[00:00:08] Ray Salmond: Welcome back to another episode of Decentralize with Cointelegraph, a podcast aiming to bring you cutting-edge conversations at the intersection of emerging decentralized technologies and finance. I’m your host, Ray Salmond, and today, we’re going to take a brief bird’s eye view of the crypto and equities markets.
So, a lot has happened since our last episode. In the aftermath of the 2024 US presidential elections, markets are buzzing with speculation about what the future holds. Equities have been on a tear, and Bitcoin reached a few new all-time highs. Yet today, the momentum seems to have paused around the $100,000 mark. With certain aspects of the markets consolidating and others continuing to move higher, there’s clearly a lot to unpack.
To help us break it all down, we’re diving straight into a brief chat with Brian Russ, a seasoned investor with a unique perspective on the US economy and the market structure of the crypto market. Brian walks us through the key themes shaping this moment, including how traders are processing the likelihood of favorable US tax and fiscal policies, the disconnect between rising interest rates and surging equities, and what these trends mean for crypto, gold and other risk assets. With the national debt ballooning and structural deficits projected to grow, Brian explains how these dynamics might impact markets beyond the immediate aftermath of the elections. To start, Brian gives his take on why equities and Bitcoin are behaving so differently and what the bond market might be telling us about the road ahead.
[00:01:43] Ray Salmond: All right. Welcome, Brian. How are you doing today?
[00:01:46] Brian Russ: Doing fantastic. Good to see you again, Ray.
[00:01:48] Ray Salmond: Likewise. A lot has happened since we last spoke.
[00:01:51] Brian Russ: Yeah. So, I think that’s the key factor, is if we are expecting wider deficits, a cyclical period of higher inflation, for the reasons that you mentioned, then bonds are going to look less attractive compared to real assets. And that could be equities, but certainly things like precious metals. Bitcoin, I think, gets into that conversation. And commodities as well. You see some of the price action in commodities, which is partially driven by the story and partially driven by supply dynamics.
But yes, I think the big concern is that under a Trump administration, and especially if Congress flips red as well, that we can expect significantly higher deficits. We’re already running around a 7% federal deficit to GDP in the midst of a pretty strong expansion here. We’re not in a recession. The economy is still relatively strong. The labor market may be weakening, but it’s still pretty strong. And so, that’s unusual. You know, if you look back through history, it’s unusual to the extent that we did have a recession, a crisis, something unexpected that happens, you would expect that deficit to blow out even further. So, I think the market has to price all those different scenarios in. Those are probably the key factors that are driving the backup in the bond market.
[00:02:59] Ray Salmond: I’m perplexed. Commodities like gold and silver have been hitting new all-time highs. I think silver hit a 12-year high. Gold’s been hitting new highs like back to back to back. And this is not a new phenomenon. It’s been happening with gold. For at least six, seven, eight months, it’s been showing strength. And what confuses me is what you mentioned earlier. Contrast this against the narratives of the crypto and stock market, where investors have been kind of like peddling this narrative for the last two or three years that when the Fed pivots, you know, price go up, number go up, helicopter money starts falling. Maybe that’s happened a little bit, but I’m a bit confused on why are risk hedges in commodities continuing to rise when the Fed has already signaled.
[00:03:44] Brian Russ: Yeah, that’s a great question. I think you’ve got to separate out speculative commodities like precious metals and then utility commodities like gold and copper, let’s say, for example. And if we focus in on the precious metals market, I think it’s an anti-dollar trade. And so, what I think confuses people is that we oftentimes think of gold and silver as hedges and risk-off type of instruments, but if you look back through history, you know, that really hasn’t been the case. There were massive sell-offs in the precious metal markets in 2008, as well as in March of 2020, so they can actually be sources of liquidity during those periods of time, assets that are sold in the face of a crisis. And what I’ve noticed over the years is that gold and silver, you know, they have their own set of drivers. They don’t often act like hedges, per se. They’re not really that insurance policy. Traditionally, we’ve seen the US Treasury market and US dollars serve as better hedges to a crisis or a recession.
And what’s interesting to me about the precious metals market is if you go all the way back to the dollar unlinking from gold back in 1971, we’re, I think, now right smack in the middle of the third bull market in precious metals. So, the first one was in the 1970s. The second one was in the 2000s. And now we’re in the in the third one. And I think if you go back through each one of those periods, there were a different set of catalysts and drivers. It wasn’t necessarily a crisis as much as it was a confluence of factors that led to the appreciation of scarce resource, precious metals relative to US dollars.
The 1970s was really principally a story of the dollar unlinking from gold and becoming a freely traded market, as well as the inflationary dynamics, demographics that shaped the decade that was the 1970s. And then, if you look at the 2000s, that was principally a China story. So, around 2000, 2001, China joined the World Trade Organization. They went from being relatively disconnected to the global economy to being deeply connected. And they saw the most rapid growth of any large country in the history of the world during that decade. And so, it caused a massive run-up in the price of commodities, and you saw precious metals kind of follow that story.
So, to me, I look at these decade-long epochs, and it’s like they all have their own catalyst and story. But what’s my interesting observation is that these periods in precious metals, these bull markets, they tend to last a long time. So, historically, they’ve lasted about 10 years. I mentioned the 70s and the 2000. It’s difficult to say where you would mark the start of this precious metals bull market, but I think it’s reasonable to say that March of 2020, you know, or around 2020, is a good time because we had this once-in-100-year viral pandemic crisis followed by the bazooka stimulus. And so, that was a ton of money that was just pushed into the system, right? I think we expanded M2 by something like 50% over the course of 18 to 24 months with all the stimulus, as well as the monetary policy at the Federal Reserve was engaged in. And I think we’re probably about midway through that story. So, that puts us about four or five years into what could be a decade-long bull market in precious metals.
So, I think when you combine the factors around Covid and the stimulus response, the fiscal deficits that we touched on, the presidential election, which we expect to be a catalyst for deeper fiscal deficits, the sort of Lyn Alden nothing stops this train dynamic of deeper and deeper deficits of this becoming a reflexive thing, I think you’ve got really just a sentiment shift around the dollar as a store-of-value asset. And so, there’s more space for competition here. And precious metals are one part of that competition. And, of course, Bitcoin has been another exciting part of that competition as well.
[00:07:31] Ray Salmond: That’s a brilliant answer. There’s the headline right there: gold and silver and 10-year bull market. So, five years left. Don’t miss out. Yeah, if you’re content with like 30% year-over-year return I guess, but that’ll probably dwindle next year and the year after and the year after. But a good headline nonetheless.
[00:07:48] Brian Russ: Yeah, I think, look, if you want more upside to that bet, I think you can look at precious metal miners. They’ve historically given you a leveraged-like bet, almost like a call option-like bet, on the price of precious metals themselves. So, that is definitely another way to play this. You know, you can own things like GDX and GDXJ, which are just ETFs that pick up a broad basket of gold miners. I think SILJ is the silver miner ETF. And look, if you want even more upside, I think a higher beta expression of the same view is you just buy Bitcoin because I think that’s the same narrative that’s driving, I think, gold and Bitcoin. I think gold is actually leading. It did the same thing in 2019, 2020, interestingly enough. But Bitcoin is a higher beta expression of that view. So, while gold may be leading, I think Bitcoin will continue to produce better returns if you want to express that view.
[00:08:39] Ray Salmond: Speaking of Bitcoin, so what do you think: Paul Tudor Jones and Fink and Druck, they’ve been talking their book this week. And Tudor Jones went on the record saying he’s all in on Bitcoin gold commodities, he owns no fixed income, and that he is bearish on America due to debt and inflation issues. So, for an average like non-economics-degree-holding retail investor such as myself and the many other people that are out there, do you think that that’s like a logical thing to say? And should people craft their investment portfolios after what Paul Tudor Jones is doing?
[00:09:15] Brian Russ: Well, look, those guys Druck, PTJ, they’re legendary managers, and their track record speaks for itself. They’ve had incredible careers, and when they speak, the market listens. That’s just the reality of it. I’m always a little bit skeptical when those guys go on CNBC, because there’s this precedent of hedge fund billionaires kind of dropping their bags onto retail. And so, sometimes they’re almost talking about the story of the past a little bit. So, I sometimes get a little bit cautious.
I personally don’t buy much into the inflation story as a secular theme. So, I’ve studied inflation extensively, and to me, it seems clear that the dominant secular or long-term drivers of inflation or disinflationary pressures come from principally technology and secondarily from demographics. And I think both of those are providing disinflationary tailwinds for us. You know, if large fiscal deficits caused inflation, then Japan would have the highest inflation in the world. And they don’t. So, I think we’ll continue to get these cyclical periods of inflation. And I think to the extent that asset prices keep moving higher, that is going to keep creating inflationary pressures. But broadly speaking, it’s not a concern of mine.
That said, I think if you’re a young person, it’s really difficult to hold bonds as part of your portfolio. We talked about the problem with the United States federal government balance sheet, and we can disagree about inflation and what the path forward is and how we get out of some of the challenges that we’re in, but there really isn’t any palatable way out of our debt problem outside of some sort of technological miracle, which maybe we’ll get it, but I don’t think there’s any other palatable way aside from running negative real interest rate policy over a long period of time. So, in the event that we get higher inflation, I still expect interest rates to average below that. And so, in real terms, I think bondholders are going to have a hard time probably for the foreseeable future. This could be five more years. You know, it could be longer. Five years lines up with the kind of bull market expectations we talked about in precious metals.
So, I agree with the view that it’s really hard to be long fixed income here. It’s a hard asset to short. So, yeah, Druck and Paul Tudor Jones can short it because they’re professionals, but be careful if you’re not a professional because the carry will really kill you, especially right now. You’re going to pay 3%, 4% to bet against that bond. And so, you really have to get the timing right. So, for me, I think that’s part of the risk asset story. As people are holding less and less in bonds, they’re looking for alternatives. The 60/40 portfolio has always been 60% equities, 40% bonds. Now folks are looking for alternatives. So, maybe we don’t have the full 40% in the bonds. Maybe gold and silver take up a portion of that. Maybe Bitcoin takes up a portion of that. And as those portfolio reallocations happen, I think that provides tailwinds for things like gold and Bitcoin, silver, even some other assets further out on the curve. And then I think you get headwinds for fixed income. And I think we’re probably in the early to middle stages of seeing that right now. So, I agree with what those guys are doing, but I’m always cautious when they go on CNBC as to kind of what the real intent of their messaging is.
[00:12:31] Ray Salmond: Yeah, the Squawk Box effect. Well said. Do you think the US economy is headed towards stagflation? Because I feel like it’s bifurcated or it’s partitioned. Equities are super strong. MMAs are still getting 4.5% interest. Commodities are up. Big Tech and the Magnificent Seven are really propelling like the indices higher and higher and higher. But then the average person’s like disposable income, amount of monthly income going towards rent or mortgage, all sorts of insurance premiums for cars, housing, all those costs are eating away at people’s wealth, eating away at their savings, increasing, I think, like credit card delinquencies are on the rise, and personal balances, debt balances are also on the rise.
[00:13:19] Brian Russ: So, with respect to stagflation, I’m completely sympathetic with the challenges for the middle class and the lower middle class, if you will, as it relates to that group of people tends to own less assets, be more dependent on hourly wages, living more paycheck to paycheck. And the challenge with inflation is that it’s measured on a year-on-year change. So, we might have gotten, you know, peak 9% CPI. If CPI goes back to 2%, that doesn’t mean that that 9% reversed. It stays. So, nominal prices stay at those elevated levels. And the challenge for that group is that if you look at wage growth compared to inflation growth, it hasn’t kept pace. So, in real terms, people are earning less money relative to the cost of living. And so, they feel worse off. And I think this is probably one of the big political drivers as well. If you feel worse off, you’re more likely to vote for a change in administration. So, I think that there’s a political tie in there as well.
But as it relates to stagflation, you know, I shared my views about technology and demographics being the major disinflationary trends. I think with those drivers, we’re unlikely to see any sustained period of inflation. Like I just mentioned, for example, that during Covid, we expanded the money supply by roughly 50%. We did stimulus handouts, the full bazooka, right? And the worst of it was 9.1% was, I think, the peak of CPI reading in 2022, which, of course, that’s bad relative to 2% target, but it’s not hyperinflation. So, to me, the message is that it’s actually really hard to create inflation. And instead, I think these larger trends of technology and demographics are going to keep inflation at bay.
And the biggest technological trend right now, of course, is with respect to AI. AI, in my opinion, is a massive enhancer of productivity. Any way you look at it, we’re going to be collectively much more productive. So, we can employ now AI bots, robots to do things that humans were doing previously. And the cost of doing that is dramatically less. So, I think that’s kind of the big story. Like prices change at the margin. And I think the big story is actually the continued evolution of technology. And now it’s AI. Who knows what comes next. So, for me, that’s massive improvements in productivity, which is enhancing for the economy. It should be a net positive for asset prices and should be a net negative for inflation. So, I sort of almost have the inverse view where I end up being extremely optimistic. I think the economy will remain strong. I think asset prices will remain strong, and I think inflation will remain at bay, for those factors.
And then, coming on to your second question. So, just to clarify, because you asked about the options on Bitcoin and Ethereum spot ETFs, what could be the impact of those option contracts starting to trade just generally?
[00:16:14] Ray Salmond: Yeah. What’s your take on that? Do you think it opens up the gates for a lot more liquidity to enter the space? And what do structured products look like on Bitcoin for the average person? Those that maintain a 401k if they work for the state or for the government or for, I don’t know, Apple or something like that, because I know that there’s a conversation about alterations to the 60/40 portfolio. People may become more bonds averse, so on and so forth. Does Bitcoin, in this case, fix this?
[00:16:43] Brian Russ: So, I absolutely think that that will be the case where you’ll see wealth management firms, asset management firms start to show to their client base that had they diversified into Bitcoin or a combination of Bitcoin and Ethereum with their 60/40, that it would have enhanced their returns dramatically. And I think as that research starts to come out, those big IRAs are going to push their customers into getting off of zero. Some sort of allocation to blockchain assets, generally.
VanEck was one of the first to kind of fire shots on this. They were out with a research report probably as far back as six months ago, just after the Bitcoin ETF launched. Unsurprisingly, the Bitcoin Spot ETF, and essentially a histogram that showed the traditional 60/40 has given you about a 9% return. But had you allocated to a combination of Bitcoin and Ethereum, and they looked at different allocation levels. The top allocation level was 7%. So, had you done 60% equities, 33% bonds and 7% Bitcoin and ETH, that instead of the 9% return, you would have earned a 17% return. So, that’s pretty compelling, right? And I think as you see more of this research come out, you’ll see more, whether it’s individuals, family offices, institutional investors, to your point, who are sitting on the sidelines, say, look, let’s put half a percent in or let’s put 5% in, and I think that will be a real tailwind.
And then specifically speaking to derivatives as it relates to the spot, Bitcoin and Ether ETF options, I do think this could actually have a really meaningful impact on market structure as well. Look, we’re going to have to wait and see how they trade, but the principal reason I think this is because of the role that market makers play. So, if a market maker is going to sell a call option, and you got to think about what’s the demand going to look like. I mean, the general sentiment around this technology is pretty bullish. Technicals look good. If you look at the call put skews, there’s way more people that want to be long than want to be short. And so, as you have this skewed activity into calls and basically betting on further upside with respect to Bitcoin and Ether, those market makers who are selling those options are going to have to hedge them on the other side. If I sell a call option, if I want to cover that, I have to own the underlying. So, what you’ll get is market makers having to, both selling these options, but also having to accumulate the underlying to maintain a market-neutral book. So, I do think that could be a catalyst for some upside pressure once you see those options. I don’t think they’re trading just yet, but once they start trading, that’s kind of what I’ll be looking for.
When you look at Bitcoin, and we haven’t touched on Bitcoin broadly, aside from this kind of macro theme, the macro factors that are driving risk assets broadly, gold and Bitcoin, more specifically, I’m in wait-and-see mode here. When you look at Bitcoin specifically, I think you’ve got... Look, the technical pattern is kind of coiling underneath the prior all-time highs at $69,000. That is technically very bullish. It’s a very bullish-looking chart. And the sentiment’s pretty good. Fear & Greed, I looked this morning, was at 71. And that’s pretty strong. And I think positioning is pretty long. You mentioned open interest earlier in our conversation. Open interest futures. Open interest is at all-time highs right now.
So, where I’m a little bit hesitant is that everyone kind of has the same view. Everyone’s positioned for upside, thinks we’re going to get upside. And when there’s that kind of consensus, markets tend to not give it to you right away. So, my view is, I think, because of how bullish the market is generally, I think that’s going to limit the downside. So, I think when we have sell-offs, I think they’ll be quickly bought. But in terms of like we snap our fingers, wake up tomorrow and Bitcoin is trading at $100,000, like has kind of been the case with prior cycles, I don’t expect that without a catalyst. So, I really think we actually need a catalyst to have that type of move.
If you go back to the last couple of bull markets, 2017, it was really a non-consensus fringe idea still, Bitcoin and Ethereum ICOs. If you go to 2020, it was a really non-consensus view in September, October, November, December of 2020 to be mega long this asset class. And we got that kind of upside, right? So, people weren’t really positioned for it. You know, the true believers, they were. But generally speaking, the market wasn’t positioned like it is today. So, I think you really need a catalyst to see that kind of upside move. I wouldn’t expect it just to happen purely because demand starts to outstrip supply. That can happen, and we can grind above 70K. But I don’t think we’re going to have a runaway breakout without some kind of catalyst.
Now, we talked about the election. The election could be that catalyst. I’m skeptical. Because it’s a known event. The outcome is being kind of priced into markets right now, so I think if the outcome of the election was going to be the driver, we’d see the breakout happening now versus on November 5th or 6th. But it could be something that follows the election, right? It could be policy that follows the election or it could be something else. So, for me, it’s kind of like eyes wide open on what is that catalyst to move Bitcoin in the broader market higher? I don’t expect that we’re just going to see it break to new all-time highs and then just run away like we’ve seen in the past. I really think we need a new narrative for that to happen.
[00:21:49] Ray Salmond: Yeah, I agree with you. So, at ETHDenver, you presented a really interesting framework for analyzing Ethereum’s current and future valuation. Now, from a price perspective, many would say that ETH has been a laggard or an underperformer in this cycle. But in terms of your methodology, do you think ETH is still on track?
[00:22:10] Brian Russ: Yes, I do. I actually like it more here than I did at ETHDenver, which would have been, you know, February of this year. I tried to look at a confluence of factors that crossover fundamentals, sentiment positioning, liquidity and technicals. And when I look across those factors, I think things are slightly better now than they were back then. You know, the fundamental story to me remains intact. If you look at daily active wallets across the L1s, they’re up something like 800% over the last three to four years. That was some research that 1RT, Dan Tapiero had done. If you look at the recent a16z State of Crypto report, they’ve got L1 monthly active crypto addresses in interfacing with L1 at 220 million, which is an all-time high and kind of increasing at an increasing clip. And if you look at some of the developments as it relates to the Ethereum infrastructure, transaction fees are way down. Obviously, the shift from proof-of-work to proof-of-stake is significant. That happened a few years ago.
So, you know, if you look at the fundamentals, the story just continues to get better. But if you look at the price, like technicals, it’s been relatively weak compared to, let’s say, Bitcoin. So, the ETH-Bitcoin cross or compared to Solana, which is Ethereum’s top competitor, at least in market cap terms. And so, I think sentiment, I’ve noticed, just follows price. So, right now, I think we’re in a negative sentiment period for Ethereum. And the narrative is L2s are parasitic, that there’s some real challenges to the Ethereum roadmap. And I think some difficult and good questions are being asked.
I am, however, despite having presented a traditional valuation model and having spent the vast majority of my career in TradFi, I’m not convinced that fundamentals are really the key driver. Right now, I think we’re still pretty early stage with this technology where it requires some seeing in the dark. There’s a potential monetary premium to some of these assets, where Ethereum can be looked at as a solid piece of collateral that can be used within DeFi or other pockets of the blockchain ecosystem generally. And then I think you could go so far as to say there’s a memetic premium that could be added to a lot of these assets. So, what’s the memetic premium of Vitalik and the Ethereum ecosystem? The community of people. I mean, if you go around to any of these conferences, a lot of them are sold out. There’s just a ton of sponsors, a ton of money, a ton of people, a lot of energy, a lot of developers. All those metrics, by every fundamental metric, things get better, are getting better on the ecosystem. I think the roadmap is going to take time. I think time will tell if the L2 scaling solution is the right solution for Ethereum, and if it’s not, I think the protocol and the foundation are smart enough to know that they’ll pivot it. And I think along the way, they’ll probably relook at L1 and the L1 scaling solutions and what’s feasible there without sacrificing on decentralization, because I think that’s a big part of the reason why everyone’s here.
So, when I look across those factors, price is lower on a relative basis compared to Bitcoin and SOL, fundamentals are better, and sentiment is really poor. So, to me, it’s a counter-consensus view. It’s a bit contrarian to be long ETH here. So, I expect that at a starting point of right now that, when we do get that catalyst, when we do get that rising tide of prices starting to move higher in the blockchain space generally, that Ethereum is going to be one of those gold standard assets that I think will outperform Bitcoin. It’s just that the narrative doesn’t suggest that that’s the case right now. But like I mentioned, I think narrative sentiment, those things just follow price. So, as soon as price starts to take off, when the broader ecosystem and asset prices start to move higher. I expect that the narrative around Ethereum will change, and we’ll be focused on something else. We won’t be talking about infrastructure. We won’t be talking about scaling solutions. We’ll be focused on something else, and that new narrative will just simply flow from higher prices. So, I like it, as a contrarian position, I actually like Ethereum better here than I did back in February, March of this year.
[00:26:05] Ray Salmond: Fantastic. Do you think the Ethereum spot ETF has been a success or a disappointment?
[00:26:11] Brian Russ: I think it’s too soon to tell. In the short term, it’s definitely been a disappointment if you look at flows and if you look at it relative to the success of the Bitcoin spot ETF. However, in the short term, call it six months after launch, it’s just a ton of noise. You had a lot of arbitrage traders, market neutral traders who were stuck in the Grayscale trusts. They were depositing ETH into those trusts to try and collect the premium. There was a lot of short the trust, long the underlying, or long the trust, short the underlying, depending on if it was a premium or discount to NAV. And when those trusts converted, all those stuck arb players, everyone who was stuck in that trust, finally was able to come out.
Now, most of those participants are theoretically market-neutral participants, so they’re not trying to speculate on the price of ETH going up. They’re trying to capture an arbitrage between price differential. And so, when those unlocked and opened up and NAV went to 1 to 1, you saw all those players exit. And I think that’s the only part of the story that we’ve been able to see so far. So, I think it’s one of those... Price will solve a lot of things. If we get that rising tide dynamic and the price of Ethereum breaks out or just starts to move higher, as we should expect. It is still the number two asset, representing about 15% of the market cap of total crypto market cap, including stables. Then I think you’ll see the sentiment and narrative shift, and I think you’ll start to see a different dynamic driving flows.
I do think those who have allocated to the Bitcoin ETFs, whether it’s family offices, some hedge funds, institutional investors, those tend to be more diversified players. I do think the Bitcoin story is easier to digest, right? Digital gold is pretty simple. But that said, they’ll look at the space and say we should be making more bets. We should diversify our bets outside of just Bitcoin. And so, my expectation is that they’ll allocate a little bit to Ethereum. If the selling pressure has dried up, because those arb players are back to focusing on something else other than Ethereum, and they’ve cleared down those positions, then you could get more increasing flows into those ETFs, and it could become a meaningful driver of the Ethereum price. I think that’s probably the story that I’d be looking for over the next six months. So, in short, I think it’s, yeah, it’s just too soon to say whether those spot ETFs have been a success or a failure for Ethereum.
[00:28:32] Ray Salmond: I translate that to hated revenge rally incoming at some point in the future. My smooth brain had viewed ETH as spot ETF launches and companies build structures to capture and amplify the yield of staked Ethereum, in a climate where we all assume interest rates will drop back under 3%. Like actual interest rates on savings, MMAs and so on and so forth. So, that’s yet to occur. But I remain hopeful.
Very last question. And it’s about Ethereum. What is the number one thing people are getting wrong about Ethereum? Crypto investors. What’s the number one mistake they’re making within the framework of your methodology on how you compared Ethereum to Netflix, Apple, Microsoft, Google, other unicorns that took decades to actually, you know, IPO and become a unicorn and get these huge market caps? So, within that framework, what’s the number one thing that people are getting wrong about Ether?
[00:29:31] Brian Russ: I think it’s the value of the community itself. So, if you go back to those five different models that I used to value ETH protocol, one of them was Metcalfe’s Law. It’s a very simple formula for saying what’s the value of the network? And in Metcalfe’s Law, you just simply square the number of nodes. I touched on this a bit earlier, but I think when you look at an early-stage network, fundamentals are less important. So, transaction speed, throughput, the scalability of it, this is less important to me and should be trumped by the vibrancy of the community that’s interacting with the protocol.
So, I think the number one thing that people get wrong is there’s a lot of debates about infrastructure. There’s a lot of debate about scaling, but at the end of the day, the community continues to grow. There’s a really actively engaged community of developers. While the L2s, you could have some debate about, ultimately, are they parasitic or accretive to the network. It’s more and more really highly used protocols that are joining forces, linking arms with the Ethereum network generally. So, this network continues to grow. And so, to me, it’s about what is the ethos at the foundation. And I think the Ethereum ethos has been one that’s been pretty good. I mean, it’s really highly focused on decentralization. We don’t need another database. We don’t need another centralized clearing system like Nasdaq. We really don’t. What we need is, is something that’s entirely different. And so, that’s an ecosystem that values decentralization. It’s an ecosystem that values public goods. I think Vitalik has been really consistent on those things. And so, we can kind of nitpick around, hey, it’s not scaling as well as some of its competitors. And I think that that’s a valid criticism. But to me, the fundamental value of these protocols is the network itself, the community of people that comes together to participate, to build, to interact.
And so, when I look at all metrics for community and network for Ethereum, they’re growing. They’re really strong. They look really healthy, even though the narrative is not quite there. So, again, I expect price to fix narrative and will shift focus from infrastructure and scaling to something else. But it’s really hard to build a centralized blockchain and then build decentralized things on top of it, or convert it to something that’s more decentralized in the future. You make certain sacrifices and compromises to build a decentralized blockchain out of the gate, and that could be sacrifices around cost, throughput, etc. But in the end, it’s playing the long game. And so, to me, it’s that network effect and the value of the community that people should be talking more about. Like, we don’t really know exactly what drives the value of these protocols. You know, I tried to construct a model, but it’s a really imprecise science, as you and I had discussed. So, when I look at it, it’s the switching costs are extremely low. We can switch from this L1 to that L1. So, what keeps people with one protocol versus the other? And to me, it’s that ethos. It’s the values. It’s that kind of fundamental story that I think people aren’t paying quite enough attention to.
[00:32:35] Ray Salmond: All right. So, there you have it, folks. Brian Russ tells us that gold and silver are in a bull market with possibly five years left. Ethereum is undervalued right now, and the hated rally is going to make all the KOL and Crypto Twitter traders either say I told you so, and I’ve like covertly been allocating to ETH this whole time, you idiots. Or they’re going to have to eat humble pie, right? And inflation is a bit of a meme. It’s overstated because technology and other factors are going to keep the United States economy strong. So, there it is. Thank you for coming on, Brian. I really appreciate it. If people want to learn more about you, hear more about what you do, be more exposed to your insights, where can they find you?
[00:33:22] Brian Russ: Yeah, thanks so much, Ray. I really appreciate the opportunity. The best place to find me is on Twitter/X at @russ_brian.
[00:33:32] Ray Salmond: Okay, there you have it. Thanks to all the listeners for tuning in to another episode of Decentralize with Cointelegraph. See you next time.
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