Fundstrat Sean Farrell 谈 Bitcoin、ETH：加密资产进入每个投资组合的宏观逻辑

Bear markets are when the most money is made, right? That's when you should be locking in and forging opinions about both long-term trends and perhaps nearer-term narratives and catalysts. That's kind of what I'm focused on here. If anything, my conversations with TradFi market participants have reinforced that and given me some confidence that we're going to see a bull market again, and that we're much closer to that than we were at the outset of this year.

I would say to any despondent crypto-native market participant: start to lock in, start to pay attention, and rest assured that all of these secular tailwinds around tokenization and TradFi—not just moving on-chain, but leveraging the blockchain to improve COGS and increase growth—are still happening.

Sean, thank you for joining us. How are you doing?

Hey, guys. Thanks for having me. Excited to join. I'm doing well. I'm staring at charts and hoping that we can get a bit of a clarity bump here in the near term, but I'm sure we'll talk through that today.

Sean, I was trying to think of when you first came on my radar. I've been following you for a while, but I think it was during this digital asset treasury mania. I thought you had a lot of level-headed takes there. Something we're trying to lean into more on this show, and me personally, too, is leaning into uncomfortable opinions, getting out of your echo chamber, and checking your bias on all this stuff. That's super important.

We were talking before we went on, and I think you called the bull and this bear really well. So we're at a pivotal moment now in this cycle where I think it makes a lot of sense to start paying attention again to everything, because this is the time to position yourself. We want to ask you what data and indicators you're looking at day to day to give you confidence in where the market's going—if somebody can even assume they know where the market is going ever.

1. Sean’s role as Head of Digital Asset Strategy at Fundstrat

We also want to talk about whether it's time for the applications to take off, whether the L1 trade is still going to be prominent going forward, and your opinions on tokenization, RWAs, and the other big opportunities you see on the horizon. But let's start with what you do at Fundstrat. I'm curious: as head of digital assets, what does your day look like? What do you spend most of your time on? Who are you writing and researching for, and who are the customers of Fundstrat? Just give us some background on that.

Absolutely. Fundstrat is an independent research firm. We're focused on delivering actionable and evidence-based insights to both institutional and retail investors to help them with portfolio allocation, risk management, and ultimately making money through market cycles.

We have a handful of research leads who cover different areas of the market in different ways. You have Tom Lee, who I think a lot of folks probably know. He's our head of research, and he covers broader macro and equities. We have Mark Newton, who provides global, multi-asset coverage and applies a technical framework to his analysis. We also have Tom Bloxs, who's head of policy strategy. Then there's me.

I cover crypto and crypto-linked equities. As a firm, four or five years ago, we decided that crypto was this emerging asset class that would be an opportunity to provide outsized risk-adjusted returns, and we decided to lean in and develop a crypto-specific research arm. That's what I'm tasked with. I provide directional views on the crypto market in an attempt to deliver alpha to both institutional and retail market participants.

From a high level, I'm sure a lot of folks who are tuning in get their analysis from more crypto-native areas of the market—folks on CT or perhaps some of these more crypto-native research arms. They put out great, much more technically focused work. My edge comes from pairing a top-down macro view with a bottom-up fundamental view on the broader crypto market.

In terms of deliverables, I put out market commentary on a near-daily basis through written reports and recorded videos. I also manage 2 model portfolios for clients. One is purely token-based. The other is a portfolio of crypto-linked equities. My goal is to outperform Bitcoin over a market cycle through asset selection, position sizing, cash levels, and hedges that all adjust based on how the opportunity set is adjusting.

A large part of my day is trying to determine what is actually driving the crypto market and then translating that into actionable recommendations for clients. Broadly, this involves looking at macro data, on-chain data, market positioning, and token fundamentals. These days, it's a lot of regulatory developments as well.

I've also learned a lot from my colleague Mark Newton on the technical front, so I've started to pair a little more technical analysis into my work, mostly by leveraging his work as well.

2. When did DeFi become legit tech for Fundstrat?

Knowing, Sean, that you've worked hand in hand with Tom Lee, I'm going to assume a lot of the ideas that I've seen him talk about over the years, especially on major networks like CNBC, are informed by that. I noticed the pivot years ago to suddenly being that much more interested in DeFi and, more specifically, what Ethereum was building, whether that includes stablecoins and now, more broadly, tokenization.

Given the fact that you all work together, and you're clearly driving a lot of the primary research that backs the ideas he brings onto TV and into interviews, I'm curious what moved the needle for you as a team toward seeing DeFi as a legitimate future for finance, versus this tinkerer, experimental phase that we were all living through in 2020 and 2021, hoping that we would eventually be able to rewire the back end of finance.

My role has evolved a lot over the years, and I think our audience has changed quite a bit. My approach to the market has been pretty consistent, with a few changes here and there. I would say that the 2 big step-function changes are worth discussing.

As an analyst, stepping back real quick, it's worth covering the unique exposure—the unique seat—that I have at Fundstrat and why I like it so much. I cover crypto markets day in and day out, staring at crypto charts 24/7, like you all are. But I'm also covering macro as well. Like I said, I have a macro-informed outlook on the broader crypto market. I think that's the best way to outperform cycles year in and year out.

I have 1 leg in the crypto-native world and 1 leg in the TradFi world. It provides me with a pretty unique exposure to both worlds and how they interact with one another. I think, starting in 2024 with the launch of the ETFs, that was the first big step-function move from this TradFi bucket toward dealing with the crypto arena.

We saw a huge conversion of our macro-only clients shifting to being more interested in crypto, both from an allocation perspective and just having an opinion on the space. Now, allocators need to have an opinion, whether they like it or not or think there's an opportunity. They need to be informed.

I would say the next big step-function change in that dynamic was the passage of the GENIUS Act and the subsequent IPO of Circle. We had something like a 30% conversion—I can't put an exact number on this; I'm just pulling it out of the air—of these TradFi-only investors becoming more interested in crypto, and not just Bitcoin. They were interested in things beyond Bitcoin and in how crypto rails might change how finance is configured and how value accrues to the different market participants within that financial infrastructure.

I've always—and again, we can talk about this later—valued the intellectual independence at our firm. Myself and the other analysts, including Tom, all have our own opinions and our own ways of looking at the market. Tom forms his own opinions based on data. Some of that is provided by me, and some of it is provided by his own team of analysts.

Some are just based on conversations with other people—hedge fund analysts and large allocators that follow his work. I think what we noticed, or what Tom noticed, following the passage of the GENIUS Act and the subsequent Circle IPO, was that there was going to be a real, genuine interest and rush toward adopting stablecoins and engaging in tokenization to both improve margins and expand access to particular financial products from these traditional financial companies.

With that in mind, I think Tom viewed ETH as a great way to gain exposure to that secular megatrend. Obviously, as you all know, and I think it is important to point out, his endeavors with BitMine are separate. There is a pretty thick firewall between his day-to-day at BitMine and what we do at Fundstrat. I think that process—that evolution of the market—really did inform his views on ETH, and I think it has done a good deal to inform my own opinions on tokenization and the coming acceleration of stablecoin adoption that we're going to see.

Obviously, the big question is where that value accrues, which I think we could debate until we're blue in the face. But at a high level, that's the background behind Tom's conviction.

3. How Sean and Tom Lee marry differing market views

Yeah, you touched on one of the things I wanted to ask you. I don't remember exactly when it was, but I remember there was a moment, or there have been some moments, where what Tom may be saying on TV differs pretty strongly from what Fundstrat Research is telling people. I was curious: How does that go in the office? Is Tom ever like, “Dude, Sean, you're killing me. What's going on here?”

Sometimes he'll ask me to fix the crypto market, but in a tongue-in-cheek manner. Outside of that, he's honestly super supportive. But I think one of the things I really value about Fundstrat is that, as I said, there is genuine intellectual independence here.

I think you guys have probably seen it. There have been a lot of people up in arms about some of the differing viewpoints between myself and Tom, and I think the folks who don't follow our work think that there's some defined house view on everything. That is how a lot of shops work, but that's just not how it works here.

We certainly do, as I just mentioned, collaborate on ideas. I share some of my thoughts on the broader space—tokenization, stablecoins, and so forth—but all the analysts here have their own approach to the market and their own respective views. Sam and I often agree on the long-term direction of the asset class. I actually think ETH is probably one of the cleanest macro trades of the next cycle, whenever the cycle does turn.

The differences between Tom's approach and mine normally center on some combination of timing, positioning, and the path to get to a certain end state. Tom might be looking 6 to 18 months out, whereas I'm more focused on the next, say, 20% to 30% move in the here and now and how clients might want to be positioned for that.

I think it's also helpful to understand that my work is more tailored for active investors seeking alpha who have a pretty significant crypto sleeve within their broader portfolio and might have different risk parameters across shorter time frames. Another way to frame it—I don't want to go on and on about this—is that I provide a macro-informed crypto allocation framework, whereas Tom integrates crypto into his broader macro allocation framework. I think there's a stark difference there.

Ultimately, my job is to follow my own process, which is based on liquidity flows, positioning, fundamentals, catalysts, and some technicals. If the data is telling me that positioning is crowded, liquidity trends are subpar, and risk measures are showing complacency—which is kind of what we saw at the beginning of this year—it's my job to tell clients that that is how I'm seeing things.

I also think disagreement, frankly, is useful for clients. Markets are uncertain, and presenting one monolithic view to our audience can create a false sense of confidence. It's valuable, especially for institutional clients, to show where our frameworks might disagree and what variables might determine the outcome. It also sets up convergence: If Mark, our technical strategist, Tom, and I all turned in a more constructive direction together, that should intuitively strengthen the signal that our clients receive from us.

I understand why some people might view it as complicated or weird, but I think it makes this place a great place to be. I do want to re-emphasize that Tom has always encouraged that independence and has been very supportive along the way.

I think one of the issues we've seen within the crypto asset space is that there are a lot of investors who have confused what trading and investing are over the long term. I think Nomadic and I clearly sit in that sort of long-term investor standpoint. We're always thinking 5 years out—maybe 2 years on the shorter time frame, as much as 10 years.

I definitely draw upon Tom's views for my conviction over the long term. I've watched the views he's put out over the years, and I've recognized that a lot of what he's saying has ultimately come true. It's just that, in many cases, he suffers from what we call this eternal-optimist view. So, anyway, my long-term conviction definitely relies on that sort of thinking from Tom.

What I want, though, is to be more of a student of what you tend to focus on—not just the long-term conviction, but trying to understand what happens over the next 12 months and having that macro-informed view of what's going on in digital assets. I will tell you, that's a blind spot for me personally.

I try to understand what's going on outside of the crypto space, but at the end of the day, the place where I feel like I have real edge, and so I continually double down, is what's going on onchain and what's happening at the frontiers of DeFi.

4. Why market conditions for crypto have vastly improved

Part of the reason we invited you on is that we really want to get a sense of where you think we are in this crypto cycle—the 4-year Bitcoin cycle, if you want to call it that. Where are we in the bear market? What inning are we in? Do you see a turnaround anytime soon? What can you tell us you're seeing based on your research?

Yeah, look, I can definitely confirm that we are in the throes of a bear market. That is for sure. I'm not a huge fan of the inning framework, just because it removes a bit of flexibility from the process—at least my process—in assessing the risk-reward of any asset class, really. It also only contemplates the time element versus price.

You might be in the 8th inning of a certain bull or bear market, but that 9th inning could be something you may not want to miss if it's a bull market, or may want to miss if it's a bear market. If I had to put an inning on it, I would say that we're in the 7th-inning stretch. Maybe even later in the game, but I say we're in the 7th-inning stretch because I do think that we could have a bit of constructive price action—a bit of a relief rally.

I know we're not really focused too tactically on this podcast. I don't think that's what we're trying to do. But in terms of time, that's probably where I would place it. The biggest driver of this bear market, if we go back to my views at the start of the year, would be the divergence between liquidity conditions and the pace of liquidity growth versus the pace of earnings growth.

And that's coupled with a number of idiosyncratic factors as well. You had idiosyncratic, crypto-specific factors that have also weighed on prices. Particularly in Q1, you had miners selling hand over fist to fund capex expansion, and you had OGs selling due to the 4-year cycle.

You had DATs selling—or rather, they were unable to raise capital because they were all trading at or below 1.1x NAV. And now we've had DAT selling. You also had significant redemptions from liquid crypto funds, so there were significant idiosyncratic sell-side flows that folks should have contemplated in the first half of this year.

But the broader backdrop, I think, was that you had an environment in which you didn't really have central-bank balance-sheet expansion, especially through Q1. You had a severe tightening in rate expectations, with real rates rising precipitously. The real 2-year yield, save for the price action in the past couple of days, is at a new cycle high, which tightens the screws on liquidity-sensitive assets such as Bitcoin and ETH, and by extension, anything that has beta to Bitcoin and ETH.

Meanwhile, just to unpack the other side of that dynamic—the earnings side—I think a lot of people have been despondent over the fact that equities have continued to roar to new all-time highs while crypto has not, for lack of a better word. That simply has to do with the fact that earnings have grown at an impressive rate, mostly attributable to the pace of this AI capex build-out. Broader economic growth has been sound as well, and so you have this environment where there's just not a lot of excess liquidity, and there's no need for an excess-liquidity sponge like Bitcoin.

As a result, you have any marginal capital that's in the market being put to work in these productive assets that are spinning off earnings, and that's why you've seen such a crazy divergence. In terms of getting up to speed with where we are right now, I think a lot of those liquidity headwinds are behind us. A lot of the tailwinds for earnings, I think we're probably in the seventh-inning stretch of those as well. I know a lot of equity bulls aren't going to want to hear that, so I do think that dynamic will change over the next 3 to 6 months.

From an idiosyncratic perspective, there is a world in which Strategy makes some subpar decisions around its capital-markets endeavors, and that is a tail risk that should be considered here. I do think they made some mistakes in terms of how and when they repurchased those puttable bonds, which kind of led to that spiral and stretch and the broader strategy complex. But overall, I think the idiosyncratic risks are behind us, and the flows outlook is a lot more constructive.

Now I just think most of the risks for crypto are really attributable to the broader macro landscape and some of the muted risk measures that I'm not a huge fan of, which make me wary about the 3-month risk-reward for crypto here. But overall, things are improving.

Yeah. Okay. What I keep hearing from people is, “Hey, things look good. It's probably been a time to start adding,” but everybody caveats that with, “We think there's another drop coming,” pointing to maybe late September or early October because, of course, that lines up with the cycle.

5. Is this the market bottom?

I feel like there's a lot of people still afraid to fire or start positioning fully, and a lot of people are still hedging for that end-of-summer, “Oh, crap, here's the actual bottom”—or here's another bottom, I should say. I wanted to ask you, too, as far as what you're telling Fundstrat clients these days, when it comes to crypto: Has it been a time to buy? Is it more of a cash position?

I know in Telegram, when we were going back and forth, you mentioned that we're still a bit away from when you think the credit cycle is going to start inflecting up. That probably seems like an important tailwind to you as well.

In summary, my base case is that the second half of this year is better than the first half. Low bar, I know, but it will be better. There will be opportunities to make money, but it will remain choppy.

I do think this is an important time for investors to have a conversation with themselves. You just went through a whole dialogue that a lot of investors are having within crypto: Should I allocate now? Should I wait? Is this the bottom? I think that indicates a lot of those people haven't had a frank conversation with themselves as it pertains to what their benchmark is and what their time horizon is.

I feel pretty comfortable that you could buy right now. I'm fine telling you guys this, and frankly telling any of our clients, that I feel pretty comfortable that you could buy the majors right now, and maybe some select alts. Although some of the alts that I like right now have actually bounced 25% to 50% off the absolute lows, so I might be a little more patient there.

I'm pretty sure you could buy the majors and sell them at a higher price a year from now. It's just a matter of what bills you have to pay over the next 3 to 6 months. If we do get one more leg down and see a four-handle on Bitcoin, are you going to be okay with that? Will you still have some cash on hand to layer in?

6. Price recovery will precede an expansion in crypto-native credit

I do think it's important for folks to have that conversation with themselves. It's something that I'm pretty cognizant of 24/7. I view Bitcoin as my benchmark, and I try to make sure that I'm armed with dry powder should we have the opportunity to buy good assets at cheaper prices.

As it pertains to the credit-cycle conversation, it's important to differentiate between the credit cycle in TradFi, which is humming by all means, and the crypto-native credit cycle. That really is just people taking their higher-quality assets and borrowing against them to ostensibly go long names that are further out in the risk curve or to be put to work in cash-yielding opportunities.

Given the state of market prices and the deluge of hacks that we've seen in DeFi, you've seen a huge tightening in crypto-based credit. This happens every bear market. You see major credit expansion, some of it very toxic. We didn't have the same level of toxic credit expansion this cycle as we had last cycle, but a lot of it is unhealthy, and you see that unwind.

You see people pull back on risk and leverage. Generally speaking, you see prices recover before that credit-cycle expansion happens. Given that we're just on the precipice of a potential recovery in prices, I think it's right to think that any kind of recovery in the crypto-native credit cycle is still a bit of a ways out.

That doesn't mean you shouldn't be looking for potential cyclical opportunities that would benefit from an expansion in credit. I think this bear market has offered a lot of projects in DeFi the opportunity to show their level of sophistication as it pertains to risk management and business management, as well as product development.

You do see that a lot of these DeFi applications, particularly those that facilitate borrowing and lending on-chain, are spinning off solid cash flows. Some have demonstrated compelling, robust fundamentals in the face of credit tightening and will probably present some compelling opportunities should we see that credit cycle start to expand again.

7. Can DeFi app-layer tokens be winners in the next uptrend?

One trend that has played out over the last few years is that, if I could go back in a time machine to 2020 and give myself some advice about my portfolio, L1 tokens just continued to accrue value, and it seemed like everyone wanted to speculate on the next L1 token.

Fast-forward to now, and we have a select few L1 tokens. Obviously, we tend to focus more on Ethereum here, but there are other L1 tokens. Solana had an incredible last bull cycle. We've always wanted to see the application tokens do well, and I think sometimes I've gotten lost in all of the fundamental growth that we saw on-chain with DeFi.

I remember looking at DeFiLlama at times and just staring at the top protocols. You're seeing all this growth, and you're seeing them build up a reputation and a track record for not having exploits and ultimately being reliable for investors. Yet many of those tokens were sold off into the ground every bear market, and some of them even failed to gain much ground in the bull run.

So I’m wondering: do you think we’re finally at a stage of maturity where DeFi application tokens, or just application-layer tokens in general in crypto, can do well? Is this the next stage of digital assets maturing?

Yes and no. I think that, by and large, DeFi protocols—if you just look at, say, the leading DEXes or the leading borrow protocols—should continue to trade in a cyclical nature, mostly because the collateral and the assets being traded or borrowed against within these protocols are also pretty cyclical assets. You should see them trade with large upswings, perhaps at a discounted multiple due to that cyclicality.

But I think this is actually a big benefit of tokenization. The benefits to DeFi from tokenization are massive because you have this opportunity for these protocols on-chain to actually integrate with less cyclical assets. You can bring equities, commodities, and the S&P 500 on-chain and use them as collateral or as assets to trade on-chain.

I think that should, over time, reduce the level of cyclicality in these protocols and create more robust, steady price action in a lot of the tokens that ostensibly accrue value from the traction on these protocols. That’s one of the things I’m most excited about, and something I’m trying to hone in on is what protocols are actually going to benefit from this trend.

I think the biggest example has been Hyperliquid. As an analyst, it’s a name that I doubled down on back in February, and a big reason was not just crypto-native traction. In fact, it was just the opposite: RWA-based markets were starting to comprise a significant chunk of the volumes on Hyperliquid. That was leading to the lack of cyclicality and the outperformance that we saw in Hyperliquid.

Now you have bulge-bracket banks looking to Hyperliquid for pre-IPO markets ahead of their listings, or listings that these capital-markets teams are actually bringing to market. I think that’s been a huge and poignant example of what crossing that chasm and branching out to service traditional assets can do for some of these on-chain protocols.

8. Which DeFi sectors are best positioned to accrue value?

Yeah, that was a wild run that Hyperliquid went through. We had the gold explosion, then silver, and then oil, and Hyperliquid was just there to trade them all. That stuff was available on some centralized exchanges over the years, too, but it never took off there.

It was such a wild string of events where Hyperliquid just seemed so well positioned to take advantage of all of that. Then you see people talking about it on Bloomberg, and it’s getting written up in Citrini and all this stuff. Just a wild run.

I’m wondering: are there any other sectors or themes, or particular assets, that you’re starting to watch closely that you could share with us?

Yeah, look, I think the big question you asked about value accrual and tokenization—RWAs—is the big megatrend. Investors are thinking about how to best take advantage of that, and that’s where I’ve been spending time.

Outside of really honing in on my broader macro view and assessing the forward-looking price action for the majors—which, again, I still think over an intermediate time frame will drive the majority of portfolio returns for people allocating to the crypto market—I’m focused on thinking longer term about how value accrues from this secular megatrend in tokenization and RWAs coming on-chain.

I would bucket the projects and protocols I’m focused on into 3 different categories. The first would be the harnesses, to steal a term from the artificial-intelligence world. This is essentially the conduit through which people access these state-of-the-art models, and I think that’s a good framework to apply here.

The harnesses, or the conduits, are the apps that will actually source and monetize any kind of flow from people trading these RWAs on-chain. You have the obvious examples, like the one we just talked about, Hyperliquid. You also have Robinhood and Coinbase, if they can get their act together. That’s one bucket.

The next bucket would be businesses that leverage blockchain to improve margins and growth. I think this is presenting the biggest challenge for a lot of crypto-native market participants. It’s not as simple as throwing a dart at the board and picking an on-chain protocol that should benefit from an upswing in crypto-asset prices.

You need to actually look at a business that sits between the 2 worlds and serves customers in a useful way to generate free cash flow, while using blockchain technology to improve margins or increase growth. I actually think a lot of these businesses don’t exist yet, and that’s why it’s somewhat challenging to pinpoint which businesses they are.

Some existing, poignant examples would be Figure, which has leveraged blockchain technology to launch tokenized HELOCs on-chain. That has reduced costs by 80% and sped up the underwriting process by 5x. You also have companies like Stripe, which you can’t really access in public markets, but it’s a good example of a business leveraging blockchain technology as an accelerant to its bottom line.

You also have crypto-native businesses, things like Maple Finance, which I think we talked a bit about at the outset. The ticker is Sarah, but it’s a name that’s been on my watch list for a little while because they’re a good example of a project. They’re a protocol, a token-aligned protocol that doesn’t have an equity-based entity behind it, but they’re also a business.

They’re just leveraging blockchain technology to source capital better and more efficiently, and they’re pairing that with a centralized risk-management and underwriting process. That’s a really good example of how you can find a wedge into certain markets and outcompete incumbents by leveraging this technology. I think that’s a good example.

The third bucket would be businesses that facilitate capital markets on-chain. These are more traditional things like borrowing and lending protocols and exchanges. But, again, going back to discerning between more and less cyclical protocols, I think that’s an important distinction to make.

Projects like Hyperliquid, which are integrating more RWA markets, are inherently going to fare much better than the same-purpose RWA markets integrated or traded on-chain.

Yeah, well said. I want to riff a little bit on your thoughts about Maple and the SYRUP token, but also on your overarching idea of companies that embrace blockchain and smart-contract operations. I think that can be supercharged, and you’re starting to see some evidence of that.

Taking a bit more about Maple as an example, I wrote a piece recently because I wanted to find the answer as to whether I should buy more SYRUP. I have a very small position, and I still have not bought more as of this podcast.

Maple, to me, is the asset manager of the future. In the piece, I compared them to one of the iconic companies, Blackstone. The edge Maple has is that they’ve already managed to utilize tokenized collateral in their workflow, and they’ve already managed to utilize stablecoins in their workflow: 24/7 operation, low headcount, and efficiency.

That’s not to say that a bigger ship with a small rudder like Blackstone can’t get into that tomorrow, but it’s doubtful to me that they’re going to streamline all these operations in their business, probably even over the next year or maybe 2. I think Maple is very well positioned to capture a lot of upside and efficiency going forward with its business model.

It’s not a new business model. It’s an old, classic business model that’s been updated for Finance 2.0, and they’re already ready to go and lean into that. So, yeah, super, super bullish on that one as well.

9. TradFi and fintechs are integrating DeFi into their business

I also want to note that Maple is not integrated or recommended within our model portfolios right now. It’s just a name that’s on our watch list because of some of these themes that we’re talking about.

Maybe just staying on this track for a minute, Sean, are you seeing examples of some of these more traditional businesses adopting blockchain rails to make them more efficient, like the example we’ve been talking through?

I know Figure is an incredible one, but maybe even less crypto-native companies are saying, “Okay, yeah, massive opportunity.” Obviously, BlackRock comes to mind too, with Larry Fink being one of the biggest spokesmen for tokenization. But I don't know that DeFi Dad and I are as connected to that world. I'm assuming you're more plugged in, so any insight would be awesome.

Yeah, I would say fintech, definitely. I think we're all well aware; we saw the Robinhood announcement. You obviously see that those more forward-thinking fintech companies are trying to bridge and curate financial products that tap liquidity sourced from on-chain sources.

You also obviously see very prominent examples in the form of, say, Stripe, and some of the constituents within that open USD consortium that was announced a couple of weeks ago. There are a lot of companies that are trying to integrate stablecoins into their operations.

As it pertains to the banks—which I think is where a lot of the interest lies, because that's where a lot of the AUM and transaction volumes are going to come from—I think the banks are just turning. Changing the strategy at a large bulge-bracket bank is like turning a cruise ship: You actually end up completing that turn long after you make the decision to turn.

I think we're in the process of that cruise ship turning, and you see experimentation, particularly in areas such as intra-bank settlement. You see JPMorgan tokenizing deposits, and you see other banks working to reduce COGS within their operations.

In terms of them moving toward actually sourcing or providing liquidity on these public networks in a meaningful way, I think we're a bit of a way off. But that ball is definitely rolling.

10. Is sentiment bullish for crypto on Wall Street?

Sean, when you talk to colleagues who work in traditional finance, is there any signal that they're looking for there to be a bigger opportunity to rotate money back into digital assets and crypto? We've been covering the fact that there are lots of major institutions, like BlackRock, that are now tokenizing assets.

We think this is the first wave, where select assets will be tokenized. It's still very experimental, but once that proof of concept is there, we're imagining more of the portfolio gets tokenized, and then eventually there's primary issuance going directly on-chain.

That said, we're definitely more firmly in the DeFi-native camp, so I'm trying to ask folks like you: Do you see that sentiment shift? Retail sentiment in the crypto space is pretty poor right now, but we're hearing from other colleagues that sentiment among traditional finance is very strong. They're seeing that this is legitimate. We need to double down on this.

This is no longer an option. This is a mandate that we have to bring our assets on-chain.

Yeah, look, I think that's been a huge theme within this bear market. I think it's important to delineate between fundamental traction and a secular trend versus asset prices. Throughout this bear market, you've seen very promising sentiment and efforts from some of these traditional financial institutions to engage in tokenization, whether it be something material or just experimentation. I don't think that has slowed.

Just to comment on broader sentiment, because I think we both have observed and feel the same way: the level of despondency among investors in crypto-native circles is significant. I think one thing that crypto-native investors miss is that crypto is just really small. It's really tiny from a market-cap perspective, and in the eyes of some of these traditional financial institutions, it's just not that big.

You have Micron producing earnings in a quarter the size of one Solana network, right? The size disparity is quite stark. So I think it's important to realize that a lot of TradFi is becoming more interested, but from a price perspective, a lot of it is the Don Draper meme: The one guy says, “I feel sorry for you,” and Don Draper says, “I don't really think about you at all.”

It's not exactly like that, but it's kind of like that, right? When TradFi is ready, from an investment perspective, for when things do turn, they'll be here. They'll be back. They'll be in the arena. They'll be buying assets. I think that's just an important takeaway.

I think you alluded to this earlier in the conversation, but bear markets are when the most money is made. That's when you should be locking in and forging opinions about both long-term trends and perhaps nearer-term narratives and catalysts. That's what I'm focused on here, and if anything, my conversations with TradFi market participants have reinforced that and given me some confidence that we're going to see a bull market again, and that we're much closer to it than we were at the outset of this year.

I would say to any despondent crypto-native market participant: Start to lock in, start to pay attention, and rest assured that all of these secular tailwinds around tokenization and TradFi—not just moving on-chain, but leveraging the blockchain to improve COGS and increase growth—are still happening.

Yeah, it's funny. When you frame it like that, just that whole meme, and you actually sit back and look at how small our industry is, it's something I don't think about all the time because I'm so in my bubble and so in the space. But that's a heavy dose of reality.

On the flip side, it's funny to me that crypto put together some of the biggest lobbies in Washington for this movement. When you talk about the Micron earnings and how big they are relative to our space, it's still wild to me that we generated that much backing and power in Washington.

This brings me back to the political landscape, because in our crypto circles we're like, “Why isn't the CLARITY Act getting handled? Why does it keep getting pushed?” But really, it's so small to so many people.

11. Chance for CLARITY to pass + possible political headwinds

The question that I ultimately want to ask you is, on this political idea, if we do get a new administration, is this something you're thinking through? How does this affect digital assets? I'm curious if you think about this in the context of talking to your Fundstrat readers or viewers. How disruptive could this be?

We had a president who was supposedly pro-crypto, but I think he's made somewhat of a mockery or a mess of it. I think he's given people grounds to absolutely go after crypto and make an example of him. What are you thinking as far as the political landscape here and how it could affect this space?

Yeah, no doubt. President Trump taking office was positive from an agency perspective. We now have agency leaders in place who support the industry and can create rules of the road for regulating the space, tokenizing assets natively on-chain, and creating innovation exemptions for protocols to raise capital and eventually decentralize and shift to commodity status.

Just as importantly, we have rules of the road: a disclosure-based, rules-based regime. We're going to get that regardless of whether the CLARITY Act passes or not.

Unfortunately, like you alluded to, the president had some other personal endeavors and made about a yard off of his memecoin, which obviously left a bad taste in a lot of folks' mouths. The memecoin and World Liberty were less than ideal, and right now that is the big holdup on Capitol Hill.

That's the big gating item for the CLARITY Act, which I am perhaps a bit more non-consensus bullish on. I think there's a decent chance they reach an agreement on the ethics provisions, which are the gating item for CLARITY right now. Democrats want to establish some sort of conflict-of-interest provision to prevent any instance of a president or his associates doing what Trump did with a memecoin and World Liberty Financial in the future.

I think a lot of that is more just eyewash and politics, but we are in a place where the CLARITY Act itself, based on my conversations with advocacy groups and people that are close to the metal on Capitol Hill, is great. I think all the negotiable items are set in place in a great spot, and if we had all the runway in the world and we didn't have this ethics provision, I would be at 100% that it's going to pass. I think, frankly, a lot of Congress on both sides of the aisle is just tired of crypto, largely due to that war chest that we've raised and the number of doors that we've beaten down.

But this does present a risk that the CLARITY Act does not pass. I do think I'm above a coin flip that they actually do find some compromise on ethics and we do actually see the CLARITY Act pass. So we'll see whether that prognostication is right or wrong in a few weeks.

Beyond that, to your question about political risk, it certainly does persist into the next administration, assuming that the CLARITY Act does not pass. If Fairchig does run out of capital and is unable to leave an imprint on the congressional makeup, obviously that does present some kind of risk that we see a new administration put in new agency leadership and those rules do get pulled back, because we're going to get rules regardless, right?

12. The macro case for ETH and BTC in every portfolio

The SEC and the CFTC are working in conjunction with Congress such that, if the CLARITY Act does not pass, we're going to get rules that would be pretty aligned with what the CLARITY Act says. It's just: How sticky are they? I think they are somewhat sticky, right? I think once those rules are in place, it takes a huge effort to actually roll them back and create new rules. So I don't think it's a foregone conclusion that a new administration rolls these rules back, but it definitely is a non-negligible risk, I should say.

I think the hardest part about this past year for me and Nomadic, and probably anyone else who's very long digital assets like ETH, is it's not just that the prices have been down; it's that it seems like everywhere else markets have been up. Obviously, there's been a historic run with AI-related equities. We've also got metals, which had an incredible run. I know there's been a pretty brutal sell-off since then, but still, if you look at gold, it's been up a lot over the last several years.

Can you just try to summarize for us what that analysis looks like when you talk to investors about, “Hey, why should I still allocate to crypto assets? Why should I allocate to something like Ether or Bitcoin when, again, they're down 50% this year and basically everything else is up?”

Yeah, I think it's important to recognize that the story and the risk-reward for Bitcoin and ETH, relative to the rest of crypto, are a little different, and I would say that there's somewhat of a call option attached to the rest of crypto. I can confidently say that Bitcoin and ETH are integral to a modern portfolio. I think that they will have their day in the sun again, and it really just comes down to an understanding of macro and the fact that you have this situation in which debt-to-GDP remains elevated, fiscal deficits relative to GDP remain elevated, and they're likely to persist.

You have a reduction in the labor force, and so you have labor force trends moving in a way that isn't conducive to paying down that debt and reducing those deficits. And so there are only a few ways out, right? You can see productivity gains from AGI, which could happen. I don't know if it's going to happen in the super near term. I think there's some diffusion and adoption that has to take place, especially from some of these larger corporations.

You can inflate the debt away, in which case I actually think Bitcoin still does pretty well, because that would involve the monetary powers that be accepting inflation and accepting that we're going to have high nominal rates but low real rates—some kind of financial repression. The third route is some kind of austerity, right? That's us just accepting some kind of financial crisis or depression. But we know that our overlords will not accept any kind of pain. It's just politically unpalatable.

And so at some point, you're going to get another bout of liquidity expansion, and folks are going to need these tools as outlets. Obviously, the cyclical names that track the ebbs and flows of the majors will do well, right? They'll be volatile, and we may not see that same adoption curve that perhaps a lot of folks do expect. But there is that call option that we do see, and there will be projects that emerge that are able to forge a bridge between these onchain, internet-based capital markets and TradFi, accrue a lot of value, spit off free cash flows, and actually become compounders.

That's a big problem for crypto and one big reason why I advocate for active management: Name the assets that have outperformed Bitcoin over multiple cycles. There aren't that many, if any at all. I think maybe BNB did it once, or I'm not even sure. But the point is, in TradFi, you kind of rely on the economic engine continuing to churn, companies providing goods and services that spit off a return of capital to investors, which we haven't seen to date from a lot of these protocols.

And the bet is that tokenization—the concepts and the adoption of these rails for tokenization and the transacting of RWAs—actually does turn these onchain companies into real cash-generative assets that you can have in a portfolio and see outsized returns over a longer term. I'm excited for that. I'm prepared for that future. That's kind of my view.

I do view this as kind of a multi-decade process of moving all of finance onto blockchain rails, and that's kind of the longer-term thesis that I try to proselytize. But, yeah, I guess I would summarize—I guess that was a bit long-winded—but that's kind of my pitch and why I think that both Bitcoin and ETH, but also the longer tail, the other aspects of crypto, do still deserve investor attention and a spot in your portfolio.

13. From niche alternative markets to trillions onchain

Yeah, absolutely. I think what we started with, with something like Bitcoin as a digital store of value, is more remarkable to me because it didn't die off over the years. I think going from 0 to 1, there was a huge leap, and then you get to something like Ethereum, where now we've rebuilt finance, but onchain. Those tools, although very powerful even 5 years ago, were very powerful for a very niche group of us that were experimenting onchain and willing to ultimately live in a digitally native portfolio and then use all these parallel use cases from TradFi.

Now we're at a point where we're all realizing that if you can ultimately pick out those major primitives, the application layer, the winners, you get to own a share of something, I think, very early on through a token that is accruing value if it's designed properly as all this money is onboarding. I know Joe Shalom and others like him, obviously your colleague Tom Lee, talk about how there's all this money out there, and however you want to size that market—$700–$800 trillion of assets—even if we capture a small fraction of that and bring it onchain, it goes back to just the fact that the crypto-asset market is still so small, just a few trillion on any given day.

And so, yeah, if we can tokenize however much of that and bring it onchain, I think we get to tens of trillions in a matter of years. So the question is: How much in terms of fees does that drive? How much revenue can it drive back to tokens? So, yeah, it's crazy to say we're this far along in the maturity of DeFi and yet we're still talking about the fact that there is this call option to being invested in this space.

It's not a surefire bet for just anyone, depending on the token you're holding, but, God, it's as clear as day to us now with stablecoin adoption and real-world assets coming onchain. We are moving into this big-boy era of crypto.

14. Closing

But Sean, I think this is a great place for us to start to wrap up. Sean, thank you so much for coming on. I know with all the research you do and your own podcast, you're obviously busy creating all of this valuable research, so we're very grateful and privileged to have you come out and share your insights with us. I want to give you the final word before you go. Any other links at all that folks should look to to follow your work?

I think you nailed it. Great summary, and I really appreciate you guys having me on.

And you guys have a great podcast going here. You mentioned I do have a podcast, which is separate from my day-to-day, but I try to rival the production quality that you guys put together. Thanks for having me. I hope we can do this again sometime.