🎙"I Try to Tell People About DeFi; It Will Come Here and Completely Flatten You:" Jim Bianco

Jim Bianco has decades of experience as a macro markets researcher. He's been leading his firm Bianco Research since 1990, which has family offices and traditional money managers as clients. He was at UBS and Lehman Brothers before that.  He’s as TradFi as it gets, but recently, he’s been falling down the crypto rabbit hole —hard. 

He says that while bitcoin was interesting as an investment, to him it’s DeFi that really caught his attention. It was after installing MetaMask, and doing some yield farming and NFT investing, that he realized, DeFi is a new financial system, and it will replace the old one. And the reason is simple: it’s just better.

He has carefully brought this up to his clients, but it’s been tough. Those that don’t underestimate open finance, are waiting to retire before they have to catch up. But Bianco thinks DeFi is taking over sooner than they think, and when it does, they’ll be just like taxi drivers in a ride-sharing world. 

Bianco believes the biggest risk is US regulation but he sees it as a risk to the US, not to DeFi. He believes the US’s stifling regulatory environment will force innovation to start elsewhere, it will likely grow in the developing world and then come to the US and as he put it, completely flatten everything else.

The podcast was led by Camila Russo, and edited by Alp Gasimov. Transcript was edited by Owen Fernau and Dan Kahan.

🎙Listen to the interview in this week’s podcast episode here:


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🙌 Together with: 

  • Zerion, a simple interface to access and use decentralized finance

  • Balancer, one of the leading DeFi automated market makers (AMM) for multiple tokens. Dive into their pools at https://balancer.finance/!

  • Kraken, consistently rated the best and most secure cryptocurrency exchange, which can get you from fiat to DeFi

  • Casper, an enterprise-focused blockchain which aims to introduce unprecedented security, speed and scale for businesses


Jim Bianco: Yeah, so we're going to scare everybody away. Oh, my God, you're talking to a boomer from traditional finance, although I do think of myself as an older Gen X, but that's a different conversation. So I've been involved in the traditional financial markets since the stock market crash of ‘87. So I go back almost 33 years now in the markets and I worked on Wall Street in the 1980s and into the 1990s. And then I moved to an institutional bond brokerage firm called Arbor Research & Trading. 

And in 1998, so 23 years it'll be April 1st, I started my own firm Bianco Research. It's an advisory firm where we publish research and offer ideas and advisory in a traditional payment model for traditional financial people, where focus is macro. So that mainly means interest rates, Fed policy, the economy, but it also means the stock market, the currency markets, a little bit of politics, and wherever else I want to go with it.

The beauty about being at a shop with my name on it, is I can go anywhere I want and I can try and bring my customer base, which is a traditional financial customer base along for the ride. And so I've gone in various different directions over the last many years. And the newest one in the last couple of years, has been crypto and DeFi which I've been trying to talk up a little bit more than being a traditional financial boomer guy and basically arguing when is all this stuff going to go to zero and go away? It actually isn't. And that's what I'm trying to get across to a lot of the traditional financial people.

Camila Russo: So interesting. So what made you become convinced that this isn't going to zero or going away?

JB: First of all, I opened my first Coinbase account in 2017, so I've been playing in these markets for about four years. And I was traditionally playing it in Bitcoin and I was struggling to understand the bigger picture of Bitcoin, this is 2017, ‘18. And to put it bluntly, I thought of it as a competitor to a gambling site, you know, just plunk your money down and bet whether or not the little horse is going to go up or go down and that's basically all I saw as Bitcoin. I still think a lot of financial people think that that's what Bitcoin is to this day so they couldn't really see the bigger picture.

Then, DeFi summer came. I had been aware of DeFi before last summer, then DeFi summer came and I started delving into it a little bit. I got my MetaMask wallet, I started connecting to sites. I started doing a little bit of yield farming, started investigating NFTs. And it just occurred to me that this is a brand new financial system, and that this is going to replace the current CeFi financial system. 

In my chair, I have been somewhat critical of this current financial system. I think it's slow, it's cumbersome, it's obtuse. There's way too much permissioning. I have to get permission from everybody to do everything, including the ultimate permissioning is know your customer, which is I have to beg my broker to let me do stuff which I find to be antihuman rights, if you want to go that far, with some of that stuff. And I've always found that the financial system is operated, the current one, it's just a series of toll booths that they just continually take money. I still don't understand why it takes me two days to send money to somebody through some kind of a transfer, because the ACH and the SWIFT systems are so old and antiquated as well too. So I was always of the mind that this system was going to be ripe for some kind of a disruption. And when I saw DeFi, I started to see where that disruption was going to come from. And I started to understand that this is going to be where it goes. 

“I still don't understand why it takes me two days to send money to somebody through some kind of a transfer, because the ACH and the SWIFT systems are so old and antiquated as well too. So I was always of the mind that this system was going to be ripe for some kind of a disruption.

When people ask me a question, well, how do I invest in DeFi? And how do I take advantage of that, if I believe what you're believing? And I've said, this is the problem. There's lots of protocols. There's two major systems, you know, there's the Ethereum network and the Binance Smart Chain network. There might be more. There will be more protocols that come along. And I've said to them, quit thinking like Warren Buffett that this is a horse race track, and they're going to shut down the racetrack. No, you got to pick the right horse and that's going to be tricky.

“...quit thinking like Warren Buffett that this is a horse race track, and they're going to shut down the racetrack. No, you got to pick the right horse and that's going to be tricky.”

But what I do feel comfortable with is the current systems in trouble, because the current system, they don't get it, and they don't want to get it. And they want to be like Paul Singer of Elliott Management, who just says, I'm just biding my time until I can say I told you so, is his attitude about this. So that's kind of where I've been cutting through with a lot of this to try and say, now this is coming, I might be able to tell you whether or not it's going to be Uniswap, or Sushiswap, or PancakeSwap, or some version of it, or another swap that hasn't been created yet, as to which will be the main protocol that will win out above all the other ones, but one of them will. And when it does, the current system is going to look like it's standing in place: you're going to look like a bunch of taxi drivers in a ride sharing world is what you're going to wind up with.

“...the current system is going to look like it's standing in place: you're going to look like a bunch of taxi drivers in a ride sharing world is what you're going to wind up with.”

DeFi As Blockchain’s Killer App

CR: I completely agree. So it's interesting that it was actually DeFi what convinced you of the value of blockchain technology. I mean, not really Bitcoin, but seeing how DeFi is helping build really a new financial system from the ground up.

JB: One of the complaints that people had about blockchain technology, I'm going back to 2017, ‘18 when I first got started, is all this blockchain technology is going to change the world. Okay, where's the application? It's been around for eight years. Any kind of transformative technology doesn't take eight years for people to figure out what to do with it. It becomes almost obvious what you're going to do with it. 

When the internal combustion engine was invented, it didn't take eight years to figure out that we can make an automobile. We knew that right away. Just then, to follow up on my analogy, by 1900, in the United States, there were over 100 automobile companies in the United States because we all knew where we were going to go and then eventually turned out to be the big three about 30 years later. And we were all trying to get there. 

When I saw DeFi, I was like, here's what you can do with this blockchain technology. It's not some IBM commercial where they talk about tracking fresh vegetables, I was like really, they put together DeFi and that's the best you could come up with is to track fresh vegetables? That it's something a little bit bigger than that. And that's why when I saw it, I was like they’re creating a whole new financial system, and the current trading, and everything else is stress testing that system so that it will be ready for primetime when you start to introduce it to the real economy. 

“...when I saw it, I was like they’re creating a whole new financial system, and the current trading, and everything else is stress testing that system so that it will be ready for primetime when you start to introduce it to the real economy.”

CR: So for you, what's missing for it to be ready for primetime? I mean, you've been testing this stuff, is it the UX is still too difficult? Is it scaling? Is it regulation? All of the above. What are the pieces missing for you?

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