John Gillen: Ethereum Will Fly From Here And Most Investors Aren't Ready (Here's Why)

0:00All right, guys, we're here in Tegas, Assistant Tawa with John Gillan, John, great to have you. I love the suits, looks great. After those of you guys don't know, John is one of the hosts of Milk Road Daily Show. It's one of my favorite crypto pods. I get some of the best guests in the industry. I love their thumbnails, I love the whole vibe. John is X Black Rock, very smart guy, very bullish ETH. And yeah, I mean, we, I was a big fan of your pieces that you put out. You put out the pieces about wartime Ethereum, situational awareness, and now about this short squeeze. So talk to us about what is going on in the land of Ethereum. What's got you so bold up? Well, a lot's going on. It's great to be here, Andy, thanks for having me. Big fan of your show too. So this all started for a long time. I have been a follower of a lot of different content outlets and media outlets in digital assets. Bankless has always been one of my favorite. And one of the co-hosts of Bankless David Hoffman publicly sold his ETH and wrote an essay called Why I Sold My ETH. And there wasn't anything specific to David about this,

1:02but it was a bear market. The vibes were down and everybody was just rage quitting. And in general, I don't know, it just felt like a time for a rallying cry and a call to action. So wartime Ethereum was an article that I wrote in response to David's article about Why I Sold My ETH. And I was basically just saying that I think it's too early to call on this. He was saying that Ethereum has reached this vague middle ground where it's going to stay in this area for a while and not really re-rate in price higher or lower. And I think Ethereum is either worth 20 bucks or it's one of the most valuable assets in the world. So I wrote an essay saying, it's too soon to call on this. It's just bear market rage and frustration. It has been in a downtrend against Bitcoin for nine years. And I don't know. It's just somebody had to pound the table and say, I still believe in this. I believe in something. I believe in ETH. And so that's how it started. And then I kept having more, every couple of months, I would have more to say or things would happen in the market that I felt bared additional commentary. And so the most recent one I wrote, wartime Ethereum blitzkrieg was about this massive short squeeze

2:02that we saw in Bitcoin and Ethereum and across the digital asset space that seems to have catalyzed us out of the bear market. It's been almost a month since that happened. And the price action is holding. So the momentum is going in a good direction. It's nice to see this kind of turn around. And it's been nice to see the community really respond to those articles because I think there's a lot of people who are feeling these things and articulating them. I think it resonates with a lot of people. And I was just happy to see that. Man, I put out a tweet today that was like, nobody owns Ethereum. How did we get here? How did we get to a place where the number two crypto asset is not owned by people in the industry themselves? And I've been kind of working a scoop, John, that is whether the Clarity Act passes or not, I don't really have specific intel there. I'm hearing that it's been dead since July is what it is. Right? There's, you know, the polymarkets got it at 15% chance this year. But what I do have scoop on is that there's an innovation exemption for tokenization coming, imminently. Like I think Clarity, my thesis Clarity fails.

3:03This exemption comes immediately after. In my view, there is not a single better asset to be bullish on the tokenization thesis to express that bullishness than Ethereum. What are we missing? What is the market missing, John? I think that everybody has gotten a lot of things wrong about a lot of things. So I want to correct a couple things here. Just I see this a little bit differently, right? Bitcoin's market cap is, rather Ethereum's market cap is like over $300 billion now. It's bigger than Coca-Cola. It's bigger than Bank of America. It's bigger than Chevron. It's the estimates that I've seen is that there's something like 190 million holders of Ethereum globally. It is a global asset. It is a censorship resistant, open, secure, permissionless asset ecosystem network. And you're right, it does stand to benefit the most from some of the largest momentum, let's say, narratives or just like changes that we're seeing to global monetary, financial, and economic systems. Namely, tokenization and agentic finance. I talked about this a lot in this episode, this interview I did with Tom Lee a couple of weeks ago, where I talked about, he talks about Ethereum as the solution to the uncanny value of wealth.

4:04And so what he's talking about is this double narrative that's happening where Vlad Teniv has talked about the tokenization super cycle, all assets are migrating on chain. And in addition to that, we're able to tokenize things that previously we didn't have a way to trade in a fungible way in markets and like make these assets can be commoditized and sold. So you're going to be able to swap Twitter clout for a rinbrent painting and stuff like that and like fractions of these things. So there's a huge amount of things that are unlocked for capital markets by tokenization. This is just the early days of that combined with the rise of agenda commerce, and you're going to need some kind of a way through smart contract technology or leveraging the solutions that blockchain technology unlocks and makes possible to maintain human supervision of this new rising economy of trillions of agenteic actors trading hundreds of trillions of dollars of value. And so that is kind of the thesis that Tom has. And there's always been this like third thing, which is just the rise of stable coins, which is just in my view

5:05another iteration instantiation of the tokenization thesis of tokenizing the dollar and other assets. Revolute is tokenizing the euro also on Ethereum, on the Ethereum blockchain. So all these things are converging on eth. They have been for a long time. And I think that there's just been an impatience, right? Like Ethereum's initial pump, we've been in this like sideways channel ranging here for like five years on Ethereum on the USD chart. And I think the initial pump that got us up here was the best performance from any asset in history. And it was pricing in over over over exuberantly this reality that is now starting to manifest. So now we've had a long time for people to like rage quit capitulate because of the frustration. But now these things are actually starting to plan out. I agree with you. I don't really care if the Fed hikes are holds. I don't care if the security, if the clarity act passes or fails, all these things cannot be stopped. This is all a broader secular trend. And it all benefits. It converges on Ethereum and benefit the asset. 100% and that was always the thing that Tom Lee Haters had in their arsenal was kind of like, well, sure, we're going

6:08to tokenize all these assets. We're going to have all these stable coins. All this is happening. But like, how does it benefit? And the second that we get animal spheres back enthused into this market, that was a very bare market take. It was a very bare market take as hyperlicker was dominating why made a bunch of money bought back to token. That's not the only way. Certainly not the only way for the world's largest decentralized permissionless censorship, resistance, smart contract layer. They don't have to play by the same rules as hyperlicker. Right. And there's a different game here. And so this tokenization thesis, the beautiful thing about it is that it's permeating Wall Street and global finance. And Vlad is going to war for it. And I think that Ethereum is going to be Wall Street's new favorite shit coin. And I love it. And I fucking love it. I don't think that term applies to Ethereum anymore. But I think that it's going to become one of the most popular and most respected assets on Wall Street very quickly. I think you're right. And Tom himself said this at the time that a lot of this is just bare market frustration. I said this to David too.

7:09Just to defend David, like as well, he rotated his capital into a lot of other assets that are performing very strongly, but they're higher risk because they have much less adoption, much less like Lindy effects. Lighter is a great asset. It's only a billion dollar, slightly over a billion dollar market cap. Hyperliquid, you mentioned, has been on a generational run. Right. It's like a 2022, $25 billion market cap. Small. And Ethereum is well over 300 billion in growing. So I think that you have to have that network effect, that Lindy effect, the momentum and the liquidity in order for major institutions to be able to consider building or deploying capital into some of these ecosystems. There's a lot of great projects that are technically very advanced and sophisticated. But if they only have like a billion or $2 billion market cap, we can't migrate $700 trillion of assets into that ecosystem because it doesn't have the track record, the trust, and the credible neutrality and censorship resistance, and the zero downtime that Ethereum can offer those institutions, all these things matter a lot. Because they think in terms of the language of risk,

8:09and counterparty risk is a major thing that you have to consider if you're deploying capital into an ecosystem that is very small and only run by a few people. But yeah, I agree with you. There's a lot of things that are converging on eth here. And I think as far as the price action goes, this narrative will flip once that price action flips. And that may have started today, because $2,500 has been a key resistance level on Ethereum that we've tested, I don't know how many times this point throughout each history over, not just this recent month of price action. I don't know for the last five years. Five years, right. And you know, at last I checked my phone, we're over $2,500, we're holding there. We'll see what happens. I'm not really like gonna make a short-term price prediction here, but I think we can get over $2,500 and hold it. The next target is $3,000 pretty quickly. And I think that brings back animal spirits, it brings back this hot ball of capital. This is why for months I've been saying, if you're an AI pivot to crypto, because although I think that trade will continue to work out, those AI stocks are going to continue to perform well, everybody had been max bearish crypto and digital assets, particularly ETH for a really, really long time. This is why ETH outperformed when that short squeeze happened,

9:12because there were so many people who were short that they got wrecked really bad. And so ETH went up higher even than Bitcoin or anything else. So yeah, this is a lot of things. I'll make a price prediction. This thing's gonna hit $4,000 for the end of the year, I think, I mean, look, it looks fantastic. I think it could double quickly. This tokenization exemption comes through, you know, we get a little bit more Tom Lee getting to his 5% target. I mean, you just spoke to him and he's a couple, I mean, he's a couple more buys away from being there. I think he's got half a billion in cash ready to go and might be him hitting the market today. I don't, you know, who knows? We'll know next week what he did this week. And I mean, it's the most hated asset in crypto and it's very reflexive, because Ethereum's narrative is terrible when it's going down, because there's no value accrual. It has, it's not like Bitcoin, it's not a store of value asset. It doesn't really compete against Salana, but when it's going up, it's like, well, duh, the world needs a permissionless decentralized, a credibly neutral base layer for the future of finance. It's always been Ethereum. What the hell are, what, what, you know,

10:14what were we thinking? And so crypto is very reflexive in that way, right? And I think we're kind of going through that immediate short-term reflexivity across the board currently. I think all markets are reflexive in that way. I think that a lot of these things are working out in Ethereum's favor right now. I don't agree that Ethereum doesn't capture these narratives, though, I think that their strategy is different. So on the Fiji generation thing, they are deliberately allowing themselves to benefit things like Arbitrum, like Robin Huchain, like Coinbase, in order to create the network effects that are necessary to sustain the long-term dominance of Ethereum and the EVM ecosystem. That's a trade-off in the moment. In long-term, that generates an enormous amount of feed demand for Ethereum. All these things are denominated in and settled down in Ethereum. That will pan out. The gas on Ethereum is at all-time highs in terms of how much volume is going through ETH right now. Unuswap is seeing all-time highs and volume. So that thesis is playing out. It just needs time to actually matriculate into burning ETH, which will come. It's a process of development. If you like, let me just add something there.

11:16So Paul, FranBot, the CEO of Morpho, came out on our show and said, look, I'm not doing buybacks. I'm not playing for the 5%, 10%. Kind of like a dividend. I'm playing for the 100X. And so people have been criticizing Ethereum for Robinhood Chain because Robinhood Chain's been making $2 to $3 million of revenue per day from their single sequencer, Arbordstrom Chain. Arbordstrom's getting 10%. And Ethereum's making like 150 bucks a day. That doesn't concern you at all. You're just like, this is a pure bootstrapping Amazon selling books. Now we're selling this. Now we're selling this. Now we're selling this. All of a sudden, Amazon's one of the biggest companies in the world. That's how you see this. I think that it's totally legitimate to be concerned about that. And a lot of people are. I think that they should ask those questions and make noise about that. However, the response from the Ethereum community and the strategy that Ethereum has taken, which Joe Luben talked about this on the show. I did ask him this question of ask, the E-flabs guys, this have asked Ethereum institutionalists. The strategy that they are taking is exactly that Walmart Amazon strategy of like offer the best solution at the lowest cost, get the whole market. And then once you've got all that market share,

12:16it's much easier to maintain and defend it rather than trying to have it compete in other ways. That you can say that's not an effective strategy, but it is the one that they're going with. We'll see if it works or not. There's a risk to all these things. And you can have criticism of them. So I don't think that anybody should not be able to make that point of view. I do too. I asked these questions a lot. Of course. As you should. Right. Exactly. But so on the other side of this, as all of this capital and user adoption comes to Ethereum, that drives the store value thesis on Ethereum. It makes it a more compelling collateral asset, capital asset, and store value asset. And that's, I think, what the market is pricing in as well. So I think one of the things that people struggle with with Ethereum is that there's not a clean, simple, one sentence digital gold thesis on Ethereum. It is a complex, complicated, and evolving asset. And the thesis of it is unlike any we've ever seen, because we've never seen an asset like ETH and a network like Ethereum before. So I think that that's something where you just have to be able to expand your imagination and understand that there are multiple things that drive value

13:17to this network and to this asset. The strategy that they're deploying seems to be working now if something else beats it and finds product market fit. That the market will tell us that too. But right now, Ethereum is winning. The way Joe Shalom of Sharpling glycise says, Ethereum has the license to win. They are currently winning. You can look at the scoreboard on almost any metric you want in terms of stable coins, tokenization of real world assets, volume users, market cap, all of these things. And price action will resolve to the upside as well to follow that. But it's just a really interesting time in digital assets. I'm not by any means an ETH maxi, by the way. Sure. I'd like to mention that because I don't think that you should be loyal to one asset or one idea, one organization. The idea of what we're trying to build in digital assets of this global, decentralized, incredibly neutral, open permissionless, secure, scalable ecosystem for economic, monetary, and financial activity. That is what I'm loyal to. That's what I'm bullish on. That's what I want to invest in and move my capital towards. And right now, Ethereum is just like the best

14:17and the leader in that category. So that's why I focused my concentration of energy and capital on this asset for right now. Yeah. OK. And so when you're thinking about this whole issuance conversation that came out, that kind of came and went, you were, I assume you were just on the side of, that's not going to happen. And there's no need for that to happen. And it's just a silly proposal. Or what was your take on that? Yeah. I never really pounded the table too hard one way or the other on this because I think that the Ethereum community had that dialogue and conversation amongst themselves and made. That decision, Solana, and a lot of other ecosystems have had this dialogue amongst themselves and come to different decisions. But they all are starting from a different place in terms of their issuance. And they're all like, got different competing objectives, different situations in the market. So I'm happy, let's say, with the outcome of that. But I don't think that it's a settled, closed thing. I think that there are legitimate ways to say that different aspects of Ethereum and its issuance could be more optimized.

15:17However, I think it's a little bit like not the right time and tinkering with something that isn't, there's not enough pain from the problem of it, frankly, in order to make it something that the community all desperately needs to solve. And I've told this to people before, but I think that if that problem ever gets painful enough for Ethereum, then I do believe that there will be a solution implemented. But that optimized issuance curve is going to kind of vary based on a lot of circumstances and dynamics around the asset in the market. And so it's a little bit hard to fine tune that right now when we should be focused on other things, such as increasing the demand for Ethereum and the use cases for Ethereum and the adoption of Ethereum, as opposed to tinkering with some minor minutiae of supply dynamics. Not that it's trivial. I mean, there is a discussion to be had there, but to me, it wasn't, I'm happy with the outcome. Let's just say that. Sure, sure, sure. When you think about the kind of eth Bitcoin ratio and just kind of how you anticipate capital flowing into Ethereum from other areas, right?

16:19Whether it be AI trade, Bitcoin, institutional allocation, who do you think is the next marginal buyer of Ethereum from this point forward? We need something. Tom Lee's almost tapped out. Shalom hasn't been buying that much as of late. Some of these debts are kind of like, they're as happy as a man could be having this bounce back. And I think they're going to have a roar and come back. And I think there's an interesting trade to be put on to be looking at Bitminus and Sharp Link as kind of like premium beta plays to Ethereum. If you're, you know, if that's your style, what is the next, who's the next marginal buyer? So I'm going to answer this in a way that you may not expect, but I think this is something that's very important to me. Every episode of Milk Road that I do, I end by saying stay safe, stay educated, and stay bullish. It is very important to me to try to contribute something. This is why I took this job. I left, I was at BlackRock for six years on the Aladdin platform. I worked a little bit with the digital assets team there. I wanted to move my career in the direction of digital assets for a long time. I was writing for some crypto YouTube channels. I got this opportunity to host this podcast, and I took this because I think this is one of the most important

17:21moments in the history of financial and capital markets. And trying to participate in sharing good information with people and just like being a resource for people as they try to navigate this. And it is really important right now. The answer to your question, there's a person named Samira Cohen, who is, I think, like a global executive community level at BlackRock. He's been there for over 20, 30 years, something like that. She's the leader of their ETF business. She said that a struggle that investors and Wall Street had in prior generations was converting savers to investors. Meaning the people who had survived the Great Depression were very reluctant to put their capital back into investments because they didn't trust banks, they didn't trust the financial system. The problem now is converting what people would say are politely self-directed speculators but are really more closer to gamblers converting them into investors. So what I want to try to do is help this community, this community of digital asset native investors, self-directed investors who I have a lot of respect for, to develop respect for themselves and for their capital and to develop a longer term hope and faith-based strategy

18:22of deploying their capital into something that has a long-term value thesis like an Ethereum, like a Bitcoin, as opposed to treating their capital like a lottery ticket or a poker chip and gambling with it just for short-term funding gratification. You know, a lot of these things, I know you're quite bullish on it. I don't want to tell anybody what to do with their capital but a lot of people lose, it's like 90, 95% of people who speculate on these mean coins in their money. All right, I'm not bullish on mean coins. Well, no, I'm not trying to bullish on people's stopping sports gambling and learning what a portfolio allocation looks like even if it starts with mean coins. Sure. Because when you sports bet, there is no portfolio. Right. So there is just a number for the day and that number is usually gone by the next day and you need to restart. At least when they open their meme coin portfolio, the next day they can see green or red. I mean, hey, I'm so much better, but it's a start, okay? I think you're right that it's a way to onboard people but I also don't want that onboarding to experience to just be they lost all their money and they left, right? Like I want to try to convert that,

19:23the general thesis for me though is just like move people, move people with capital away from speculation and gambling and more towards a longer-term mindset and investing mindset and basing that on respect for themselves and for their capital and trust that there is a possibility of a better way to have monetary and financial systems set up in this world than that a theory and digital assets can offer the way to that. So who's the next marginal buyer? The answer to this really, institutions Wall Street. Everybody's coming to this slowly. It seems like they've all gotten here but they're still coming around and they're still trying to compete with Ethereum. I think we're just now getting to the then they fight you phase of Ethereum's adoption and growth. Eventually institutional capital will with size and conviction rotate towards Ethereum. But I think for right now the opportunity is for retail for self-directed investors to position themselves, to be ahead of that and to ride the next five to years of growth of Ethereum of digital assets and of ETH. So I don't know, it's not so much that I'm like an ETH max you're telling everybody to full-port ETH by any means.

20:23But that's the general way I think about this and that's who I would hope the next marginal buyer would be would be just self-directed investors who understand how important they and their capital are and to treat it with the respect of investing with it rather than speculating with it. Yep, I like it. I like it and I agree. When it comes to thinking about ETH, it's just something that you can put money in and just kind of forget about it. That's like the beautiful thing about kind of store value assets, gold, Bitcoin. You know there's quantum things you can still kind of just put money in Bitcoin and be like, it'll be there in five years. I mean, let's Q-Day comes and you gotta like change your wallet and things. I mean, there's a whole kind of conversation there. One thing that I like to ask about though is I saw some news that I didn't really understand which was a theorem is gonna allow users to pay gas fees in USDC instead of ETH on the main chain, I believe. This to me sounds like a way that is going to reduce the money-ness of ETH in favor of user experience. Am I wrong? I agree very much actually with David Hoffman's take on this which is that he said this is a little bit

21:24of like a small-minded thinking because I agree with you that in the short term in a myopic view, it does harm ETH's money-ness but only so far as in so far as ETH stays in the tiny little tide pool of crypto-only native investors. But allowing for people to pay for gas in other things radically expands the addressable market that a theorem can service and the money-ness proposition of ETH as an asset by bringing in that capital, those users, that economic activity is far, far outweighs the tiny benefit we get from forcing everybody to hold $300 of ETH in their wallet so that they can pay gas fees. So to me, I think it's a really much needed and great thing to see, a great change to see, it'll bring a lot more adoption to Ethereum, to a lot of more users to ETH Ethereum. It's good. I think it's a bullish thing and it's gonna totally increase the addressable market for ETH and the value drivers for ETH, yes. Love it.