Ethereum's use case extends beyond simply investing and speculation. Jason Lau, COO of OKCoin, discusses the second largest crypto's utility and evolution.
Cryptocurrencies have had a nice run in 2021. Is this the end of the worldwide war? Can we see more upside action? We're here to discuss valuations, Ethereum and altcoins with Jason Laos. COO of okay. Coin Jason, welcome to the show. Thanks for having me. Jason, we've spoken to a Hong Fang CEO of OK. Coin several times before.
So it's, it's good to have another member of, okay. Coin to talk about, uh, uh, crypto from a different perspective. We're going to start with Bitcoin today, the biggest cryptocurrency and it's valuations, or what you think, uh, of the valuations, as you know, Bitcoin has had a tremendous run. Up to its peak of over $60,000 this year, it's come down a little bit and as we speak on Friday actually has come down 10%.
What do you think of the price movie seen this year? And do you think that this is possibly the beginning of a correction phase as some people might be calling it?
Yeah. For Bitcoin, um, It really depends on your time horizon as an investor. Um, if you zoom out and you take a look at what Bitcoin has done, price-wise over the past 12 months, maybe even a little bit longer, um, it's up, uh, something like 10 times, right? Um, so it has come a long way already. And it's natural for Bitcoin to take a bit of a breather, have a little bit of a price correction here and there.
That said, I don't believe that, um, this is the beginning of a prolonged bear run or a winter, a crypto winter, or anything quite like that. I think the, the dynamics of the market structure around Bitcoin have changed quite significantly since 2017. The last bull run, uh, when Bitcoin went up to 20,000, um, most notably is if you, again, if you zoom out and you take a look and some of the participants that have entered the Bitcoin space, A lot of these participants are some of the biggest financial institutions in the world.
Right? You have the, you have the likes of state street, JP Morgan BN, my Y melon. These are PayPal. These are some of the largest organizations that have taken years to take a look at the tenant, the trend and the adoption of Bitcoin. And I've gotten comfortable with it that over the last six months, they're not, um, Committing company resources and putting themselves out there, uh, if Bitcoin were to be a flash in the pan, uh, PR uh, so to say, so again, zooming out, I think Bitcoin is still undervalued.
Um, you know, I, I know Hong has on our, on your platform, uh, mentioned the a hundred thousand dollar valuation, which I think we're, we're getting closer and closer to. Um, however, I think it's, it's always important to note that. Bitcoin is still an emerging asset class and there is volatility involved. So 10% drops I'm not faced.
I think it's very normal. I remember she first said that to me in November, 2020, around November. Yeah. I think at the time crypto Bitcoin was trading around 26 or $30,000. It had just breached its previous all time high. In 2017, then I asked Hawn to come on the show. And, uh, a lot of people, a lot of my personal friends didn't believe that call actually, it's a, they're like three times in a year.
It's a bit outrageous, but we're getting closer. As you said, now, we did see a major, pretty significant pullback since last week. What do you think was the cause of this pullback? I think the, the immediate cause of this pullback were two things. One is the excitement and interest in crypto ahead of coin basis.
Listing. This is a big moment for crypto, really getting in front of equity, investors, global investors, uh, everywhere, and sort of really validating crypto as a new, um, space, right. A new industry, a new asset class. That's one. And then two ahead of that listing, um, Traders were just over leveraged and a bit, um, In a really, really gung ho about that, that listing excitement.
So over leveraged and the, the Coinbase listing where the, where the key reasons why, and as a result. Yeah, well, we, uh, you're, you're right in the fact that that the time horizon for investors is important. And so long-term, you could still be bullish, but short term, we have seen Bitcoin in, in, in, in shorter term horizons, correct.
By 50%, even 70% on some occasions in the past. What do you say that kind of volatility portfolio is still normal? Is that still possible right now? I would be very skeptical of the possibility of something, a draw down as large as that, uh, today, mostly again, back to sort of the market structure and the participants in the industry, uh, in the, in the market today, some of these large institutions are, you can kind of tell based on the price action, but some of them have actually been outspoken about them, accumulating Bitcoin for that balance sheet corporate balance sheets.
Um, uh, I think Morgan Stanley launched a fund where investors can. Uh, invest directly, sorry into Bitcoin and get back on exposure. You can see these, um, these institutional types of buying behavior as supporting the market underneath. Um, when, when there is a dip, we do see on both on our platform, but also broadly in the market that these players come into to pick up Bitcoin on the cheap basically.
Um, So, so that's my, my, my, I don't think it large draw down like a 50% or 70% is, is. Likely before we move on to the second biggest point of theory. And we're gonna talk about, uh, uh, another old coin that has been popping up on you. Actually, I was, I was going on Google trends, uh, search results, and actually doge coin has been searched much, much, much more than any theory I'm in the last couple of weeks, the search result differential was just huge.
Um, you know what happened with doge coin? I suspect that the, the reasons doge coin was pushed up. And then when it fell back down to, I think it's about 20 cents now, today, which is about a 50% drop from its highs. Last week, I suspect the same drivers were not present for Bitcoin. Right. Those are different reasons for the price movements.
Absolutely. Doge coin, uh, has been very popular recently because it's because of two things. One, um, The it it's obviously fun and people get around, get, get really behind it. And they spread the message of, you know, this coin with it's about a dog. It's it's just fun to talk about. So let's say the virality of doge coin has been very high.
Secondly, The wall street bets community on Reddit, uh, also picked up interest in doge coin, which also drove a lot of interest, um, especially from retail traders into dosha. And this is a coin that institutions are not really touching obviously. And so you can expect to see larger swings that said doge coin over the past seven days is still positive, uh, versus Bitcoin or Ethereum, like you've mentioned.
So there is a, you know, it is, it is still a, uh, at least on a weekly basis, a profitable, profitable trade for some. All right. Uh, let's talk about your theory of now. Um, Ethereum has, is again, very strong, has had a very strong, uh, run in 2021. Tell us about Ethereum's primary case use case, and then we'll can move on to Israel 2.0 and any technological improvements that we may see down the line.
Yeah. So Ethereum, the way I think about it, and it's not a perfect analogy is, you know, if you think about Bitcoin as a store value, as something akin to gold, Um, if they're him, to me is something like oil, right? It's a very important asset, very, um, uh, critical. But what it's used for is to power the network and the Ethereum network is designed to be a decentralized permissionless unstoppable.
Uh, they call it a world computer, which means. You know, anyone can deploy their applications, deploy their data and run programs. On top of, uh, we call the smart contracts and run these on top of the Ethereum blockchain. As long as you have theory to pay for the gas, right? The analogy again, is everything that's built on top of Ethereum helps us theory, uh, get value because more people need the Ethereum to power those applications.
Um, and so when you look at the value of Ethereum, you have to look at the ecosystem. Is there a lot of developers developing cool new things on Ethereum? The answer is probably yes. Um, are there applications that people are using and the answer probably is yes. Also, right. You look at, uh, over the past six to 12 months.
Things like defy, decentralized finance or things like NFTs. Most recently, a lot of these are built on top of Ethereum. The, uh, use case of Ethereum as a network has certainly increased over the past 12 months. And that has driven a lot of the price increase of Ethereum as more and more developers and users need theory to run their empower their smart contracts.
I've been reading some counter-arguments to hold an Ethereum. So. As you said has had a tremendous run, but some people think that first of all, it might be in a bubble because of how far it's run up already compared to some other coins. And second, uh, transaction fees are too high. Gas fees are too high, you know, it's just an expensive coin to invest in.
What, how am I just spreading FID right now? Where do I have, is there any validity to this claim, Jason? Um, so there, there is a little bit of validity to that. I think those are great counter arguments, but, you know, Ethereum has been a victim of its own success. As more people use these decentralized applications, it drives up the demand for ease and makes the running of these applications more expensive.
That's the gas fee component. And so that has caused, um, users to look at alternative smart contract platforms. Uh, things like avalanche things like stacks, other token layer, one, um, platforms that can also run applications like Ethereum, but are offering the much lower fees and much faster settlement. So, um, This is, this is perhaps a good counter argument.
It remains to be seen how this would play out, but the Ethereum camp is not, uh, just resting it and, um, waiting for competitors to, to catch up. Right. There are things like Ethereum, 2.0 that are coming up and, and upgrades to the network that are coming down the road that may decrease sort of the gas fees and increased scalability for the Ethereum network.
Okay. I'm going to come back to the store of value. Um, Argument you made earlier, and I know what you were saying about Bitcoin skeptics and I have personal friends of mine who are skeptics of the store of value. Argument would say that, yes, it's true. There is a cap on the limit of Bitcoin that's that's capped, but there is no cap on the number of all coins you could create.
That could drive capital away from Bitcoin. And as we've seen now, even the governments are protecting well, not exactly creating, you know, all coins, but they're creating central bank back digital currency CBDC as we've seen the Chinese central bank do it. ECB has indicated interest in now recently, uh, the bank of England Brit coin is popping up on, uh, on news headlines.
What do you think of this? Is this going to drive capital away from Bitcoin? For central bank, uh, created digital currencies. Um, I don't think they are a competitor to Bitcoin at all. If you look at what Bitcoin is, scarce permission, less on, uh, uncensorable, it's, it's really quite different than what these central bank issued.
Tokens are. Central bank issues. Tokens are by nature. Controlled by the central bank. I think that that's the most important distinction there is. And really they are, they are sort of digital, uh, maybe upgrades of the existing Fiat, uh, money that we have. So I, I, I find that hard to believe that they would be competing with Bitcoin.
Okay. So let's talk about before we talk about regulation, let's just talk about Ethereum upside potential and what you think the price is. What do you think the price could hit without giving specific targets? Um, how much upside room do we have left? It's already climbed up a lot since, uh, 20, 21. And, uh, you know, like Hong said, Bitcoin could climb up to a hundred thousand dollars, which is, you know, another, another $50,000 in force.
So from here, uh, what about you theory? Are you theory. And one thing I like to look at is the ratio of price between Ethereum and Bitcoin for over the past, almost three years, it's hovered between a range of two to 4%. Um, but recently it's broken out from that range. It's, it's now a 4.5% or so. Um, so what that means is you theory, um, and perhaps its use cases are decoupling a bit from the Bitcoin story.
It's trading almost within its own narrative now. And I think that's important to watch if it continues that trend, uh, I could certainly expect, uh, Ethereum to rise these, these are the Bitcoin even higher. Um, and that's what the charts are signaling at least. So I think Ethereum does have potential here.
Okay. Um, government regulation. There's been, I remember in Bitcoins earlier years, there's been a lot of speculation that it could be used for illicit activities, illegal transactions. And to some extent it still is, but. So as a us dollar, let's be honest right here right now. Um, the, the, the worry here is that it could be shut down by the government.
We've seen some interesting developments from the government. Um, right now, actually in recent weeks, the CIA director, Michael Morel, who has been with the agency for 33 years has actually said that, um, the broad generalizations about the use of Bitcoin in Alyssa finance are overstated. And he says that blockchain analysis is highly effective and crime fighting.
So not only is he saying that no, the government is unlikely to shut this down because, because it's not really being used that much for, you know, illegal finance, but actually it's a pretty good tool to fight illegal finance and cyber cybersecurity risks. How do you, how do you think this will change the investment landscape?
If governments start to adopt this attitude? I think, uh, one, like you said, the, the, the usage of Bitcoin and cryptos for illicit activity is a heavily overblown headline. It, it draws a lot of clicks and, and I think, uh, people that like to dismiss crypto latch onto that as, Hey, it's only for criminals, but the reality, like you said, is I think, I think the, at the chain analysis had a.
A report that came out earlier this year that said 0.3 or 0.4% of Bitcoin transactions were, uh, involved with the illicit finance versus the UN, which States that up to 5% of yet is actually related to money laundering and illicit activities. Um, just, just to put that in perspective, uh, that amounts to a $4 trillion value of money laundering using U S dollars and regular government currencies.
So that's, that's. Multiples of what, uh, is going on in the crypto space. And that's exactly right. Right. The CIA director or ex-director highlights a key point, which is Bitcoin and blockchain transactions are a transparent and on a open blockchain. So anyone can go in and take a look at what's going on.
The, the, the expectation of privacy. Is a little bit different there. And so I think as governments understand that, um, and as organizations understand that this, this angle of Bitcoin attack or, or FID will, will dissipate and it's in line with the trend of. Uh, broader adoption, broader embracing of Bitcoin with the broader adoption of Bitcoin as a major asset class for all investors, institutions, and retailers, and perhaps even the governments.
Now, do you expect more or less regulation? I think regulation is important to set fair and level playing grounds for, for companies. There are companies out there that do try to, uh, engage in fraud. Um, And take users' funds, for example, uh, I think we just read something in Turkey where a large company ran away with a user's crypto.
And so regulation is important to make sure that the operators are, are, are, you know, uh, doing, doing things right. Um, I think the level of regulation is going to be commensurate with the risks and, um, Activity in the crypto space. I don't think there's going to be more or less. I think we will eventually end up in a position where, uh, similar to maybe other fintechs and other technology companies.
Uh, that's where that's where crypto companies will end up. Okay. Finally, let's talk about altcoins. Uh, what can you tell us about the popularity of alt coins in the past year and a half and in particular on, okay. Coin, which coins have been trending in terms of trading volume? Yeah, all coins, uh, has been a hot topic.
I think we recently saw Bitcoin Bitcoin's dominance fall below 50% indicating that the rest of the market has, is that the first time it's ever happened, not the first time, but it's, it's the first in, in quite a few years. Um, okay. So it, it, it is, it is, um, and many argue, it's a flawed metric because like you mentioned, anyone can create all coins and how do you value them and things like that.
But, um, I think it is, it is something to watch out for it because the interest is, um, as Bitcoin and Ethereum has risen so much over the past 12 years, 12 months, Um, others are, people are looking to rotate their capital and look for other opportunities. And so we're looking at, as I mentioned earlier, other layer, one smart contract platforms that have taken a lot of interest, especially as, as has been very congested.
Um, and so on our platform, what we're seeing is snacks. STX has been a very strong performer, uh, doubling, uh, I guess over the past month or so. And price. And one of the reasons why is because it brings smart contracts, Ethereum like, uh, capabilities onto the Bitcoin network. Uh, it's it's enabling the massive amount of capital that's locked into Bitcoin.
Uh, almost a trillion dollars worth to be used for, uh, defy and, and decentralized applications. There's there's a lot of interest in building new. Use cases on stacks to take advantage of that. So we're seeing a lot of interest there and users today can, uh, commit their stacks to earn interest that is paid in Bitcoin up to around 10% a year today.
So that's a very popular use case right now, already. And then secondly, if you look at, um, Protocols like avalanche, uh, algorithm, again, other smart contract platforms that are very popular as ease alternatives. Those are, those are hot. And then lastly, I do want to mention, um, some of the, the, uh, decentralized, um, exchange, um, app, uh, tokens out there to Eunice swap is a, is a prime example.
As, as the leader in that space, this is an application that has a governance token, uh, uh, uh, Know, that's available for trading. And as those applications are picking up in usage, their token has also appreciated in value and interests. Okay, before I let you go, Jason, I just want to ask you about how our viewers can learn more about blockchain.
I've had a few personal friends of mine who have been showing a lot of interest lately because, uh, because of where the price has been going. And so they want to learn more and they're reading various things. How did you educate yourself? Tell us about your career back when we spoke offline, I know you have a pretty traditional finance background, then you.
Working in a startup by yourself before you joined. Okay. Coin between, uh, working in banking. And now, how did you educate yourself about blockchain technology and cryptocurrencies? I think, um, you know, for me personally, I was a little bit fortunate in that when I was working, uh, at a startup here in the Bay area.
In my off time, I did go to some of these Bitcoin meetups and get to meet some of the, uh, um, People in the Bitcoin space early on. And so really, you know, Bitcoin crypto, there's this. Interesting intersection between finance and technology and economics, that really, really peaked my interest. And so the meetups were, were great, but very quickly, you, you, you look into connecting with these people online, right on Twitter and on various other, uh, social media platforms.
And so that's where I did a lot of my learning. If you go to maybe not now, since there's so many resources out there, but back then, you could go on Reddit, go on Bitcoin, talk to all these forums and just ask questions. Um, digest what people are are saying. And, and I, I think that's a very easy, uh, and low sort of low effort way of engaging with the community and learning more.
Um, today though, I think, you know, sites like yourselves, you guys have a great series of interviews and speakers that have provided fantastic insight, but there's just so much resource available on the internet now. Um, Large companies. If you're looking into the sort of wall street research angle, Goldman fidelity, they're all producing research reports in a, in a sort of financial, uh, approach.
Do you like the technology angle? You've you go to some of these technology forums and they're talking about and poking holes at, uh, assumptions that people are making on the technology front, I think. And then if you go with on Twitter, there's always like, you can just ask a question and see what people respond and, and a debate about.
I think it's. It's it's really up to you. Yeah. I know some schools have been, uh, offering blockchain courses. Uh, Gary Gensler with teaching at MIT. I've been watching his Oakland core stuff on YouTube. Actually. I I'm wondering, I'm wondering if all schools, all business schools should have blockchain as a curriculum.
Do you think, do you think that should happen or do we, should we leave it out for the traditional finance world? Absolutely they should. I w w without a doubt, I think this is the, this, this is a generational change in sort of how we structure value, transfer and finance. Uh, as we think about it going forward, uh, much akin to how the internet led to a huge boom and, and change in our lifestyles.
Uh, I think blockchain, crypto Bitcoin will do the same for, uh, billions around the world. I think it's absolutely critical to learn about this and dabble and experiment yourself. Whether it's investing or using some of these applications early on. All right. Well, thank you very much, Jason, for your thoughts and your update on the markets.
I, uh, appreciate it. And I look forward to speaking with you again. Thank you very much. Thank you again, and thank you for watching Kichler news. I'm David Lynn. Don't forget to subscribe. If you're watching this on YouTube. .