IMPORTANT: Announcing Blockworks’ Latest Podcast, 0xResearch

Episode Summary

Executive Summary: Blockworks researchers Dan Smith and Sam Martin discussed how crypto trades like a high-beta macro asset, why they prefer ETH and DeFi yield strategies in a bear market, and how Ethereum’s merge and L2 roadmap could support long-term value. They also previewed Zero X Research, launching Nov. 2.

Main Topics: Crypto as a macro-sensitive asset class (Priority: 5/5): The speakers argued crypto has largely tracked broader risk assets this year, with drawdowns tied to inflation, rate moves, and bond yields. They framed macro as a sentiment and liquidity filter for crypto exposure. Bear-market portfolio positioning and yield farming (Priority: 5/5): Dan explained his approach in risk-off conditions: park capital in stablecoins, farm modest yields, then rotate into blue-chip assets like ETH and staking once risk appetite improves. Ethereum post-merge economics (Priority: 5/5): The discussion covered how the merge reduced ETH issuance and changed Ethereum from inflationary toward potentially deflationary, especially as on-chain activity returns and fee burn rises. Stablecoins, DeFi yields, and institutional capital (Priority: 4/5): Sam and Dan compared stablecoin yields to Treasury yields, noting that high bond yields and smart contract/custody risk have pulled institutional capital away from DeFi stable farms. Convex, Curve, and ‘bribe’ revenue mechanics (Priority: 4/5): Dan broke down how Convex aggregates Curve liquidity, uses governance power to direct emissions, and earns revenue from protocol incentives paid to CVX lockholders in multiple tokens. Ethereum scaling via ZK rollups and L2s (Priority: 5/5): Sam highlighted ZK Sync and broader zero-knowledge technology as the long-term scaling path for Ethereum, emphasizing security, UX, and the migration of activity off mainnet onto Layer 2s. Ethereum vs. Cosmos vs. Bitcoin (Priority: 4/5): The hosts contrasted Ethereum’s modular L2 ecosystem with Cosmos’s application-specific chains and argued Bitcoin remains optimized for simplicity/hard money, not application-layer innovation.

Key Arguments: Crypto trades as a liquidity-sensitive risk asset, so macro shocks hit it similarly to tech stocks and other high-beta assets. Bitcoin and ETH have held up better than expected given the severity of 2022’s macro drawdown, with BTC above 19,000 and ETH above 1,300 at the time of recording. In bear markets, the rational move is to seek safe yield in stablecoins, then move into blue-chip assets like ETH and staking when risk improves. Stablecoin yields have fallen enough that U.S. Treasuries are often a better risk-adjusted option for professional allocators. Ethereum’s merge eliminated substantial miner sell pressure and may become strongly deflationary when on-chain activity picks back up. ETH’s long-term bull case rests on its growing ecosystem, L2 adoption, and the coming deflation narrative once supply turns negative. Zero-knowledge rollups are presented as the best long-term scaling technology because they preserve Ethereum security while improving throughput and user experience. Cosmos and Ethereum represent two different modular scaling visions; Ethereum’s base-layer security plus L2s is viewed as more robust than fragmented cross-chain security. Bitcoin is viewed as strongest in simplicity and hardness, but not likely to host rich DeFi-style application ecosystems anytime soon. Crypto always retains narrative-driven opportunities, meaning even in bear markets there are pockets of speculation and relative value to exploit. The new Blockworks podcast, Zero X Research, is designed to make analyst-grade crypto research more accessible in audio form for listeners who want to think like researchers.

Data Points: Bitcoin level: above 19,000 - Used as evidence that BTC held up despite macro stress and crypto drawdowns. Ethereum level: above 1,300 - ETH was described as holding a key floor during the bear market. Bitcoin dominance: above 42% - Referenced as a macro-style metric in crypto to gauge market concentration. Stablecoin share of crypto market cap: over 15% - Used to illustrate the rush to safety in crypto markets. Stablecoin share a year and a half earlier: less than 5% - Showed how much risk-off capital shifted into stablecoins. ETH staking reward: around 6% - Described as a way to earn yield on ETH in the post-merge environment. Stablecoin farm yields: 2% to 5% - Dan described typical bear-market returns from Curve-style stablecoin farming. Stablecoin lending yields: 1% to 1.5% - Sam noted current stablecoin yields are too low relative to Treasury yields for many allocators. Curve/Aave/Compound risk-adjusted comparison: 10-year Treasury yield is higher - Used to argue bonds are preferable to DeFi stablecoin risk for professional money managers. ETH supply change since the merge: 1,000 ETH - Shown as a post-merge supply result on the Ultrasound Money chart. ETH avoided issuance since the merge: about 491,000 ETH - Equivalent to roughly $750 million of sell pressure removed from the system. Value of avoided ETH sell pressure: roughly $750 million - Dan translated the issuance reduction into dollar terms. Ethereum gas fee: 21 gwei - Illustrated low on-chain activity during the bear market. L2 gas spend on Ethereum mainnet: roughly 3% of all gas spent - Sam cited this as an early sign of growing Layer 2 settlement usage. Projected L2 settlement share: 70% to 80% over 5-10 years - Sam forecasted L2s will dominate Ethereum settlement costs over time. Current ETH inflation rate compared with BTC: ETH can become deflationary; BTC around 1.75% annual inflation - Used to contrast Ethereum’s post-merge economics with Bitcoin’s fixed issuance schedule. Convex token yield: 20% to 40% return - Described as consistent real yield for CVX lockholders. Bribe revenue/rewards for Convex: $3 million to $5 million recently; previously $10 million to $20 million - Showed the decline in dollar-denominated protocol incentives from bull-market peaks. Polygon TVL peak: about $10 billion - Used to show how liquidity migrated to Ethereum-compatible chains when fees were high. Ethereum gas fees in May 2021: up to $200 - Illustrated why scaling solutions are needed for mainstream usage. Zero X Research launch date: November 2 - The podcast launch date was announced near the end of the conversation.

Pivotal Quotes: "I think the deflation narrative literally cannot be understated. Once that number goes negative, you're going to see that all over Twitter." — Dan Smith: On why ETH’s post-merge issuance dynamics may become a major bull-market narrative. "I think in my head, it makes the most sense for there to be one secure, censorship-resistant, like very solid and slow-moving base layer that kind of secures everything on top of it." — Sam Martin: Explaining why he prefers Ethereum’s architecture over Cosmos-style fragmented security. "It’s called Zero X Research, and it’s a podcast hosted by analysts, kind of for people who want to think like a crypto analyst." — Sam Martin: Introducing the new Blockworks podcast and its target audience.

Implications: The conversation suggests crypto investors should treat macro as a primary driver, but still focus on protocol fundamentals. ETH, stablecoins, and L2 scaling remain the strongest themes, while high Treasury yields challenge DeFi carry trades.