Fourth: Bitmine It helps clarify the narrative around Ethereum. Bankless: Complex financial instruments like leveraged ETFs and options are flooding the crypto market. Should we be worried? Arthur Hayes: I launched leveraged ETFs in Asia. They are the worst products ever. You should never buy leveraged ETFs; it's better to buy futures directly. Add option chains to these products and you're setting yourself up for a complete capital loss. Yet the powerful are making a lot of money on this—one major bank earned $160 million in fees last month alone from providing debt facilities. Tom Lee: Cryptocurrencies have had virtually no access to capital markets for the past four years, so there will be a significant amount of pent-up capital by 2025. These instruments reflect people seeking exposure. However, leveraged ETFs aren't a need within the crypto industry; rather, they're an attempt by issuers to capitalize on volatility. Hopefully, this won't cause investors to lose money on their exposure to crypto—they should generally hold for the long term. Regarding the Four-Year Cycle Theory: Bankless: According to the four-year cycle, we should have peaked between November and January, but it doesn't look that crazy right now. Is the four-year cycle dead? Arthur Hayes: I'm writing about it. Historically, there have been three completed four-year cycles: 2009-2013: Bitcoin originated during the financial crisis, with the Fed's quantitative easing and China's massive credit expansion. Bitcoin rose to $1,000. It then collapsed due to the "taper tantrum" and a credit slowdown in China. 2013-2017: China's 2015 credit expansion fueled a rebound in ICOs. US interest rate hikes caused the bubble to burst at the end of 2017. 2017-2021: COVID-19 stimulus and credit growth pushed the market higher. The market peaked in November 2021, when the Fed discussed tightening. The current cycle is different. Although the Fed's reverse repo program provided $2.5 trillion in liquidity (now exhausted), it has begun to cut interest rates. The Trump administration talks about stimulating the economy, printing money, and stimulating the real estate market. China is also reviving its real estate market. Looking at credit conditions in China and the US, there is no clear four-year cycle—we are in an extended cycle. I expect market participants to pull back at the end of the Trump administration (2027-2028), when Democratic rhetoric begins to influence investors. Tom Lee: In addition to cycles, sentiment is also important to consider. Both stocks and cryptocurrencies experienced a boom in 2017 and 2021, but current market sentiment remains low due to the divisive nature of Trump and the stock market downturn from February to April of this year. Cryptocurrency requires bipartisan support, and we do not want a regime change to lead to a complete shift in regulation. Cryptocurrency can also be a stakeholder in Democratic policies, such as universal basic income or social policies implemented through blockchain. 03. Asset Positioning and Ecosystem Relationship Bankless: Arthur, as the author of the "$200 Billion Altcoin" paper, how do you view ETH's position? Should it compete with Bitcoin or other smart contract platforms? Arthur Hayes: I view Bitcoin as currency and ETH as computation. This is my core distinction. Both are extremely important and are the two largest holdings in my portfolio. ETH should be considered a reference asset in the computing space—comparable to Nvidia, Apple, and Amazon. The key question is: When will Ethereum become more valuable than Nvidia or TSMC? Tom Lee: I believe they complement each other; one cannot replace the other. Bitcoin is digital gold, already mature. Ethereum is an architecture that Wall Street is building on top of. It's like the dollar going off the gold standard in 1971—gold became a store of value, but the entire economy was built around the dollar standard. Gold's network is now worth $2 trillion, while the stock market, generated by synthetic dollars, is worth $40 trillion. Both create value, but in different markets. Ethereum can grow without competing with Bitcoin. Bankless: What if blockchain becomes financial infrastructure? For example, JPMorgan Chase is run by 313,000 people, but a blockchain-based operation might only require 20,000. Tom Lee: That's exactly our theory. Ultimately, banks could become tech companies using AI. Bank valuations should also change—from trading at tangible book value to trading at true price-to-earnings multiples. Costco and Walmart went from consumer staples trading at 15-16 times earnings to tech stocks trading at 35-50 times earnings, exceeding even Nvidia's valuation. Bankless: You took a photo with Vitalik. Did your holdings lead you to connect with people in the Ethereum ecosystem? What conversations have you had with the foundation? Will Bitmine participate in protocol design? Tom Lee: The Ethereum Foundation is a great conversation partner, and we share similar views. As a large holder, we have the opportunity to serve as a bridge between traditional finance and the Ethereum Foundation. We've had great conversations with the core developers and Vitalik. We plan to invest 1% of our balance sheet (approximately $13 million) in projects. The best approach would be for Bitmine to take an advisory role, helping to set priorities, like a diplomat or third-party intermediary. We don't want to get involved in protocol design beyond our capabilities. Bankless: Tether has raised funds at a $500 billion valuation, making it the third-largest crypto asset. What are your thoughts? Arthur Hayes: My reaction is that they're going to IPO. Tether is the best bank ever—150 employees and over $10 billion in annual net revenue. I'd rather use Tether to shop or pay in Southeast Asia than JPMorgan Chase. Emerging countries understand this, and forward-thinking banks will survive. Tom Lee: The valuation is reasonable. Tether has always been the central bank of cryptocurrencies. Without Tether, entities like Binance wouldn't exist. The incremental value from $100 billion to $2 trillion is $1.8 trillion, so a $500 billion market cap might actually be cheap. We should be thinking: When will Tether become the world's largest bank? Bankless: Tether's stablecoin market capitalization is $177 billion, while Bitcoin's is $2.5 trillion. Could Tether's supply surpass Bitcoin's? Hayes: Absolutely. If the Trump administration gets its way, it absolutely will. This will come at the expense of eurodollar deposits and US dollar bank accounts abroad, which is exactly what the US government wants. They're issuing as much debt as possible for Tether or other companies to absorb. 04 Innovative Applications and Security Perceptions Bankless: Prediction markets (Polymarket) and platforms like pump.fun represent an emerging trend in financial entertainment. What are your thoughts? Tom Lee: The term "financial entertainment" likely underestimates the importance of prediction markets. The 2024 election demonstrated that this isn't just entertainment; it's the wisdom of the crowd at work. Combined with tokenized stocks and the tokenization of real-world assets, prediction markets can create a kind of alchemy, making the financial system more liquid. Arthur Hayes: Inflation creates a speculator class. For the 99% of the population, wages haven't kept pace with inflation. They gravitate to the stock market, casinos, or crypto, hoping to make a fortune with a small investment. It's sad, but that's the world we live in until the financial system is reformed. Markets like pump.fun and Polymarket reflect what people truly want, often in conflict with government policy. Markets send good signals—reflecting the value people ascribe to money and how global governments respect human dignity. Bankless: People often associate hacks with crypto, but Vitalik recently pointed out that capital losses in DeFi are less than 0.3%. What are your thoughts? Arthur Hayes: The biggest recent hack involved Bybit, a centralized entity. This aligns with Tom's point—centralized entities are subject to these risks. The more we can do on public blockchains, the better. Tom Lee: Crypto losses pale in comparison to traditional financial ledgers (JPMorgan Chase's 6% suspicious transactions) and all the hacks. The Bitcoin and Ethereum blockchains have no history of being breached. Bankless: Arthur, you're the most qualified person to speak to regarding perpetual swaps. Will this neutral financial instrument be accepted by traditional finance? Arthur Hayes: The challenge facing US exchanges is that the clearing system is based on an outdated model from the 1930s, with no exchange performing real-time settlement. If founders want to enter the US market, they should attack the designated clearing organization license (which hasn't been issued in 30 or 40 years). Once they obtain a license, they can change the clearing model and issue 1,000x leverage. 05 Outlook for the Future: We're still two and a half months away from the end of the year. What are your year-end price predictions for Bitcoin and Ethereum?
Arthur Hayes: I'm staying consistent:Bitcoin $250,000, Ethereum $10,000.
Bankless:ETH is going to more than double in two and a half months?
Arthur Hayes:Yes. Tom Lee: By the end of the year, our target is $200,000-250,000 for Bitcoin and $10,000-12,000 for Ethereum, even higher than Arthur's prediction. Bankless: Bitcoin has grown slowly over the past three years. Isn't a 2.5x increase in ETH in two months too fast? Aren't you worried this is the top of the breakout? Tom Lee: Ethereum has been trading sideways for four years and has just broken out of its range. This isn't a breakout climax, but rather a search for new levels of price discovery. There will be a lot of fundamental events next year, so I don't think this is the peak, but it is certainly a large, enjoyable level. Bankless: If you could make one wish for the crypto industry in 2026, what would it be? Tom Lee: For Bitmine, it would be to increase ETH holdings and staking. We will also enter the second and third phases of the company, investing in specific projects that will strengthen Bitmine. For the industry as a whole, I'm excited to see innovations in prediction markets and tokenized stocks. I'm not in favor of tokenizing Bitmine. I'd rather see companies like Nvidia tokenized, allowing them to tokenize their China revenue or Blackwell chip sales individually and use prediction markets to hedge risk. Arthur Hayes: My grand wish list: France exits the eurozone, the ECB gets a bailout, China resumes real estate stimulus, USD/JPY reaches 200, the Bank of Japan capitulates and prints money, and Trump takes over the Fed. Regarding crypto products, I'd like to see the "Big Seven" stocks tokenized for 24/7 trading, putting pressure on traditional US players.
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