome to The Report with your two hosts, myself, Sam Badawi from the
Wolf Team, as well as Zach Pandell from the Grayscale Team, Head of Research.
We are here for another installment, another episode.
I feel like these days go by very fast, obviously not running low in any type of news to report
at all whatsoever.
Not a single week goes by without some sort of geopolitical event occurring,
which is very relevant to crypto.
But more importantly, we have seen quite a good amount of stability
as far as all crypto assets and the Grayscale ETFs.
And speaking of which, we see that BTC,
which is one of the Grayscale's ETFs as well as ETH, is very much outperforming SPY or SPX
as well as the Qs in the last five days. Very good to see that relative outperformance because
in my opinion, whenever you see that outperformance on a relative basis, that usually means that
money is flowing more toward there and outflowing toward other assets and
classes. Good afternoon, Zach. How are you today, sir? What's up, Sam? I'm great. How are you? I
can't believe it's been a month since last we did this. There's been so much going on.
Looking forward to digging in again today. Yeah. I mean, I feel like we were just talking about
Warsh coming into the Fed nominee.
We were talking about the 10% credit card rates.
We were talking about how crypto was not outperforming,
was underperforming the broad indices.
But here we are today, a month later,
and things are definitely looking a lot better
since we had basically bought around 60K on Bitcoin,
which is pretty interesting because that was
that's like around the level where we basically topped out in 2021. And usually when we have these
different cycles, the bottom of the next cycle ends up being close to the top of the previous
cycle. So definitely good news. And as you pointed out in your report, and I will leave a link to the
report in the show description and also pin it in the chat.
But as you guys have pointed out, we've seen a lot of crypto stability in early February after all the drawdown we've seen. And again, calmer volume and of course, calmer volatility, which does make for a good sign of recovery and probably is leading to what we see today with the outperformance of crypto, namely the grayscale
ETFs versus the broad indices, which is really what has been propping up the market for quite
some time. And seeing this broadening out of the market is definitely good to see versus centralizing
around, of course, the industrials, utilities, and the risk off trade. The market is starting
to seem a bit more risk on, but more in assets that have not been
performing too well lately and obviously fundamentally it is a very good time to be
accumulating crypto for long-term opportunities what are your thoughts about that on zach and
also we will get of course into the recent events that happened just last weekend. Yeah, that's a good summary, Sam, since last we checked in.
You know, we spoke in early February.
Crypto markets were still coming down with a relatively steep trajectory, I think.
You know, it was a pretty tough drawdown from early October to early February.
But since that time, I think, as you said, signs of stability, calmer waters in general,
and that's both price performance.
You know, markets came down, crypto markets came down
quite a bit in February until February 5th.
And then it basically been up a little bit since that time.
So price has been more stable.
And then the other types of stress indicators
that you might look at in markets,
you mentioned very high volume during the sell-off that has settled down. Option markets,
implied volatility in option markets have come down. And we haven't seen the same wave of
deleveraging in futures. Crypto has lots of leverage, different parts of the market. You
haven't seen a shrinking of that leverage.
Open interest in futures contracts has been pretty stable.
So there's a lot going on in the world, and we're going to get into all that.
But in terms of crypto market conditions, say, going into the Iran events, going into this week of news,
I think kind of finding a pretty healthy equilibrium, finding some stability.
a pretty healthy equilibrium finding some stability and yeah we would argue you know
maybe the time for longer term investors to start uh considering allocating uh to the asset class
yeah it's also very interesting how we have much more insight and of course grayscale is much more
insight as far as the mechanics of how the market moves in the crypto assets versus the way it's
been for about 10 years of course as technology better, as Grayscale does improve its research and
foundation and tools, you can start to pinpoint the correlation of when things are bottoming
and when is a better time to buy versus maybe it was like five years ago where you, of course,
didn't have access to all of the tools that you guys use today.
And considering what you've had in your report,
it does look pretty hopeful that we are starting to see some sort of bottom,
but more importantly,
some sort of stability in terms of the crypto markets where money can start to
look as volatility decreases,
more money can be allocated because from,
from my experience of what I've seen is that fund managers tend to not allocate
as much when
volatility is very high in an asset. But now that we're starting to see the volatility of gold
increase, silver increase, as well as the stock market and risk assets increase in that perspective,
you start to see the money rotate back into less volatile assets, which in this case will be
crypto because you'd expect these type of moves
you'd see in like gold and silver to be in crypto land. But that's not exactly what we're seeing
today, which is very good when you think of allocation as far as risk parameters for these
fund managers. Yeah, absolutely. Look, as you say, fund managers, they don't want to catch
falling knives if they don't have to. And, you know, crypto markets typically behave like this,
where, you know, there are commodity markets, I guess, at a fundamental level, like other
commodities, they tend to, you know, the knife falls all the way down to the floor and then
rests there for a while, you know, and usually gives investors time to, you know, build positions
and observe that stability. I think that's one of the lessons for me kind of trading crypto over the years is you have, you can have a little patience
in these drawdowns. You typically, unlike equities, you don't typically draw down and
then go straight back up. Typically there is a period of stability or choppiness and, you know,
a lower volatility. That's what we're going through. That doesn't mean price is going to
go right back up. But I think we are seeing the signs that could be consistent with a durable
bottom. And that's what we're messaging to our clients at the moment. That's good. That's good.
What are some examples of some indicators you're seeing? And you've talked about it in your report,
but for the audience, what are some examples and signs that you've mentioned? You mentioned the
volatility, but like maybe give a little bit more specifics on that as to why that's such an important indicator. Yeah, just like in any
other markets, whether it's equities or currencies, there's lots of different indicators that you can
look at to try to gauge investor positioning and speculative trader positioning. We have those same
types of tools in crypto. So in crypto markets, for example, the ETFs
have been a big new buyer. And so we've been watching ETF flows closely. You had about 900
inflows into the spot US ETFs. The bid has returned. And then we also have a offshore
futures market, perpetual futures market. This will be
coming to the U.S. market alongside regulatory change. But there's a lot of futures trading
offshore. And so often we're looking for signs of increasing leverage or decreasing leverage
and how much traders are paying for that type of leverage. These can be indicators of how much speculative
excess there is in the market today. So at the moment, we would see a little bit better ETF
flows, ETF starting to see net inflow, a pretty calm picture, pretty low leverage in offshore
futures market, not a lot of speculative excess. and these are exactly the kind of things that you want to see if the market is beginning to turn a corner yeah if i'm looking at um the way crypto
has been acting since uh it bought in early february you can see that well i don't have the
chart up right now but viewers probably are aware of the price of crypto around certain times but
bitcoin headed down to around 60k and it's been somewhat staying afloat over
here finding some support around the 60k region and it's good to see also of course you know we're
going to get into the conflict in the Middle East but since the announcement of the escalation of
events in the Middle East you could see that crypto's drifted up higher while the Nasdaq 100
or sb500 have been drifting down lower. And of course,
the VIX, which measures the 30-day volatility of the S&P 500, has risen dramatically since then.
I don't exactly have a measurement of the Bitcoin volatility on record over here, but
that, of course, if that's pinned to the price, as far as how volatile the price of Bitcoin is, it is likely dramatically decreased.
And we were just at like 70K yesterday and we didn't exactly break through.
But you come to these resistance levels in Bitcoin in general, but seeing how it's coming back to retest it and it's getting bought up.
Meanwhile, the Nasdaq isn't getting bought up just as much.
It kind of shows a rotation in leadership.
And that relative outperformance is very important to me. And of course, a lot of traders out there, but more importantly,
the people with a lot of size. Yeah, absolutely. Look, I think the technical picture, the chart
picture, the price performance looks pretty good in the last few days. I don't want to
overstate it. I think if you were to kind of zoom out and, you know, I do look at
charts, I do look at technicals. I think it's an important part of the process in risk management
in markets. I don't think we need to be shy about that, even though we are very focused on the
fundamentals also. Look, when I look at the chart, I think, you know, short term, it looks like we
have a bit of a base and price action has been good. If you were to zoom out, look at the weekly charts, the monthly charts, I think it's still
a little bit unclear whether we've definitively hit a bottom and whether we're racing back up to
100,000. I don't know whether the charts are telling us that just yet, but it's been a very
encouraging short term stretch here. Tells you that, again, the leverage has been washed out.
The paper hands, as people say in crypto, they're out of the leverage has been washed out the, you know, the paper
hands, as people say in crypto, they're out of the market at this point. So when you don't
go down on military conflict over the weekend, that's a pretty good sign that, you know,
you'll have really durable holders in the price at the moment. I think that's how I
would characterize the kind of Bitcoin positioning picture. The paper hands are basically out of the game right now.
Yeah, a lot of the a lot of the drop that we've seen, like you've mentioned, and it's
not just in crypto, it's also in a lot of high beta, high growth stocks as well. And
a lot of tech positions and software, especially a lot of it has been more deleveraging than
just all out selling. I mean, if you think about how much leverage, especially with the NAIM index, exposure index,
that shows the fund manager allocation where you have zero as a no allocation or net neutral,
you have 100 as a net long, and then 200 as a max leverage long.
You've noticed that there's been a bit of deleveraging in there below the average. And usually bottoms tend to form or at least start to come up close
when it is below the average to a certain point. Now, obviously, if we think about a lot of these
indicators, you have multiple indicators as a tool in your entire tool belt. So there's never
one indicator. but from, from
what I've seen is that a lot of it was deleveraging also a lot of the underperformance we've seen,
but that has kind of stabilized and we're starting to see that relative outperformance
in assets that have been delevered to the point that, Hey, maybe these have a chance to kind of
pick up some steam or at least outperform on a relativity level uh versus what has been leading the market up for quite some time so with that being said obviously we're about what four days into this
war already and things have somewhat escalated um but not to the point where it's like oh my goodness
you know i think a lot of the crazy and surprise stuff has already happened last weekend uh am in
any other escalation that we're having but as far
as the effect of the markets what are your thoughts about it like what was kind of running through
your head last weekend and what's your reflection on that today well let me say a couple things you
know i'll talk about the the macro you know i used to do macro investing and strategy at full time
so i'll share my view on that but maybe more importantly is just what we learned about blockchain finance,
on-chain finance, and how it's modernizing capital markets. So these events, the start
of the conflict, President Trump's announced at 1.30 in the morning on Saturday, new out
in Pacific time. Traditional markets were closed,
had been closed for a while, and were going to open for a while. And so if you needed information,
if you needed to hedge risk, you were going to use crypto markets, essentially. And there's a
bunch of things stood out. One is tokenized gold. So Tether's tokenized gold product,
which trades on Ethereum, saw a surge in transfer volume
and was a way to observe the price to trade gold when traditional markets were closed.
I mean, that's exactly what we want to see open 24-7 permissionless finance. These are some of
the things you can do. Hyperliquid, a big futures market, was a place where people were hedging risk, not just for crypto assets,
but for stocks, but for commodities. Again, over the weekend when traditional markets were
closed. These are tools that active managers, active professional managers and traders that
they're going to need. I think we're going to see continued growth in these types of flexible tools
that are always open. And then prediction markets like Polymarket.
I mean, people basically know what Polymarket is. I don't need to explain it when I'm on the road
talking about crypto anymore, but this is a blockchain based prediction market platform.
You know, we're in the fog of war. You know, that's what there's a term for it. You know,
it's really hard to distill all the information during military conflicts.
You have sometimes biased information, sometimes contradictory information.
Prediction markets like Polymarket allow us to distill all that information into simple probabilities that are easy to understand, easy for decision makers to action upon. So tokenized assets, perpetual futures, prediction markets, these are really a
showcase of all the things that crypto finance, on-chain finance has to offer. And I think it
performed spectacularly well, frankly. We don't want to have to have an unfortunate situation
like a military conflict, but it speaks to the value of these tools and the way that they are transforming
our capital markets. I think that's very, very encouraging. Now, just my two cents on where
things are going. I'll say briefly, sorry, Sam, briefly where things are going. Look, I think
it's always tough and you can't read too much into the short term, but the really big question is,
is this a contained conflict between a small number of countries,
a small number of actors or something much broader? And at the moment, fingers crossed,
it looks contained where we don't see participation from a much wider set of countries.
Of course, there are certain actors throughout the Middle East, but this is really about
US, Israel and Iran, not about China, not about Russia, not about the Gulf states at this point. If it can stay
contained like that, hopefully markets will be able to move on from these risks before too long.
Of course, there's a human level to all this, but strictly speaking from the standpoint of a
financial analyst, that's how I would be thinking about it, that if the conflict can be contained just to those actors primarily, then it doesn't necessarily need to be weighing
on asset prices day after day, week after week from here. Yeah, it is somewhat, I know it's
a bit of a sensitive topic for some people but strictly from mark perspective it is
somewhat of a relief to see some sort of stabilization in any type of escalation uh
in what's happening across the world um we'll be that in may obviously we do have the tariffs
as kind of background noise we did receive a decision from supreme court um that they deem
uh a lot of the tariffs as far as being unconstitutional,
whatever exactly were the new decision.
They were obviously against the tariffs as far as the Supreme Court of the United States
of America goes.
But then Trump came on the podium and he basically said, I have many ways to enact more tariffs.
And then he had more blanket tariffs on top of that.
Now, that has kind of
taken like a little bit of a background or a little bit of step into the background uh as the
war conflict started to escalate a little bit um but let's say the let's say any escalation um
there is no more further escalation in the war right things play out the way that the president says they are. Things don't escalate
outside of the region. Do you think that that sets up for a good or supportive macro backdrop
for crypto to continue its return to at least like maybe the $70,000 range above the $60,000
that we see right now? Yeah, I do. I do think if we can put these, you know, when military conflict, geopolitical
conflict, it introduces tail risk into markets and you need to price that tail risk while
the conflict is ongoing. And if we can get through some of these couple of weeks and
you can reduce that tail risk, you know, then markets can go and focus on other things.
And I think when you look at the broader backdrop, it looks pretty encouraging. We talked a little bit last time, Sam, about Kevin Warsh at the Fed.
We don't think he's going to be an instinctual hawk all the time. I think he'll probably pursue
pretty balanced policy, probably will support cutting rates further this year. But beyond the Fed, the U.S. economy looks
in solid health and the world economy beyond that. When you look at the parts of markets that are
really geared to the real economy, like industrial stocks, like copper, we used to call it Dr. Copper,
like it had a PhD in economics because it tends to be correlated to the economic cycle.
The Korean index, you know, the Korea is a really a trade oriented nation, very geared to the health of the global economy.
So, you know, it's these kind of assets that are performing well.
And the reason is that the economy is in good shape.
So I don't think that we have a lot of downside risk, recession risk at the moment.
I don't think that we have a lot of downside risk, recession risk at the moment.
If we can kind of move the geopolitical conflict to the side from a market standpoint, then
I think that the rally in assets can continue.
Yeah, so I totally agree with you.
I think a lot of the, as far as technical wise from the broad markets we've been in quite a
decent range uh since last october and no matter what you really throw at the market it tends to
find a footing at around the same level um and always brings its way back up to the top end of
the range um but what we've noticed uh prior is that before we had some sort of clarity as far as who the next
fed nominee is going to be now that we do have that clarity and if I really do think about this
from a monetary perspective um as long as we have continued monetary expansion that is or
global M2 money supply M2 money supply in a global perspective that is a bullish backdrop when you
think about liquidity expansion especially for crypto as long as we continue to have that
expansion that could bode well for risk assets but more importantly for crypto in my opinion
and i think we're starting as we start to uh dive more into the nominee and his way of thinking um
it does seem pretty hopeful that things are not as bad as what the market had collected them to be.
And usually the market moves in anticipation
of something happening.
And once you get more clarity
or once you get more certainty from that perspective.
So I wouldn't say no matter what the certainty,
but usually when you find out the outcome,
the market tends to unpriced that uncertainty out. And that's when
price brings back stability. And therefore, as markets are built, they're made to go up, right?
At the end of the day, markets are built to go up. And crypto is definitely the same, especially when
you think about the impact that we're seeing from a podcast perspective with AI, and especially on
the privacy layer. So one thing that you've discussed in your report
is the innovation expanding across AI for privacy peers and prediction markets. We've already touched
a little bit on prediction markets, but what is the AI and privacy capability or application
for crypto and how is that overall beneficial toward the entire sector? Yeah, great question.
And this chart that you have on screen is a good one to talk about.
This chart is showing the grayscale crypto sectors family of indexes.
So these are the ways that we define all the different assets across crypto.
We bucket them in basically industry groups or sectors similar to equities, but for crypto.
And you can see on the far left hand side of the
chart, most things were down quite a bit in the month of February, as we've talked about really
the beginning of the month before that stability. But for the month, things were down, but the
artificial intelligence crypto sector hanging in there quite a bit better. And some of the assets
within that sector had very strong price performance.
Look, I think what's going on here, Sam, is that we've had an AI trade pass through markets
in general. AI is revolutionary technology, and we're starting to see faster breakthroughs,
AI agents seeing faster development. We're seeing innovations from Anthropic
on professional business services like legal, HR,
these types of things.
So that disruption trade is passing through markets.
And I think investors are looking carefully
at what is harmed by AI from a competitive standpoint,
and what is helped by AI from a complementary standpoint.
And we believe strongly that AI and crypto are complementary technologies. They are not
competitive technologies. Crypto is all about using economic incentives, open source software,
networks of computers to reduce centralized trust in the financial system. That's very
different than what large language models are trying to do. As revolutionary as they
are, I don't think they are trying to replicate what blockchains are trying to do. And AI
agents are going to need to be able to make financial transactions. It's great for your
AI agent to read your email, but ideally you want it to be
booking flights and managing your brokerage account and paying your college tuition or
whatever it happens to be. You want them taking financial transactions on your behalf.
And I guess in my view, it's very unlikely that the robots are going to use the banks.
I mean, you can't really have a bank account. And, you know, with banks, of course, you have to wait for a couple of days for settlement
and you have issues with cross-border and all, and you have issues with low value transactions,
all of these types of things. Blockchains were kind of made for machine driven finance, really.
I mean, anybody, including a robot, can have an address on a blockchain and transact
just like you and me on a blockchain. So we think that crypto, public blockchain technology,
will be the financial rails for artificial intelligence. And that's why these technologies
are complementary. So we think both of these things will move forward ahead. Crypto may be
been a baby thrown out with the bathwater in the AI disruption trade over the last couple of months.
We think as markets, investors re-approach this question, look more carefully on what is harmed, what is helped by AI, that crypto will be on the right side of the line.
Because I really do think fundamentally it is complementary.
Yeah, that fear of AI disruption has not only spread into the crypto sector, but parts of tech and specifically in software.
And I've been monitoring the relative performance of IGV or the software ETF versus SOX, which let's be honest, semiconductors have seen a large amount of appreciation toward AI build out because you do need that compute
foundation across the board in order to basically to power all these transactions that happen at
very quick rates and in myriads of data that go across the network. And once you are able to build
that foundation, that's when the software that's built out there in addition to blockchain
really finds its footing
because now the bottleneck is no longer the amount of compute that's out there to be able to process
all these transactions uh it's more about associating all the bills that are supposed
to be passed we were talking about the clarity act last time and everything for basically to
replace the entire system because this system has been around for more than a century right and changing that does
take time but i think for people who are much more longer term looking you do have some uh you
do have you you are able to sit through um the obvious volatility you've seen in these markets
but like we've mentioned earlier the fact that the markets are stabilizing does have some positivity toward how things can
act in the future. Obviously, and you said in a lot of your charts here, past performance is
unindicative of a future price movement. But at the same time, having less volatility is much
more important, especially as you have a lot of these institutions putting a lot of Bitcoin on
their balance sheets and not just the debts, of course,
but also the GSIBs, right? If they have so much crypto allocation to their balance sheets and
there's so much, I would say, static crypto and less of the trading and volume, that would provide
price to find more stable ground and give more of a green light for fund managers to allocate more to
it versus what we've seen for a lot of the metals that are out there, which in my opinion, you do have some industrial application for certain metals,
but a lot of the precious metals, namely gold, there isn't as much industrial application to it
as you have crypto in less of an analog scale, but more of a digital scale. Like you've mentioned
with blockchain, obviously, I feel like when it comes to blockchain we haven't even really experienced its full magnitude and i don't
even think we are going to experience its full magnitude because the possibilities are pretty
exponential when it comes to that when you think about analog application which is what i think
what i think of precious metals and semiconductors that is when there is as the efficiency does grow
the application starts to lead more toward
the digital aspect of it which is what you're saying anthropic clod and open ai chat gbt
and all these models that are being released by the other companies especially google gemini
they're finding more application and their capabilities are growing exponentially and it
is the job of these leading companies to be able to utilize that
as a positive move in a positive direction versus something inhibitive
or something negative where it's like, oh, I'm going to be disrupted.
I'm going to be done here.
But instead, take that and use it as your strength versus your weakness.
And I think that a lot of what's been expressed as far as crypto,
especially as the market, hasn't really been looking at it lately because like you mentioned when prices are falling people tend to disregard
it in terms of buying in size but when you find the stability you look at it from the technology
side there is a lot of application people kind of oversaw before and this is going to be in my
opinion one of those movements where it's going to be very slow and then all at once.
You're going to start to see application happen very fast.
And I believe at that point, that is when you're going to start to see that rapid rise in appreciation of the crypto asset.
I think that's a good way to articulate the thesis, Sam.
You know, I spend a lot of time doing other type of work in my career and decided a few years ago I needed to be all
in on on crypto. And the reason is exactly as you suggest, you know, new technologies,
they tend to follow a adoption path that looks like an S curve. You know, adoption is initially
relatively slow, then it speeds up and then you reach diminishing return. There's some point
where only a few people have a cell
phone. Then it looks like everybody's getting an iPhone. And then at some point, everyone has
a phone and you've sort of saturated the market. So new technology goes through that same path.
And I think public blockchains will be no different. And our thesis at Grayscale is
essentially that because the technology is more mature and because the regulatory picture is
becoming clearer, that we're near the steep part of the S-curve, that over the next five years or so,
you will see quite a lot of growth in the industry and ideally in the value of the assets.
That's our investment thesis, I guess, in a nutshell.
That's good. That's good. I wanted to touch a little bit on the security when it comes to crypto we've mentioned
obviously transactions with basically near instant settlement versus transactions we've seen in
legacy systems today not really legacy systems but they wires switch transactions and so on
when we think about the instant settlement, are there any
security concerns that have been addressed recently to this? Because I know you guys
released the Avalanche C-Chain transaction reports in addition to your February 2026
Grayscale report. What are some thoughts you have around that area as far as security and also AI
application? Yeah, absolutely. This topic is really about crypto for payments.
Blockchains can be used for different things,
but let's talk about it in a payments context.
And really the breakthrough,
just so I think people kind of get it to some degree,
but the breakthrough is,
with the traditional banking system,
if I wanna send digital dollars to Sam,
I have to call up my bank and they debit my account and my bank calls up
Sam's bank and it credits his account. And over a settlement cycle of a couple of days, eventually
it turns into a debit and a credit. So our digital money system works through intermediaries and
credits and debits and has lots of frictions and delays related to that, especially for cross-border. So blockchains, whether it's
for a human or for an AI agent, can be a more efficient to make a digital payment. And so Sam
has an address and I have an address and I want him to have my digital dollar. I just send it
directly to Sam and nobody's standing in between that transaction. There's no intermediary,
essentially. So that's sort of the
breakthrough. And I think what we found over time is that these public blockchains are very secure.
I mean, you very rarely have problems with the blockchains themselves. Now it's an innovative
asset class and there's lots of new types of development. And so some of the peripheral
things, you know, there are weaknesses and not every piece of software and crypto is as good as strong as Bitcoin or strong as Ethereum or as strong as Solana or Avalanche.
But these kind of core platforms are quite as strong.
In Avalanche, its strategy is unique.
You're showing transactions on the Avalanche C chain.
I think that the C stands for center.
But that's how I think about it. I don't know if that's actually the right way, but Avalanche is a unique project
where it has this one central chain that they call the C chain, and it has a constellation
of other blockchains around it. There are about 450 other blockchains connected to that central
chain. And so how that processes transactions is sometimes they can be
just like directly between two parties, like I just described between myself and Sam. It can also be
individual businesses that are running their own blockchains and they want to interact through that
avalanche chain. So avalanche blockchain, a unique structure, very suitable for businesses that want
to have some blockchain integration,
but they need some degree of customization. And they have partnerships with tons of great
businesses. I'll just mention some of the fun ones on this call, FIFA, Cleveland Cavaliers,
video games like Off the Grid. Avalanche has been a real winner in that kind of use case where
businesses need custom ways, secure ways to make these types of digital payments. It's really a leader in that type of use case where businesses need custom ways secure ways to make these types
of digital payments it's really a leader in that in that type of space yeah i can already start to
see um certain businesses start to accept uh crypto as a transaction i've always wondered like what
what type of under underlying currency are they using um as far as um what form payment like
currency are they using as far as what form payment, like maybe it's on Bitcoin. Maybe it's
in some other form of currency, but- Yeah, stable coins like Tether or Circle,
those are the popular ones today. There's more, but those are the two big ones.
Yeah. Circle is the one with USDC. And that's actually pretty interesting that you mentioned Circle,
because if I do look at the chart for Circle,
Yeah, I mean, it's up like 6%, 7% today.
And if you think of the relative outperformance of Circle,
Internet Group, or CRCL,
that has been appreciating in the last five days
versus the NASDAQ, which is not doing too well.
It's been underperforming pretty dramatically. And like we mentioned earlier with the Grayscale ETFs,
those are outperforming those broader indices as well. But the adoption of the stable coins is much
more profound and probably a lot more reliable than transacting in like Bitcoin or Ethereum, where
those are obviously more volatile than the stable coins.
And that's the whole point of stable coins because they're stable, right?
What one thing that I wanted to ask you, we did discuss, you mentioned some gaming in
there.
So you mentioned the Cavaliers, but I'm sure there's a lot of gaming. You mentioned
the gaming sector adopting forms of paying in stablecoin. Do you want to touch on that one a
little bit? Because I saw here one of your reports that gaming entertainment are key vertical growth
areas for the adoption of blockchain. Yeah, absolutely. And we can talk about Avalanche
in that regard. There's a lot of blockchainsains but i think avalanche really is a leader in uh video games now why would a video game want to use
uh a blockchain to to begin with right well you know for the gamers out there and i i consider
myself a gamer i also have teenage kids who are who are gamers we did some of this stuff this
this weekend uh i'm happy to share that as well. But for people that are gamers, there is value,
of course, in the in-game items, the collectibles in the game, whether it's a Roblox game or
classic Zelda-type games, there's value in the digital items in the game. And so potentially,
these can be transacted on a blockchain or held in digital
ownership in that way. There's also gamers everywhere in the world, right? You know,
gamers are everywhere. Many of these games are, you know, they're not specific to one
country, really, like the Roblox platform of games. People are distributed all over the
world, of course. And so if those players want to transact with each other in currency,
stable coins really are the best way to do that because it's internet native money. It doesn't
have to worry about the traditional financial system, rails. It's just as easy as sending an
email. So if you can engage with somebody on a video game in a kind of social way, you can engage with them basically in a financial way using blockchains under the same technology.
Now, I think admittedly gaming has been a slow growing use case.
I think it is a use case of blockchains, but it's not like the first one that has taken off.
And I think some of that has to do with the mega game developers.
They prefer to control their own space to some degree. They have economic interests in limiting
the ability to trade these assets and financial assets outside of the game.
But as we see a new generation of games that develop in a world that already has blockchains,
already has ubiquitous stable coins, they're going to take more advantage of these features.
And so I think we're going to have a world where on a blockchain like Avalanche, on a
blockchain like Ethereum, you can hold a stable coin, you can hold a tokenized corporate bond,
you can hold a sword from a game and transact in these things all in exactly the same way. So
we're just at the very early stage of this process, but it's coming. I think stable coins, again,
will be a way to try to drive this industry forward. And I would say, I think Avalanche,
for people that are interested in this angle, the gaming angle, is a blockchain project to explore they're really a leader in that
category yeah i i share that with you um my kids um they don't play as many video games uh they're
they're a lot younger um my son is four years old my daughter is six but they definitely love roblox
and they learn very early um i'm still surprised at how much they know how to play how much my son
does play his game and he's only four years old he barely even plays like they just pick it up so quickly um and the
last thing that parents want to do is give them access to a debit card and just say hey go ahead
and spend this in the game right or you use the debit card and spend it like you obviously need
some sort you'd obviously need some sort of currency and they have the role they have the
robux and everything but uh to think about cross-platform gaming transactions
like yeah you're gonna need something more than just like robux you're gonna need exactly a stable
coin that's specifically built for like that it that certain set of games in case you want to
switch from like roblox or fortnite or whatever it is like i you know those are the only two games i
can think about the top of my head because i don't really know too much anymore i haven't played games
in quite a bit it's a great that's a. I think you articulated well, just real briefly,
you know, Roblox has Roblox Bucks, you know, the currency in that game. Fortnite has V Bucks,
you know, they have their own kind of economic system. What we're talking about with this
technology, just like with everything on the internet, is breaking out of those closed silos
and having open finance that connects to everything, games and your bank account and your savings,
all of these things together.
That is really the dream of public blockchain technology.
And we're in the early innings of that story.
And there are success stories
that Avalanche has a number of them,
but it was a long way to go.
I think we will have a future
where there is fewer in-game currencies
and more use
of stable coins and other cryptocurrencies across these platforms all right cool yeah i mean we could
definitely get a lot more into that but uh clearly running into we're running into uh toward the um
toward the end of the podcast but i did want to share this with the audience in case they're
interested these are the uh grayscale uh etfs that you guys have on your website so i'm want to share this with the audience in case they're interested. These are the grayscale ETFs that you guys have on your website. So I'm going to share that over here in case
people want to check it out. Of course, it's going to be in the description as well. But like we've
mentioned, seeing outperformance in certain assets on a historical basis is not impeditive on future
performance. But the correlation between, of course, the assets that you have from Grayscale
are obviously correlated with the Bitcoin price alone.
But like not many people have access to a crypto wallet
and some people don't necessarily want to transfer funds
between brokerage accounts,
but this provides a medium
that people will be able to invest in crypto.
But of course, through the use of the same brokerage app
that they would use any other day,
as long as their broker offers it which most actually do um what are your thoughts on and
I know this is kind of uh going a little bit because I do have it open over here actually
let me just share it over here real quick so people can see um but I wanted to ask a question
uh regarding um the technical application for Solana um I'm not a technical expert on it,
but maybe like a high level case at like,
what is the difference between like Solana or something like Avalanche or
Chainlink?
Yeah. Great, great question. There's,
there's so many different projects in crypto and that,
that education is something that we spend a huge amount of time on with
individual retail
investors all the way to large institutions.
You know, they all have those types of questions.
And for people that want to, I will answer that question specifically, but if people
want to get their head around this topic, a great place to start is the Grayscale Crypto
Sectors Framework.
This is up on our website.
This is our categorization or taxonomy
or index tools that divide crypto up into all the unique market segments. And so Bitcoin is one
thing, Ethereum and Solana and Avalanche are another thing. Chainlink is another thing altogether.
So there's a different category. It's just like there's different types of stocks,
energy stocks, consumer staples, utilities, etc. They're all quite different.
It is sometimes hard to compare stocks across sectors. It's hard to compare tokens across
sectors. So Grayscale Crypto Sectors up on our website, a great place to begin that education
process. How I'd answer that question, Sam, is I think let's talk about three smart contract
platforms. Beyond Bitcoin, smart contract platforms.
It's a mouthful, but those are really the cornerstone of crypto investing beyond Bitcoin.
When people are taking their first step beyond Bitcoin, smart contract platforms,
usually the first thing that they invest in. And these are the platforms for the future of finance. So stable coins,
tokenized assets, decentralized finance, all of these things run on smart contract platforms.
So Ethereum, Solana, Avalanche, these are all leading smart contract platforms. There's
50 or so individual assets like this. We think a very small number, including those three,
Ethereum, Solana, Avalanche, are likely to be winners in the long run. They have compelling
technology, compelling development strategies, and can be the platforms that host all these
types of financial transactions in the future. So I think that's how people should think about it.
Think about Bitcoin as the currency, digital gold, the base layer, the foundational asset for all of crypto.
And the next step is smart contract platforms, Ethereum, Solana, Avalanche,
a great place to start to explore that, all three of those assets.
Very cool. So I put down in the chat also the Grayscale research website, but I also have here your X handle or your alias on there in case people want to visit.
Zach Pandell, of course, is the head of research at Grayscale, but he also has a lot of commentary that he releases throughout the day, especially important news for people who are heavily invested in crypto and would like to keep up to date. You do provide a lot of content on there, which I do read on this like, man,
that's how it affects the sector. And it's pretty important too, especially when you
see it from a tech perspective, but also on a fundamental perspective. So with that being said,
we are coming to the close to the top of the podcast over here. Was there anything else you
want to close off the audience with before we end the live stream? Yeah of the podcast over here. Was there anything else you want to close off the
audience with before we end the live stream? Yeah, let me plug one other thing, Sam. Thanks
for the plugs of our research content. We recently started a blog in addition to the Twitter content
and our regular published material, but a blog for the research team called The Stack. It can be found on the Grayscale website. And so for
people that have insatiable appetite for all things crypto investing, this platform, and here it is
up on screen, I think it looks visually pretty nice, I think, in my view. But this is where we're
offering our more timely commentary on crypto markets, really the kind of front of mind topics for myself and the
research team here at Grayscale. You know, most recently talking about some of the things this
last weekend on prediction markets, on tokenized gold, those types of topics we've covered more
recently. So for people that really want the timeliest high frequency content on crypto
markets, the Stack blog, a great place to look.
You can check it out and subscribe at grayscale.com.
Yeah, there's a good amount of content
you actually released there recently.
So that'd be pretty cool to dig into following the show,
but really appreciate your time coming on here, Zach, of course.
And my name is Sam and this is the Wolf Podcast.
This video, of course, will be available in case you missed any of it.
It'll be available to rewatch anytime.
And yeah, so the links are over there.
I'll also include them in the description.
And until next time, it'll probably feel like it's just a few days before we have our next one.
Because, of course, the world does not have a single boring day.
There is always new news every single day, which of course will affect all markets.
But thank you very much, Zach, for coming on here.
I'm also looking at it.
Yeah, there we go.
Thank you very much for coming on here.
Really appreciate your time.
And thank you everyone for joining.
Take care guys.
Thanks, Sam.
