Tom Lee & Arthur Hayes: How Crypto Flips Wall Street

Ryan:
[0:00] What do you think the year-end ranges will be for both Bitcoin and ETH?

Arthur:
[0:04] So I'm going to stay consistent. $250,000 Bitcoin, $10,000 ETH.

Tom Lee:
[0:10] Yeah, but by year-end, our target for Bitcoin is $200,000 to $250,000. And for Ethereum, somewhere between $10,000 and $12,000 ETH.

Ryan:
[0:24] Bankless Nation, happy to introduce you to the world's largest ETH holder, the chairman of BitMine, Tom Lee. Welcome back to Bankless.

Tom Lee:
[0:31] Thanks for having me. I'm glad to be back.

Ryan:
[0:33] And we also are joined by the creator of The Perpetual Swap, Arthur Hayes. Arthur, welcome back to Bankless as well.

Arthur:
[0:40] Yo, yo. What's up?

Ryan:
[0:41] It's a pretty exciting time in the market. You guys just got finished with Token 2049, so everyone's kind of recovering and reflecting as to what went on over there. But meanwhile, on the day of recording, we have a Bitcoin all-time high, a new Bitcoin all-time high of $126,000. So I just obviously have to start there. Tom, when you see the Bitcoin all-time high price, not blowing it up, but making meaningful chunks away, chipping away at that higher and higher price, what do you make of the market right now?

Tom Lee:
[1:11] One, I think it's good to see Bitcoin at all-time highs as we're entering the fourth quarter and not correcting or in the $90,000 level because we are in that seasonally strong period and the Fed... Easing monetary policy. So I'd say it's good to see an all time high because this is confirmation. And of course, it's only early October and I think there's still room for upside into your end.

Ryan:
[1:38] And Bitcoin dominance sometime around last quarter really peaked out and it's been down ever since. But right now, Bitcoin is really pulling liquidity out of the market. A lot of tokens are holding their dollar price, if not going down. So Bitcoin seems to be sucking a lot of the oxygen out of the room. Arthur, what's your makeup? What's your diagnosis of the current state of the market as it relates to the Bitcoin versus tokens?

Arthur:
[1:59] Yeah, I mean, push and pull. This is how it usually goes. Bitcoin goes first. You know, it runs, does well. And then tokens do better. Some tokens. I mean, obviously people really want to see every piece of dog shit that they bought in 2013 go up in price. But like, yeah, there'll be some very good token price appreciations. Hopefully ETH gets its rollercoaster going on the upswing quite soon. So I'm loving this shit.

Ryan:
[2:27] Well, ETH is one of those tokens that is actually outpacing Bitcoin at least over the last 10 days. ETH is up just three or 4% against Bitcoin over a time period where others haven't really been able to keep up. Tom, the last time we had you on the show, you had 0.5% of the total ETH supply. Bitmine had 0.5% of the total ETH supply in the treasury. Today, you're coming back on the show 2.25%, almost halfway to your 5% target. How did you do that? Because there's now like a similar percentage of ETH in treasury companies as there is in Bitcoin and Bitcoin treasury companies.

Ryan:
[3:02] But Bitcoin had a three-year head start on ETH. And now ETH has caught up mostly in things to Bitmine and the very aggressive ETH buying that's been going on in your neck of the woods. How did you get so much ETH so quickly?

Tom Lee:
[3:16] Well, yeah, it's been 12 weeks since we started the company. So the close of the initial pipe was July 1st. 28th. So it's been about 12 weeks. And Bitmine has benefited from a lot of support from the public and from institutional investors. That's why it's the 28th most traded stock in the stock market today.

Ryan:
[3:43] The 28th most traded stock. Yes. Wow.

Tom Lee:
[3:47] Yeah. And I think today might have been top 15 in terms of trading volume.

Ryan:
[3:51] Where is that volume coming from? That's so much.

Tom Lee:
[3:53] There's many vectors because one, the stock is widely followed by the public, but it's also very widely acquired and purchased by institutions who have really helped propel Bitmine's Ethereum holdings. And especially Cathie Wood's ARK funds, which were a top 10 holding for her. And so, you know, and obviously she has enormous assets under management. The stock is highly volatile. so it's one of the i think it's the eighth most traded options chain today and in fact there's also been leveraged etfs launched so there's a bmnu which is a two times bitmine that also just got options listed so like there's a leveraged etf with so i think just.

Arthur:
[4:41] Give all your money away Let's go away. Trade that dog shit.

Tom Lee:
[4:46] So it's field liquidity because BitMine and MicroStrategy combined. And MicroStrategy is, you know, of course, the OG in crypto treasuries. But the two of us combined is 86% of all crypto trading volume of all the hundreds of debts in the world.

Ryan:
[5:01] Wow. Wow. There has been just a revitalization of energy out of at least the Ethereum cohort of the crypto world. where before Bitmine came around, it was kind of like some dark times in the Ethereum world. What would you say about the timing of Bitmine as it came in? And now, Ethereum has a lot of momentum behind it, at least the energy, the asset price has a lot of momentum behind it.

Ryan:
[5:26] The Ethereum vibe, I would say, is just revitalized. Was that, how much of credit will you take, Tom? How much timing do you think that was just lucky luck on the side of Bitmine? What do you think about all this?

Tom Lee:
[5:38] Well, you know, to me, I think there was a lot of like pieces that fell into place in 2025 that were favorable for Ethereum. You know, one is, of course, the new administration in the US, which is crypto friendly. And the second is the viral adoption of stable coins that have really driven a huge rise in interest and activity levels on Ethereum. The third is I think the Ethereum Foundation has made a pivot that's much more markets friendly. And I think that that's very evident. You know, even at Token 2049, you know, we spent time with the Ethereum Foundation and we had that conclusion several months ago, but it was reiterated really at our time in Token 2049 that, you know, they want to build and modify Ethereum and continue to upgrade it to be in a way that's friendly for capital markets and for AI. So then I'd say the fourth element is Bitmine has helped clean up the narrative around Ethereum. And I think that so all four were contributors, I'd say.

Ryan:
[6:44] Arthur, what's your read on the situation? Not just inside of Ethereum, but I want to get your perspective with that. But DATS generally. So, you know, some DATS, of course, MicroStrategy has a very positive MNAV. Bitmine has a positive MNAV. But as soon as you start to go down the chart beyond that, the MNAVs really have started to compress. What's your read on just the energy behind the debt? Like, I won't call it a

Ryan:
[7:07] trade, but there's momentum that has dissipated from like the long tail. What's your read on the market right now?

Arthur:
[7:13] So like at Maelstrom, we are an advisor of UPXI. We've traded a few pipes in UPXI. We need one of them, a BME one, and I think an Athena one as well. So, you know, the pipe trades initially were, you know, they look great. And then you unlock and then shit fucking falls off a cliff. Luckily, we made money on the one pipe that we've done. I think investors like ourselves are looking at these charts and like it's not that slam dunk thing you want to trade anymore. So I think people are getting a little bit more circumspect about how they subscribe to some of these things. And then obviously, as Tom Lee pointed out, this is a power law, Pareto, what do you want to fucking call it, situation where the top dogs take the majority of what really counts as average 80 trading volume, and then everybody else struggles. And I think that as we move out on the risk curve in terms of the types of corporate financing vehicles that these things use, we're going to get some more riskier stuff, which will be fun for traders like me to trade. I love trading funky derivatives, but there's going to be some tiers at the end of this story. I don't think BitMine is going to be near and near that because they're able to raise very simple equity-like things that are creative to their stock price and let them acquire more ETH per share and all that kind of stuff. I'm not sure Tom can get into details, but all these other motherfuckers are going to be issuing like shit you've never even heard of. And it's going to be some leveraged, you know, obfuscated

Arthur:
[8:43] Bankers are going to be charging only 20% fees kind of bullshit. And that's going to be what blows up in people's faces at the end of the cycle. But I love it.

Ryan:
[8:50] Is that why you were laughing when Tom was talking about the 2x long ETFs with the options chain?

Arthur:
[8:56] Mostly because I was an ETF guy for five years. I've launched leveraged ETFs in Asia on various things. And when my boss showed me how to structure these things and the math behind this, I was like, OK, so why would you ever trade one of these things? They're absolutely the most dog shit product ever. you should never, ever, ever, ever, ever buy a leverage ETF. Just go buy a futures contract if you want leverage or two times leverage. It's just the worst thing you could ever buy. So it's just funny that you're going to add this negative gamma product. You're going to put some options chain on a negative gamma product. You just completely eviscerate all your capital. But like that's the US stock market casino and like the third shade over here at crypto and the most dog shit product exists over there. So that's just my own pet peeve and comedy around US capital markets.

Ryan:
[9:41] Tom, this seems to be kind of like the pretty logical conclusion of what happens when like the crypto markets and the traditional markets touch. It's kind of like a God and Adam hands touching moment where like these things finally touch and then all of a sudden, let's 2x long the crypto debt ETF things with the lever trades and the option chains. And we're probably going to get a little bit over our ski tips because A, that's what we do in crypto. But also anyone in financial markets is happy to like, you know, put themselves out on the risk when there's a brand new asset class. So it kind of makes sense that we're doing this.

Arthur:
[10:13] The bankers are making a lot of money. Someone told me, I forgot where, that a large bank made $160 million in fees. They're on a large bank. Sorry, a player that would not be known for capital markets virus, made $160 million in fees. Just from DAT.

Ryan:
[10:31] Facilitating DAT stuff.

Arthur:
[10:32] In the last month, one fucking month.

Ryan:
[10:35] Wow.

Arthur:
[10:35] The powers that be are making a lot of money in this, and they're going to continue the game, which is nice.

Ryan:
[10:40] Tom, should we be surprised by all of that, or is this all kind of just par for the course when something crazy like the DAT world happens?

Tom Lee:
[10:46] I mean, you know, if we ignored the last four years.

Tom Lee:
[10:55] Then I would probably say that I'd have a different context, But in the last four years, it's been almost impossible for crypto to access capital markets.

Tom Lee:
[11:07] And it's also been very difficult for people to even have banking relationships. And in fact, as you know, even publicly traded banks, regulated banks, two of them were essentially shut down by the government in the last four years. So I think 2025 is a lot of pent up capital. We know that some of the most popular IPOs this year have actually been crypto IPOs, you know, Circle and Figment and, you know, Bullish. I mean, they've been very successful IPOs. And we also know that like as a bank, the stable coins, which are really essentially banks, are a lot more profitable than their traditional TradFi bank. You know, so a crypto native business model is vastly more profitable with less employees. So I think that there probably is a lot of need for people to find exposure. But you're right, like Arthur's like knows ETFs because that was his world before BitMEX. You know, leverage ETFs is not the crypto industry's desire, but it's someone who's trying to capitalize on the volatility, the issuer. Hopefully, that's not going to make the process less profitable for investors because we don't really want investors to lose money getting exposure to crypto, which they should just generally be long.

Ryan:
[12:28] Tom, Arthur, on the weekly roll-up, the episode that we record, me and Ryan, every single Friday, we talk about the markets every single week. Overall, my vibe, my state of the market, my play, is that we got a good thing going right now. Bitcoin has been up just incrementally for three years in a row without attracting too much froth. There's no parabola on the Bitcoin chart. And ETH got over all-time highs, but it's not there now. And so there's seemingly just plenty of froth just not in crypto. And if we were to play out the four-year cycle, Tom, I don't know what you think about the four-year cycle, but if we were to play out the four-year cycle, we would be topping sometime in the next one to three months. Like November, December, January. And that's four years later than 2021. And four years before that was 2017, the tops of the crypto market. And it's just like, I remember both of those market cycles. It just does not seem that crazy. And so I don't know what your attitude is. It's like the four-year cycle is

Ryan:
[13:29] dead. It's a prolonged cycle. Why are you even bringing up the cycle word to begin with? I just want to get your read on the whole cycle nature of the crypto markets. I'll ask this question to both of you.

Arthur:
[13:41] I'm writing an essay that'll be published. I don't know if I get finished with it this week or early next week before I leave again. But basically, I did a market study. If there was a most popular question that I got asked, I just made, I don't know, 30 fucking speeches during 2049.

Ryan:
[13:59] What do you think of the cycle?

Arthur:
[14:00] What's your view on the four-year cycle? Are we topping? Is this it? Right? Okay, let me go back. I intrinsically believe just like what you said, I don't think we're in the four-year cycle. I think we are in a cycle. it lasts until it lasts.

Arthur:
[14:12] Okay, let's go back to think about, there's been three four-year cycles, right?

Arthur:
[14:17] 2009 to 2013, 2013 to 2017, 2017 to 2021, right? And if we take a look, and I try to make it as simple as possible and use the same chart in each three periods. And so I took a look at Fed funds rate, effective Fed funds rate. I created a U.S. dollar credit index, a proxy, which is basically just other deposits and liabilities from the banking system in the United States. and reserves at the Fed. So that'll capture quantitative easing or quantitative tightening, and it'll capture bank credit growth up or down. And then as a kicker, I said, well, you can't talk about the United States without China because they're kind of interlocked and they either complement each other or go in that rest of the directions. And so I just pulled a Bloomberg credit, 12 months change credit impulse index. And so if we take a look at the first cycle, we have essentially the genesis of Bitcoin, which is, I believe, a reaction to the response of the United States to the global financial crisis. I don't believe it's a coincidence that it was published on, you know, the 3rd of January 2009, right? Right after Ben Bernanke announced quantitative easing, Infinity or One, TARP, all that kind of stuff, right? At the same time, China did its part and they went on the largest expansion of infrastructure, or credit fuel growth in its history, and they'll see the chart. And so basically, yuan and dollar credit being issued at Infinim in 2009.

Arthur:
[15:46] That sort of catches up with the Bitcoin price by late 2013, and we get that $1,000 or $1,400, whatever you want to call it, peak right before MTGox imploded. You'll see in 2013 that credit growth rolls over a bit. You have the taper tantrum in the United States in mid-2013, which finally catches up with credit growth. In China, they were not growing credit as fast as they were. So the rate of it, you know, it decelerated,

Tom Lee:
[16:13] Even though it was still growing.

Arthur:
[16:14] The second derivative was deceleration. And so that popped the first crypto bubble. Then we moved to 2017 bubble, the ICO bubble. And in that instance, you had China leading the way where they went on a massive credit expansion in 2015, which caused a high in the Shanghai stock market, a massive devaluation of Yuan and obviously 2015. And this sort of brought Bitcoin out of its doldrums and that lifted, that started the 2017 ICR rally.

Arthur:
[16:43] The United States is going in the opposite direction. Fed funds is actually increasing once we get into 2017 and credit growth was falling. And so finally that caught up with Bitcoin because you can't really escape the time value of money. Nobody can. And the bubble pops in 2017 by the end of 2017. Then we get in the third bubble or whatever you want to call it, the COVID response. Obviously, we know what that story was all about. That was stimulus checks in the United States. China was very circumspect in the amount of money it issued, but again, its credit growth increased. And by late 2021, we had the Fed talking about how it was going to restrain its balance sheet, increase interest rates due to inflation. And pretty predictably, Bitcoin peaked in November, right around the time when everyone expected the Fed to start on a tightening cycle. And now we're in the current cycle. And basically, this cycle has been about the reverse repo program, which was the $2.5 trillion that bad girl Yellen injected into the markets starting in 2022.

Arthur:
[17:47] And that has basically run out until now. And so if you're a proponent of this theory of, okay, for your cycle, you would say, oh, well, you know, take a look, reverse repo at zero, there's no more liquidity. But the Fed has started cutting rates. You have Trump and Besson talking about how they want to run the economy hot, which basically means either the Fed prints money or the biggie system prints money. I don't care which one. You can listen to the speeches. They'll talk about either one interchangeably. They want to juice the housing market. I don't have the chart in front of me, but it's something like trillions of dollars of home equity that has been, that's basically sitting dormant on the balance sheet of the American public and their housing market. And Trump is going to lower mortgage rates, however he does it. There's various ways to do it, to unlock that money, to then go into financial markets or buy a house, buy a car, but whatever. Trump is talking about stimulus checks. China, which has been an essentially on and off deflation in terms of credit growth. Over the last few years is making noise that they want to revitalize the housing market. Will it be as crazy as 2015? No, but it won't be as bad as it's been post-COVID. So this cycle is different than the last three. If you want to take a look at Chinese credit and US credit, which leads me to say there is no four-year cycle, at least right now. And so we are in sort of a extended cycle. We're going to call it new world order, change in trade situation, whatever, right? And so I am of the opinion that this cycle ends when the Trump administration ends because it'll be a reaction against

Arthur:
[19:16] Whether you like it or not, it doesn't really matter. And that's a 2028, late 2027 story when the rhetoric of the opposing team blue Democrats starts to cause questions in investors' minds. Oh, what if they win? And therefore, what if things change? Therefore, maybe should I take some chocolate off the table? So that's my guiding light and five-minute plug for this essay that'll come out sometime in a few days.

Ryan:
[19:40] I thought that was very great. Tom, what's your read on the situation? Do you like what Arthur just said? Does that resonate with you?

Tom Lee:
[19:45] Yeah, I mean, I think Arthur put it really well. I think he kind of put a lot of pieces together for people. And maybe the only thing I'd add is two things. One is, it's very evident in sentiment, because like, in 2017, there was a lot more exuberance in 2021, too, both in equities and crypto. So, you know, I think because of Trump and the divisiveness that he is, and also because of the swoon we had in stocks in April, February to April, that sentiment still really muted. I mean, we see that on the Fundstrat side. And I guess the second thing I'd add is, I mean, I think he's spot on that, you know, crypto needs to really make overtures to both sides of the political side over the next few years because we don't want a change in administration to result in like a complete flip in actually the way crypto is regulated. I mean, I think it's actually a really important policy thing he's flagging.

Ryan:
[20:47] Yeah, we've been big proponents of that at Bankless is that crypto is technology, not partisan. Like the internet is not partisan and neither should crypto be. But also at the same time, Tom, like we have as an industry made fantastic progress over the last two years. BlackRock is aggressively into this space with their two main ETF products and their tokenization products, which we know there's more coming down the pipe there. And of course, that's just BlackRock. I could rattle off 20, 30, 40 more institutions that are now in crypto, building in crypto materially that were not in the Biden administration. So to some degree, yes, I'm still worried about a pendulum swing in Capitol Hill, but also we're kind of embedded in there. Like crypto has seized the opportunity of the Donald Trump administration to really dig itself in, protect itself and make partnerships and do BD with the existing TradFi system. So to some degree, I kind of think we're also buffered. Maybe you agree, maybe you disagree.

Tom Lee:
[21:46] Yeah, I mean, I agree. But I think that there are probably some things that are important to like democratic stakeholders, such as like UBI or social policy that I think crypto can, you know, do some work around. You know, I mean, I think UBI is important. Probably functionally only enabled because we have blockchain and the ability to validate transactions and have finality. And so I think that there is a lot that can be appealing to non-Republicans about crypto as well.

Ryan:
[22:17] I want to turn to the conversation back to home territory for me, which is ETH and Ethereum.

Ryan:
[22:23] Tom, you're approaching half of your target and you're almost at 2.5%. You want to get to 5%. I think it's gone faster than anyone's expected you to get to five. I think when, even when I heard Tom Lee wants to put 5% of ETH on BitMine, I was like, well, sure. So do I though. And you're halfway there. So I don't think anyone can really doubt the intentionality or the feasibility of actually getting there. Assuming you do get to 5%, which maybe happens this year, maybe happens next year. Do you stop? What happens next?

Tom Lee:
[22:55] You know, 5%, as you said, as you pointed out, was in some ways aspirational Because we were just thinking about, you know, what's the level of ETH holdings that isn't going to be disruptive to the ecosystem, but a level that can actually allow you to have a positive benevolent influence. And so I think 5% was sort of that waypoint. But we've spent some time with other researchers and especially thinking about the power law. I think you can, especially in a competitive dynamic, move even as high as 10% without actually disrupting the ecosystem. And then, of course, as you know, ADAT is essentially a permanent holder of ETH. So in some ways, it provides a lot of ballast to the network. So I think it's possible to go beyond 5%. But, of course, we still have to get to 5%. And I don't know how expensive it's going to be because ETH has actually cooperated because it's stayed in the $4,000 range for now. But as ETH moves up, especially in the fourth quarter, you know, it could get very expensive to get to 5%.

Ryan:
[23:56] What do you think, Arthur? Do you think Tom can get to 5%?

Arthur:
[23:59] Sure. I mean, if you're able to sort of tap into the institutional pipes of money that wants to get into the DATS, especially, you know, everybody is a momentum person now, regardless of what stage in the capital structure you are, especially in traffic because everyone is trying to keep their jobs. And so how do you keep your job? You buy the thing that went up last month. Last month, ETH is up and DATS are cool. I'm all about DATS. And so I'm assuming that whoever your banker is, they're calling you off the hook, pitching all sorts of interesting things and how to raise some money from, you know, very motivated individual clients who now all of a sudden want to do DATS again, whereas maybe two months ago, because the market was kind of sideways, they weren't so key.

Ryan:
[24:39] Tom, with 5% plus, I mean, you're already, Bitmine is already the number one ETH holder. But at 5% plus, it's starting to approach... Structural? Like a structural relationship with Ethereum. You called BitMind would be a ballast to Ethereum. I also noticed, I saw you took a photo with Vitalik lately, which I thought was great. Are you meeting people around the Ethereum ecosystem because of the position that you have? Like, do you talk to people at the Ethereum Foundation or just other stakeholders of Ethereum? How have you found yourself just embedding yourself into the Ethereum world?

Tom Lee:
[25:13] Yes, the answer is yes. You know, the Ethereum Foundation has been a great organization to dialogue with. We're very aligned with them. And Tomas has been great. We really want to help bridge the TradFi and capital markets world and their needs and the specs that they care about to be heard properly by the Ethereum Foundation. So I think, you know, us being a large holder of Ethereum has given us a place to be a center point of that conversation. And I think that's important. We have been meeting with a lot of the core developers and, you know, and we had a great meeting with Vitalik. And I don't want to overuse the idea, but, you know, because Bitmine has so much Ethereum, of course, it's a source of liquidity and scale. So the overused word is kingmaker, but I think we can have a role in helping shape how some of the DeFi projects that get seeded and we can also make selective investments. We're planning to use 1% of the balance sheet, which is about $130 million right now to invest in projects, whether it's crypto native or traditional, like we made a small investment in ACO, which is the WorldCoin treasury.

Tom Lee:
[26:30] And I think that we're increasingly viewed as not not just a debt, but kind of as digital infrastructure. But that was our thesis from the beginning, that we're providing a security function when we stake, but that's not the only role that a large holder of Ethereum would play. And I think there's this informal role that we played, I think, which is helping simplify and really improve the narrative around Ethereum. And I think that's also been helpful because that's how TradFi can also understand, as banks want to build on the blockchain, which layer ones that they want to work with or which organizations. And I think we're sort of that non-foundation entity that exists.

Ryan:
[27:13] Yeah, certainly. Ethereum, naturally, because of what it is, doesn't have a very large voice because the Ethereum Foundation has always intentionally pushed Ethereum's voice to the margins, right? Ethereum's voice is its community because the Ethereum Foundation doesn't want to be the voice of Ethereum. But then somebody like Tom Lee, like Bitmine, rising up and being like, well we have a voice it's roughly 2.25% of the total ETH supply and actually like embodying that voice of Ethereum through the proof of the actual ownership of ETH but also being active not like And yeah, an active manager of the capital as or at least to growing the ETH ecosystem is something that Ethereum's never really, really had before. I'm curious, there's been murmurings or just like people using their imagination about where BitMine would ever potentially get involved in governance over Ethereum. And this gets into the conversations of like all core devs calls or actual protocol design. Do you ever see yourself getting involved or some BitMine person getting involved in that level of granularity of Ethereum? Or is it more from like the advocate and liquidity and capital formation side of things?

Tom Lee:
[28:20] It's a great question. You know, I think it's a best practice. It's better that, you know, BitMine have a more consultative view on development, you know, helping identify priorities. And I think even acting as like a diplomat or liaison or a third party intermediary, because I think that would play to our strengths. You know, we have a lot of connectivity to the traditional financial world. And because we're an existing rails and operate in that side of the world, that's what would be more of playing to the strengths of Bitmine rather than, as you're pointing out, protocol design. You know, We don't want to stretch beyond our capabilities.

Ryan:
[29:06] Arthur, I want to get your perspective on ETH's position as it stands in 2025. As the author of an article that was once titled The $200 Billion Shitcoin, do you think, I think that was the right number, do you think ETH ought to be comped to Bitcoin in 2025? Or should it be more comped to the other smart contract platforms of which there are many in the crypto space? Which do you think is the more relevant comp for Ethereum?

Arthur:
[29:32] I mean, I guess from a higher level philosophical point, and I know you may differ from me on this, is I view ETH, I view Bitcoin as money and I view ETH as compute. And so that's how I separate the two. And they're both very important and obviously the two largest holdings in my portfolio. And so I believe ETH should be comped in that particular way. It is the compute reference asset, if you want to call it that. And so... I don't know, what do you want to compare it to? NVIDIA or Apple or whatever, Amazon, something like that? Like a tech company, right? That's kind of how I would think about ETH. When is Ethereum going to be more valuable than NVIDIA or TSMC or one of these backbones of the internet and AI and all that kind of stuff? That's what I think ETH should aspire to. And all the other tokens can worry about how they compare to ETH. But I think ETH needs to elevate itself above the rest of the muck down where I play very aggressively.

Ryan:
[30:34] Tom, what do you think about that frame of reference for ETH? If Bitcoin is money, ETH is compute, how does that land with you?

Tom Lee:
[30:42] Yeah, I mean, I think that they're complementary. So one is not a replacement for the other. And in a way that makes, that's part of our framework. You know, when we think of digital money and digital gold, that's Bitcoin and that's already been well established, you know, and in fact, that's why many investors will own Bitcoin. But Ethereum is an architecture that we can see Wall Street building on and AI. And it's not that different than how in 1971, there was two forks, you know, gold, because the dollar went off the gold standard of gold became that store value. But then a whole economy was built around making sure the dollar which was now synthetic became the standard bearer and that's what wall street did and in in terms of value creation both created value you know gold is now a two trillion dollar network value and equities which is really came out of a synthetic dollar right we didn't want us to go on to a deutsche mark deutschmark or yen standard, that's a $40 trillion asset. So I think both come out of, crypto, but address different markets. So I think Ethereum can grow even without having any cannibalization or competition with Bitcoin.

Ryan:
[32:06] I do enjoy the comparison that ETH is compute, but I'll point it towards ETH is compute for banks or for financial institutions. Like who's doing the compute? Who's consuming the compute? Financial institutions are consuming that compute. And like something that we've seen ever since we've had a more favorable regulatory environment is these financial institutions, the more innovative ones, the more forward-looking ones are moving into this space. Again, BlackRock with the ETFs and its tokenization fund and the other tokenization products that are coming down the line. Fidelity, many of these people. Then Stripe comes in and builds their own Ethereum virtual machine blockchain. And all of a sudden, a lot of the forward-looking finance category companies are now building on blockchain. So I think the broad question, Tom, for you is like playing this out into the future. If we fast forward and let this bake a little bit, does blockchain just make the finance sector now also the tech sector? If they're all running on tech rails to begin with, what do you think about this?

Tom Lee:
[33:08] That is our theory and our thesis, because I think if I took JP Morgan, for instance, and this is something we've written about at Fundstrat, that they are operating and supported by 313,000 employees, but a JP Morgan built on the blockchain might only 20,000 employees and operate with far greater clarity and vision and efficiency. So JP Morgan may end up being, especially using AI, more of a tech company. They're replacing humans with tech spend and using the blockchain for finality and security and the multiples of banks should change, going from trading at price to tangible book to actually having a PE multiple. And Kathy Wood has pointed this out. That's exactly what happened with Costco and Walmart, that they used to be traded like typical consumer staples, you know, 15 to 16 times earnings. But because they essentially systematized their business, Walmart and Costco trade 35 to 50 times forward earnings. That's a higher PE multiple than NVIDIA, which trades at 30 times.

Ryan:
[34:18] One of the bits of news that have come out recently is that Tether is looking to raise at a $500 billion valuation, which if it was a crypto asset, that would put it at number three behind Bitcoin and then Ethereum. It would be number three. Arthur, when you saw this news, when you saw the $500 billion valuation for Tether,

Tom Lee:
[34:37] What was your reaction?

Arthur:
[34:38] I was like, okay, I guess I go an IPO. Otherwise, why? They don't need money. I imagine that Giancarlo and JL are probably up there with CZ in terms of how rich they are. Who knows, right? Because of all the crypto they own and equity values of their other companies. But as Tom said, right? They're the best bank ever created. They have 150 employees and make 10 something billion dollars of net income every year. And I would much rather use Tether to pay my ski guide in Argentina or buy a product in Southeast Asia or whatever than ever try to fucking use J.P. Morgan outside of New York City. Right.

Arthur:
[35:20] Why would you ever want to shoot yourself in the head repeatedly and survive? And so I think that's what it feels like every time I try to use a commercial bank and versus like, OK, you know, log into my MetaMask or Phantom Wallet or whatever and send somebody some money. So I think, obviously, the emerging world gets it. And these banks are going to either have a business model like Tether, one or two of them, in every big market, or they're going to be zeros. They'll fight tooth and nail the politics, right? Because that's what a bank is. It's an extension of the local government in which they operate. And they'll try to do all sorts of things to forestall the inevitable. But, you know, we drive cars instead of driving horse and buggy, even though the horse and buggy guys wanted to make sure there were no cars. And so it'll happen over time. And the banks that are forward-looking are the ones that'll survive. And maybe in a five to ten years' time, there won't be all these thousands of banks and everything, you know,

Arthur:
[36:20] totally around the world. There'll be one or two tech forward banks that can compete with a fintech or a social media company. And then there will be nobody else. And that'll be great because we can, you know, free all this amazing human intellectual capital from the drudgery of working for a dog shit bank.

Ryan:
[36:37] Tom, the Tether $500 billion valuation, was that sticker shock to you? Was that, or you're like, no, that checks out. What were your thoughts?

Tom Lee:
[36:46] Yeah, I mean, I think it checks out because, you know, we have to keep in mind, and that's actually equity value. So it's not the value of the Tether token, but really the value of the issuer. You know, Tether has been the central bank for crypto. I mean, in 2017, if we go back, they were incredibly novel and ingenious. I mean, they were Bitcoin holders, but they've proven that they're not just Bitcoin OGs. They created a business that acted as a central bank. And I think even companies or entities like Binance, et cetera, wouldn't really have existed without the existence of Tether. And in the ensuing years, Tether has actually increased its circulating supply. You know, if you look at how much Tether has grown, its usefulness is growing as crypto has expanded. that even as crypto has become more regulatory accepted, Tether's growth rates accelerated. So to me, I think it's pretty evident Tether is a growth company and at $500 billion, it might actually be a bargain. I mean, we should maybe think about the fact that Tether, you know, when does Tether flip JP Morgan as the largest bank in the world? And I'm not, I don't know Tether's financials, but because of how much growth they've achieved just even in the last few years.

Tom Lee:
[38:12] I think we have to realize that this may be, as Arthur says, one of the best banks in the world.

Ryan:
[38:16] Yeah. When you go to CoinGecko, our favorite website to go just look at their market cap rankings, they put stable coins on there, of course. And so the stable coin market cap of Tether is coming in at $177 billion. So there's $177 billion of Tether circulating on all the blockchains. You add them all together, you get to 177. Bitcoin is at 2.5

Tom Lee:
[38:36] Billion.

Ryan:
[38:37] Arthur, Do you think that Tether, the supply of Tether, the stablecoin, could ever flip Bitcoin? Is that a realistic statement?

Arthur:
[38:46] Of course it is. I think so. I mean...

Ryan:
[38:49] The dollars, the Tether tokenized dollars?

Arthur:
[38:51] I mean, if Buffalo Bill, Besson, and Trump had their way, that would absolutely happen. And it would come at the expense of Eurodollar deposit. It would come at the expense of banking every single person outside of the United States to the dollar-bic account in opposition to their local central bank. That is exactly what they want to happen. And they will issue as much debt as Tether or whoever else wants to acquire with the deposits that they bring in. So I absolutely think that is possible. And that's the goal, obviously, of the United States administration.

Ryan:
[39:22] Tom, do you agree?

Tom Lee:
[39:23] I do. And then again, if we're just doing the math, so from let's say $200 billion circulating supply to $2 trillion, that incremental $1.8 trillion, what value capture would tether have? It's enormous. I mean, this is probably why crypto equities might surprise us because they're turning into better businesses because they're using the blockchain.

Ryan:
[39:52] What message do you think Wall Street is hearing when they see Circle IPO and then just have an incredible price action after that? Stripe comes in and makes stablecoin blockchain. Everyone is just, whoever does anything in crypto gets a... 20, 30, 40% boost in valuation. The new crypto equities are popping right off the gate. What message is Wall Street hearing right now?

Arthur:
[40:19] Control F, Control R, crypto. And that S9 that you're about to produce.

Ryan:
[40:25] Is it that simple?

Arthur:
[40:26] That's the message. And then the really smart ones will actually build a business around it, but fuck that. That takes time and money.

Ryan:
[40:34] Well, that makes me think of, Arthur, is the

Arthur:
[40:37] Whole Long Island

Ryan:
[40:38] Blockchain. Tom, you know this story?

Tom Lee:
[40:41] Yeah, that was like 2017.

Ryan:
[40:43] Yeah, where Long Island ICT changed their name to Long Island Blockchain and the stock pops by like, it's 2x in a day. And that was also the top of 2017. That was like the time to be selling.

Tom Lee:
[40:54] I mean, today, I might say that today, blockchains look a lot more attractive, because of the security risks of centralized software entities. You know what I mean? I think cyber hacks are becoming so visible and companies are getting crippled, which is maybe raising the need and the benefits of actually having public blockchains for finality. And maybe that's part of the hidden message because I think seven years ago, even if the administration was friendly, it's not like a bunch of people would have been wanting to issue stable coins or build a new business on the blockchain or at least show it. But I think today it's really in demand now.

Ryan:
[41:40] It's interesting that you say that because usually I think when people hear about loss of money via hacks or exploits, it's from crypto, like some crypto protocol got hacked, some bridge got hacked, and then North Korea just found themselves $20 billion or something like this. That's the typical story. Granted, we haven't had one of those stories in a while. In fact, Vitalik recently wrote an article about how DeFi losses, like just capital losses inside of DeFi is something less than 0.3% because hacks and exploits are just down so low. So it's interesting that you say that, Tom, because that's an inversion from what it's been historically.

Arthur:
[42:17] If you think about the largest hack recently with the Bybit hack,

Ryan:
[42:21] Right? Yeah.

Arthur:
[42:22] I don't think it's fair to say that that's a hack of a public blockchain.

Ryan:
[42:26] That is a hack of- Yeah, correct. That was a private company. I know it's a safe and

Arthur:
[42:28] Improper implementation of that by a centralized entity. And so I think this goes to Tom's point. centralized entities face these risks. The more that you can have processes, finality, whatever you want to call it, that is completely adjudicated by a public blockchain Of course, yes, there are risks inherent in those blockchains. And if you use something that's not very secure, obviously not like ETH or Bitcoin, then you have all the Sybil 51,

Ryan:
[42:55] Pick your sort

Arthur:
[42:56] Of issues with proof of work or proof of stake blockchain that can happen. But the centralized company is always the risk. And if the more things that we can have on these public blockchains, the safer we are in crypto and in traditional finance. And it'd be amazing if that is the message that corporate officers are receiving. I doubt that they're that subtle. I think they're more, let's just change the words in the S9 to start with. And then maybe the young kid in the technology department can finally get some political capital to build some really cool solutions for a starchy company.

Tom Lee:
[43:29] Yeah, and I think if we just sum up everything from like traditional financial ledgers, like JP Morgan, 6% of their transactions are suspicious along with merchant fraud. And then all the hacks that have happened to, you know, department stores and all the identity leaks, I think it dwarfs the losses from crypto. And of course, and then Bitcoin and Ethereum have actually, as you know, have not have any recorded history of a breach on their blockchain.

Ryan:
[44:00] I want to knock off some last subjects here as we get into the final stages of this interview. One of them I want to talk about is this whole emerging concept of like financial entertainment. And I think this is kind of centered around prediction markets, but also things like Pump.Fun. So Pump.Fun has a live streaming platform where you can launch a token and you have a stream, there's Twitch stream associated with it. There's a bunch of content producers making a ton of content about polymarket contracts. Just will Taylor Swift get engaged? And, you know, not that much volume in the grand scheme of things,

Ryan:
[44:32] but a ton of content production just being made around that one market. Tom, I don't know if you have any thoughts or if you've been thinking in this world, but like this whole growing attention towards just financial entertainment on blockchain rails. What do you think about all this?

Tom Lee:
[44:49] Yeah, I mean, I think financial entertainment, might even under understate really how important everything these prediction markets are doing i mean to me the 2024 election and trump polly market and the role polly market played in and calling that election tells me that it's not just for entertainment it's really serious wisdom of the crowd knowledge that's coming into play as long as these betting markets don't influence by itself, by reflexivity, the outcome. But to me, I think that that's, as we move to tokenized equities and real world assets, and when you overlay that with prediction markets, that's really the alchemy that's going to cause the financial system to actually be a lot more liquid and for capital to be raised more easily. But I'm over glossing. I mean, Arthur has a lot more interesting anecdotes about that.

Arthur:
[45:43] Yeah, I mean, the sad part is that the inflation that has come and is to come globally around the world has created a class of speculators and that everyone who doesn't own enough financial assets, so call it 95%, 99% of the population. Your salaries ain't going to cut it. Everybody knows that intrinsically, whether or not you can do the math or not. And so they gravitate towards the stock market because that's been allowed in most countries. or they go to casinos, or now we have crypto, which is, okay, I can take my small amount of whatever savings I've been able to accumulate. Whatever the new hot thing is, I think crypto or pop.fun and meme coins, I intrinsically understand, okay, will this be popular in five minutes time versus today? I'm going to go and trade that. And then maybe I can be like that guy or that girl that I see on Instagram or TikTok and buy my house, buy my car, pay off the bills, whatever it is. Because I know in my gut that what I'm doing right now and anything I aspire to do in the future, there is no fucking way that I'm going to be able to afford the things that I've been told I should be able to afford, whether that's a house, starting a family,

Arthur:
[46:49] Debt-free lifestyle. And that's not an American thing. It's a global thing. And it's very sad, but that's the world that we live in until people throw off all these bullshit governments and we reform the financial system. This is going to be the state of play. And so pumped out fun, polymarket, all these things that bring markets. And this is why a lot of governments are scared because markets bring transparency, like what the people actually want versus what they're delivering in terms of policies and services and goods usually aren't are at odds. And I am a firm believer and I love free markets and I wouldn't even say the United States is a free market economy. It's, you know, it's very controlled economy in very various states and every country is on a continuum on this, this journey. But, you know, I think markets give good signals and let's see what the signals give. And if the signals are that everyone is going on pumped up fund trading on, you know, somebody taking a shit on somebody else and that's the most trending thing and let's bet on a meme coin on it. What does it tell you about the value of money and what people will ascribe to how the governments globally have sort of respected our dignity as human beings and what they've created of this energy derivative of money. So I think it's a philosophical indictment on the bankruptness of global governments that people gravitate to trade these things because they

Ryan:
[48:04] Have no other option. Wow, Arthur, that was profound. I was not ready for somebody to connect some pumped up fun shitcoin streamer to the hollowness of our money supply.

Arthur:
[48:17] It's all related.

Tom Lee:
[48:18] It's almost Shakespeare there.

Ryan:
[48:20] It's this close to Shakespeare,

Tom Lee:
[48:22] Yeah.

Ryan:
[48:23] On the other side of the speculation spectrum, Tom Arthur here, of course, invented the perpetual swap, as I'm sure you know. It's something that was birthed in crypto as just a neutral financial tool.

Ryan:
[48:35] Do you see perps making their way, going backwards into TradFi and being adopted in TradFi? Or do you think kind of perps are just going to stick around on the future side of the financial world? I don't know if you have a take or opinion here.

Tom Lee:
[48:46] I mean, we know that in the crypto world, products have emerged and leaked into the traditional financial world and they've been quickly adopted. I mean, stablecoin is like the biggest one that really has been so widely adopted. Yeah, I think that there are a lot of benefits to perpetual futures, you know, and that's a little bit outside my world because I typically focus on cash settled items or even cash traded. But without question, I think you're going to see innovation moving in both directions.

Ryan:
[49:22] Arthur, do you think TradFi is going to adopt your beloved perps, baby?

Arthur:
[49:26] Yeah. I mean, I know when people say TradFi, I think they really mean the United States capital markets. They're not really talking about everywhere else in the world. And I've spoken to a lot of founders who are having some sort of iteration on perps. And they talk about, oh, I'm going to go into the U.S. and da, da, da, da. And I think, you know, my message to all of them is I think that they're going about it. they're not barking up the right tree, yes, you can get some sort of license to operate some sort of exchange in the United States. And that's not really why the CME and the CBOE and some of these exchanges are so entrenched and powerful. It's because the clearing system in the United States is based on an antiquated model that works for equities trading in the 1930s, right? Not in today's, right? Not even any exchange does real-time settlements.

Arthur:
[50:12] Talk about the risks to CBOE and CME. Like these are very undercapitalized institutions relative to the volatility of products that they list and the margin they collect from, you know, the citadels and the virtues of the world. So if any founders are saying, I'm going to take this perp and I want to bring it to the U.S., I think the battle that they have to fight is how are they going to open up the designated clearing organization licenses that are, I don't think one's been awarded in 30 or 40 years. There's only 14 of them in the U.S. And so if they're able to somehow, some way get one of those licenses and allow the centralized, so the socialized loss insurance fund model to persist, then they're going to be able to issue thousand X leverage things because they're not going to be putting their exchange at risk by using these antiquated clearing things that force you to use, force you on boards of volatility in your business model, which you otherwise wouldn't. So I know it's a bit in the weeds, but I hope there's some, you know, perpdex founders to be or wanting to be. You know, if that's where you're going to expend your energy attacking, I think that's what you should attack. If you really want to fuck up the U.S. market and take the CME down to zero, which is where they belong.

Ryan:
[51:23] Seems all very complicated. Actually, it just seems like the simple thing to do is to just make it perpdex and not really worried about the regulations.

Arthur:
[51:32] Yeah, why not? Try it out.

Ryan:
[51:33] Yeah, you tried that once. Man, Arthur, Tom, this has been great. One last question for you guys. It is October 6th. So we've got two months, three weeks before the end of the year. Bitcoin just hit an all-time high the day of recording at 126,000 Ether. Yeah, I would like it to get at least above 5,000 this month, hopefully. Arthur, what do you think the year-end ranges will be for both Bitcoin and ETH?

Arthur:
[52:00] So I'm going to stay consistent. $250,000 Bitcoin, $10,000 ETH.

Ryan:
[52:06] $10,000 ETH. Do you think ETH can do more than a doubling in two and a half months?

Tom Lee:
[52:11] All right.

Ryan:
[52:12] Tom, you dropped off really quick, but the question is end of year price targets. We got two months, three weeks before December 31st. What do you think ETH is going to be? What do you think Bitcoin is going to be?

Tom Lee:
[52:22] Yeah, but by year end, our target for Bitcoin is 200 to 250,000. And for Ethereum, somewhere between 10 and 12,000 ETH.

Ryan:
[52:31] Even higher than Arthur. So that's basically what Arthur just said.

Arthur:
[52:36] I mean, if Tom says it, this is going to happen.

Ryan:
[52:42] Is that not a little bit fast, Tom? So like I said about this last year of price action, especially Bitcoin over the last three years, it's just been slowly incremental up. If you're telling me ETH is going to do like almost a 2.5X in two months, to me, that is no longer incremental. That is starting to become closer to a blow off top territory, which I don't want. I want the slow incremental price rise for years. If it did do a 2.5X, wouldn't you be worried about it? it kind of just being a little bit too fast?

Tom Lee:
[53:13] I mean, as you know, Ethereum's basically been basing for four years now, just broke out of the range. So to me, it wouldn't be a blow off top, but rather seeking essentially price discovery at a new level. And then at a time when I think there would be a lot of fundamental things happening next year. So I don't think it's the top, but I'm sure, but it is a big level. It'd be a big level, but a happy level.

Ryan:
[53:39] Yeah. Tom, Arthur, I don't know if I'm going to have you guys back on again by the time that the year wraps. But if you could think forward into 2026 and kind of just make a broad wishlist for the crypto industry, goals that the crypto industry should focus on, maybe goals that you're doing at Bitmine or Arthur you're doing with your trading and writing. What do you want to happen for the industry in 2026? The near-term, mid-term goals. Tom, I'll start with you.

Tom Lee:
[54:05] For Bitmine, of course, growing its ETH holdings and staking, But I think we would also be closer to moving towards that phase two and phase three of the company where we would be, you'd see us involved in some specific projects that are going to strengthen really the efforts of BitMine. And then for the industry, I'd love to see some innovation around the betting markets and tokenized equities. I think that that could be a 2026 thing.

Ryan:
[54:32] Will we see a tokenized BitMine?

Tom Lee:
[54:34] I'm less incented to tokenize Bitmine because I think what's more important is to see tokenizing a company so that we can extract and identify the portions of value. Like I'd rather see NVIDIA tokenized and then traded as if we can own NVIDIA's China revenue streams or its Blackwell sales platform. And then using prediction markets to actually hedge that. So we could be betting against Fed tightening and the implications for its margins or blackwell sales. So I think that's really what I think is exciting about tokenization.

Ryan:
[55:11] Arthur, 2026 aspirations, goals,

Arthur:
[55:14] Goals for yourself, goals for crypto. Here's my macro wish list. Let's go down the list. France leaves the euro. ECB bails out the euro, billions, trillions of euros. China reflates their housing market. Dollar yen goes to 200. BOJ capitulates and just starts printing a lot more money. And Trump takes over the Fed and does yield curve control. And then in terms of the crypto product landscape, I'd love to see 24-7 perps on, you know, mag-7 big U.S. Tech stocks. I know there's some projects working on it. Be great to see that that market kick off and sort of, you know, give a leverage trading in the United States from the traditional players that run for their money and let people trade some other things.

Tom Lee:
[55:56] Beautiful.

Ryan:
[55:57] Tom, Arthur, this has been great. Thanks for coming on Bankless.

Arthur:
[56:00] Thanks for having me. Thank you.

Ryan:
[56:01] Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in, but nonetheless, we are headed west. This frontier is not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.