Source: Unchained
Translation: Plain Blockchain
Editor's Note:
In a heavyweight panel discussion hosted by Dragonfly at Token 2049, the clash of views between Arthur Hayes and Tom Lee became the focus of the event.
Tom Lee painted a grand blueprint of an "institutional supercycle" led by Ethereum, while Arthur Hayes countered, not only warning that the DATs market faces brutal consolidation, but also, for the first time, personally explaining the real logic behind his sale of Hyperliquid. As the Perpetual Contract Wars heat up, where do their sights converge?
The following are excerpts from the interview.
01 The Institutional Wave of Ethereum and the "Tom Lee Effect"
Host: Tom, many people call you the "savior of Ethereum." How do you feel about this evaluation?
Tom Lee: Yes, it's a heavy responsibility. I think Ethereum itself is in a great state. The Ethereum Foundation has prioritized the right things this year, and of course, the emergence of stablecoins has truly ignited demand for blockchain. I think Bitmine just happened to be in the right place at the right time.
Host: It feels like you're now the chief marketing officer of Ethereum.
Tom Lee: Okay, I can add that title in.
Host: Arthur, how do you view this DAT (Digital Asset Trust) craze sparked by Tom Lee? How has it driven the development of Ethereum?
Arthur Hayes: I mean, people like to hear this guy talk on CNBC, so whatever. If he wants to bang the drum for Ethereum, then bang it, brother. Let's go. So I like it. We need more Tom Lees. Every [altcoin] needs a Tom Lee.
Host: Tom, what do you think Bitmine did right that other imitators didn't?
Tom Lee: Well, I think Bitmine, first, is very thoughtful in communication. You know, we've always kept the message very simple: Ethereum is in a supercycle. We convey this through our website, presentations, and chairman's address videos. I think Bitmine has a lot of connections with the institutional world. Cathie Wood made a significant public investment in Bitmine early on. It's now one of Arc's top ten holdings. This attracted other institutional investors, and I think this process created a flywheel effect. That's why today we're the 26th most traded stock in the US, and as you pointed out, we're really creating liquidity for DATs along with MicroStrategy.
Host: You recently expanded beyond Ethereum, for example, providing seed funding for Worldcoin's DAT. Can you talk about this part of the strategy?
Tom Lee: Well, I think Bitmine wants to play a role in helping Ethereum move into the next 15 years. This includes helping to identify projects that are critical to Ethereum, will use more Ethereum, and consume Gas. It also includes helping to provide seed funding for other payment rails coming to Ethereum. Of course, we're working closely with the Ethereum Foundation to really identify and prioritize upgrades.
So, part of it is also investing in projects that really stand out. For example, Orbs 8co, which is the parent company of Worldcoin. As a16z pointed out, one of the 11 things AI really cares about is proof of humanity. And Worldcoin is indeed one of the first projects, with nearly 17 million people already verified as human. I think protecting humanity on the blockchain is an important priority.
02 The Future of DATs: Consolidation or Extinction?
Host: The heat around DATs seems to be cooling, and NAV premiums are shrinking. What do you think the future holds for DATs?
Tom Lee: Well, yes. Someone told me today that there are 70 Ethereum DATs, which is a lot. If you look at traditional public markets, investors can support two or three, maybe four. So in this universe, there may be multiple winners, but institutions can't buy 70 DATs. I think those trading below NAV (Net Asset Value) face survival issues. I don't think DATs should trade below NAV. I don't know if they should convert to ETFs, or if they should be liquidated. They can consolidate. But they shouldn't trade below NAV; no ETF trades below NAV, so neither should DATs.
Arthur Hayes: Well, I absolutely agree with the consolidation point. I feel like Solana's DATs have really been sending this message: "We're going to consolidate. There can't be 20 DATs." But what puzzles me is that people are still launching DATs for lower market cap tokens (like those with a market cap of 1 to 3 billion dollars). I don't understand how these things can stay alive. Because the baker can earn 5%, you just don't care.
Tom Lee: Yes. That seems like it could break reflexivity. You know, the reflexivity you want is that the DAT is a permanent holder of the token, but you don't want them to be so big that the power law has a negative effect. That's why Bitmine really doesn't want to hold more than 10% of Ethereum, and the target is 5%. So, if it's a small cap coin with low circulation, I think a DAT might help promote the coin's merits, but you don't want it to be so big that it becomes the bag holder.
03 Challenges and Opportunities in the Ethereum Ecosystem
Host: Tom, how do you respond to the skepticism that "banks and institutions may use Ethereum, but they won't want to pay high Gas fees"?
Tom Lee: As you know, in the world of cryptocurrency, being "stupid" is a good thing. So take it as a compliment.
Host: So, will dedicated stablecoin chains become a new trend and damage Ethereum's value capture?
Arthur Hayes: I guess this might just be a function of mining, right? If they can provide positive mining yields, you'll go do it. If they can't create value afterward, then they'll all come back, just like all the other games you've played on all these tokens over the past ten years. It's a mine, right? It has to accelerate beyond mining, and then we can see if there's real value there.
Tom Lee: Well, I mean, I think stablecoins will be a huge market. Because right now we only have $300 billion. You know, I can easily see a path to $4 trillion. That's what Treasury Secretary Yellen is talking about. This may not even take into account that micropayments will be the real big users of stablecoins, because, you know, Tether has 12 decimal places. I mean, that's how you do micropayments. So, will all this happen on one chain? I don't think you can actually fit all the traffic into Ethereum. So, it's reasonable for other chains to experiment, and I'm happy to see a lot of things succeed.
04 The Perpetual Contract Battlefield: Hyperliquid's "Sword of Damocles"
Host: Arthur, you recently claimed to have sold Hyperliquid because there's a "Sword of Damocles" hanging over it. What exactly do you mean?
Arthur Hayes: Yes, so obviously there are these token unlocks, right? That's no secret. I think starting from November, about $500 million a year, the team is eligible to sell on the market. Now, this is either important or not. When Hyperliquid was dominant, with about 60-70% market share (about a month and a half ago), these massive unlocks didn't matter, because everyone assumed they would earn more in fees, buy back HYPE tokens, and this was what they called a "bullish unlock," just like Solana in 2020/2021. So that was the dominant narrative at the time. I didn't care about the unlocks.
Then, about a month ago on a weekend, I checked DeFiLlama to see the rankings. I clicked on it, Hyperliquid was ranked first, about $4 billion or something. Then Lighter was right behind, about $3.9 billion, Aster about $3.8 billion. This is not good, this is competition.
Now, that's not to say Hyperliquid can't beat them all, because its technology is great, and there's HIP-3 and Builder Code and so on. But I'm not going to sit by and watch the market reprice expectations right under my nose. I'll just sell, sit on the sidelines and wait. It either goes up or down. Hyperliquid either proves it has a moat and can charge real fees to all these competitors, or it can't. And I'll reassess what the perpetual contract landscape looks like, or what new products or services perpetual contract exchanges will launch that customers are willing to pay for and won't be instantly commoditized.
Host: What do you think about this Perp Dex war?
Arthur Hayes: I don't think it will be zero fees forever. Look at Aster, it has fees, and with high trading volume, it earns more than Hyperliquid. But it's clearly unprofitable, because everyone knows they're dumping tokens in the form of points. So, whether you have fees or not, all the leading perpetual contract exchanges are unprofitable.
Tom Lee: Yes, they're super smooth. And, you know, going back to 2010, if you were an investor, you were thinking: should I buy Microsoft, Google, Amazon, or Facebook? The answer is you actually bought all these companies, and the market just kept exploding.
Arthur Hayes: But they didn't offer exactly the same product. Perpetual swaps are the same on every platform.
Tom Lee: It's a commoditized product. You could also say cloud computing is a bit commoditized. But, you know, the market isn't completely efficient, but maybe over time, it will move in that direction. This sounds like capitalism at work, right? Because you have a truly explosive product, people take notes and launch their own versions. But as Arthur said, for the leader, it's important to maintain the lead, and if they can't, then the market really becomes commoditized. I do think this is a market that will grow in scale.
05 The Next Big Thing in Crypto
Host: Arthur, if you were to start an exchange again today, which direction would you choose?
Arthur Hayes: Fixed income, not perpetual contracts. We'd trade crypto cats. But we'd make it fun. When you have 1000x leverage, a lot of things become interesting.
Tom Lee: But I might add, Arthur mentioned the keyword. "Betting"—I think that's exactly what crypto is good at. Its real core is that people can hedge, arbitrage, and bet on different ideas. So I mean, that's the real big market, right? It's the betting markets. The breakout point has always been Polymarket and Kalshi. There will be micro-bets, could be interest rates, fixed income, could be real estate speculation, whatever it is.
Host: Tom, how do you use Polymarket at Fundstrat?
Tom Lee: We use it all the time! For example, predicting whether the US government will shut down. There's also betting on Lisa Cook, and whether Fed Chair Powell will stay on in December. All of these are real-time insights. Polymarket was crucial in how the market understood the last election, it correctly predicted every state in the electoral college, no one else did that. If you consider how Wall Street will use these prediction markets in the future, the betting volume in this election could be 20 times bigger. Goldman Sachs now cites Polymarket data on many things, whether it's Fed actions or government shutdowns. At Fundstrat, we've been using it for a long time, it's really helpful, it's the wisdom of the crowd.
06 The Controversy and Future of Privacy Coins
Host: Monero recently suffered a 51% attack. Is this related to the recent hype around Zcash?
Arthur Hayes: I don't know.
Host: Tom, what do you think about the privacy narrative?
Tom Lee: Well, yes. First, privacy is important. I actually think even government agencies will use Zcash and Monero when they want to make payments. So it does have a real use case. I might say, privacy is something some people care about. A lot of people don't seem to care. So, I don't know if everyone needs privacy. I mean, if you look at a lot of surveys, young people are willing to share more information with tech companies because they trust tech companies more than the government. Well, so I don't think it will just be privacy on your wallet. Of course, in a world of AI and robots, you'll want other forms of protection. I mean, even proof of humanity, right? Just proving you're human is important, especially now that we're constantly being scammed by robocalls.
Host: Arthur, you seemed to be critical of Zcash in the past?
Arthur Hayes: I'm not a critic. I just don't think it really works. I think I attended a dinner a long time ago, maybe six or seven years ago, and there was a lady from the FBI, and we asked her: "What do you think is the best privacy coin?" She said Monero. That's all I needed to hear.
