Opto Sessions

The Block’s Larry Cermak on the state of play for blockchain

Larry Cermak, CEO of The Block, a leading information services provider for digital assets, joins Opto Sessions to discuss the current state of the blockchain market, the metrics that The Block uses to measure its health, and the initiatives that he believes will revolutionise the space in the near future.


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Larry Cermak is CEO of The Block, an information services provider for digital assets. Cermak has been researching cryptocurrencies since 2016, when he decided to write his economics thesis on bitcoin. As he explains on the podcast, he explored the topic by trying to find a middle ground between the naysayers, who see cryptocurrencies as worthless, and the “zealots”, who feel they could solve all the world’s problems.

After this, he started working at Diar, one of the first crypto research shops, where he became head of analysis. He became one of the first employees at The Block in 2018, where he was promoted through several positions before becoming CEO in March 2023.

Reading the metrics

Among the key metrics that The Block uses to monitor the crypto industry is the exchange volume of both spot and futures. These, Cermak says, are currently 70–80% lower than at the market’s peak.

Cermak and his team also track interest using a variety of proxies, such as new Twitter followers, new subscribers on Reddit or Youtube channels, page views on Wikipedia, and other social indicators. While meme coins like Pepe have had moments on these metrics, overall retail interest is down.

Cermak also explains how he uses on-chain stablecoin activity to assess levels of trading activity: “They’re generally being used for sending money between exchanges”, making them a good proxy for the activity of market makers.

“When you think of investors who want to get exposure to crypto, the first thing they generally do is deposit a lot of money on Coinbase [COIN] and buy there, but if they’re international, generally, they would then go to stablecoins first.”

Additionally, stablecoin deposits are one of Cermak’s preferred indicators of the amount of money coming into the crypto system.

“When you think of investors who want to get exposure to crypto, the first thing they generally do is deposit a lot of money on Coinbase [COIN] and buy there, but if they’re international, generally, they would then go to stablecoins first.” Upturns in total issued supply tend to indicate that investors are keeping their money in the crypto ecosystem, while falling supply indicates that they are returning to fiat currency.

Wary of volatility

“There are a lot of concerns about regulatory pressures”, Cermak says, as well as a relative lack of interest from retail investors at present.

“Inflation is higher, unemployment is slightly higher, there’s just less disposable income for people to be able to speculate on some of these things.” However, institutional interest is up, especially following the regional banking crisis. He mentions the need for investors to be wary of the highly cyclical and volatile nature of cryptocurrencies.

“The ups and peaks generally go up four or five [times]... and then you crash 80–90%. It’s something the industry is now kind of used to, but it always causes damage, and especially over the last year or so.”

Use cases and speculation

While many hedge funds and other institutions approach blockchain technology mainly from the perspective of hedging or diversification, Cermak’s team at The Block are more interested in the innovative use cases the technology is being put to.

This includes the financial products being built on top of cryptocurrencies, the bulk of which are based on three pillars: Ethereum, trading platforms and leverage.

According to Cermak, the reason these three pillars tend to see the most interest is “because just like in regular finance [cryptocurrency] encourages speculation. Crypto is maybe speculation squared.”

He also mentions non-fungible tokens as a popular instrument for blockchain investors, though demand and interest here is even more cyclical than for cryptocurrencies themselves.

“The cycles are shorter, and it’s much less mature than any of the other sectors. But when they’re hot, they’re taking a lot of The Block space, a lot of demand.”

While social media and data storage could provide use cases for blockchain technology, Cermak notes that adoption for these is so far low, and their potential remains speculative.

“Just like in regular finance [cryptocurrency] encourages speculation. Crypto is maybe speculation squared.”

Tether and bitcoin

Last week, Tether Limited announced that it would invest 15% of its profits into bitcoin. The significance of this, Cermak said, lies in the fact that Tether (the company behind the Tether stablecoin) makes its money by investing deposits into safe assets such as government bonds.

“Given that they have tens of billions of dollars issued, it’s a very profitable business right now”, with high interest rates meaning these assets are returning approximately 5%. Putting some of these profits into bitcoin “creates a constant buy pressure that’s predictable”.

The outlook for crypto

As far as the future is concerned, Cermak himself is most excited about Layer-two (L2) blockchains. These protocols are built on top of traditional Layer-one blockchains, and typically either reduce the load on the blockchain, and thereby improve its scalability and performance, or offer improved security and privacy. Cermak also speaks to the significance of Ethereum’s move to a proof-of-stake (PoS) consensus mechanism, which took place in 2022.

PoS has a number of advantages over the previously-used proof-of-work (PoW) system, including lower barriers to entry for miners, reduced risk of centralisation, reduced risk of certain types of malicious activity, and, above all, better energy efficiency.

“The largest significance of this is that they now spend something like 99.5% less on energy than they did before.” According to Ethereum’s blog, the figure is in fact 99.95% less.

Additionally, these lower energy requirements also mean that less Ethereum needs to be issued in order to incentivise participants in the market.

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