Dear Bankless Nation,
This morning we interviewed Su Zhu and Kyle Davies of Three Arrows Capital for our Tuesday State of the Nation episode—the episode title…THE ETH TRADE.
👉 THE ETH TRADE premiere’s on YouTube tomorrow at 11am PST—set a reminder!
Three Arrows Capital is a renowned crypto trading fund that always manages to stay ahead of the game, especially when it comes to crypto trading and portfolio management. And right now, Three Arrows Capital is overweight on ETH.
The conversation was so good I feel like I need to give you a sneak peak now.
Here are 3 reason they made THE ETH TRADE.
#1. Traditional Finance Prefers Productive Assets
We’ve known that traditional finance investors find resonance with cash flowing capital assets of DeFi (Matt Hougan told us this). According to Su and Kyle, those same investors are going to resonate with ETH when they discover that EIP 1559 and staking turns Ethereum’s insane fee revenue into productive value capture by ETH.
What’s better than a digital store-of-value?
A digital store-of-value that delivers cash flows!
This narrative resonates even more deeply given the huge boom in NFT volume on Ethereum. How do we get exposure to the total NFT market? Buy ETH. Value investors will connect the dots between NFT volume and ETH upside.
“Culture is native to Ethereum… once you get culture, that’s when a lot of people wake up”
- Su Zhu speaking of NFTs on Etheruem
Su used the word ‘inert’ to describe Bitcoin, and went on to describe all the optionality that DeFi offers its assets, and ETH most of all. Some of that optionality was illustrated in the “Never Sell” plan I wrote last week.
#2. EVM Chain success is bullish ETH…
The only Ethereum competitors that Kyle Davies sees having any success are those that are EVM compatible…and if they’re running the EVM, are they really competitors? Or are they just helping dig a bigger moat for Ethereum?
EVM network effects are Ethereum network effects.
“I think there’s this idealism that at some point some people will interact with a blockchain and have no idea whats in the back end… the only way to get anywhere close to this vision is to be EVM compatible… and anything that is [EVM compatible] is bullish Ethereum.”
- Kyle Davies on EVM compatibility
#3. The Flippening is Inevitable
We asked both Su and Kyle their individual opinions on whether they think that the flippening is inevitable. Both said yes.
Kyle talked about how many arrows that Ethereum has in its quiver. EIP 1559 is in 8 weeks. Proof of Stake is shaping up to be released roughly ~6 months after the EIP 1559 implementation. Meanwhile, transaction fees are up only, and the energy consumption debate constantly moves into Ethereum’s favor.
“I know people that have flown around the world to move their Bitcoin cold storage to buy Ether”
- Su Zhu on the inevitability of the flippening
Bonus: Is this the last cycle?
We finished off the conversation asking about future bull/bust cycles—“Is this the last major cycle for crypto?”
This was the one question where Su and Kyle differed in opinion…
Both agreed that cycles will diminish in importance moving forward, and both agreed that crypto is now mainstream in a way it’s never been before. Both also agreed that we are “nowhere near the top” of this current cycle 😈.
But Su made that we’ve now entered something different…a crypto “super-cycle”.
Why? People are learning to store their wealth on Ethereum, not just temporarily, but for the long term (they’re going bankless!), and because of this, future boom and bust cycles will be muted by the shear magnitude of capital that is capable of quickly being allocated, when the time comes.
No more 90% drops.
Tune in to the full episode tomorrow!
This was a crazy bullish conversation. The full video of THE ETH TRADE will premiere on YouTube tomorrow at 11:00am PST or 2:00pm EST.
👉 Watch THE ETH TRADE tomorrow at 11am PST
It sounds crazy but I think 3AC just flipped more bullish ETH than even Ryan and I.
ETH only. 🤯
Don’t miss this.
- David