Avichal Garg and Jesse Eckel on the next 18 months in crypto

Transcript

the market structure has really changed. I think people in in this industry are used to retail flows. And when retail flows is just like it slams in and it like slams out and you're like, "All right, I'm out." Right? And and you sort of like you see the massive swings. That's not the way institutions work. That's not the way sovereign wealth funds work. That's not the way pensions work. That's not the way mutual funds work. What those guys have to do. Bitcoin has finally bounced. The total crypto market cap is fighting to hang on to $3 trillion. Sentiment has improved from apocalypse to garbage fire. And now everyone is wondering, have we bottomed or is this just a bull trap before a year-long bearish winter? Hello and welcome to the Milk Road Show, the daily crypto show that knows that when everyone is scared, it's a great time to

get together and be scared in a group. Today is November 26th and of 2025. And we are joined by Avvicel Gar, co-founder of Electric Capital and chairman of the crypto council. Uh it's great to have him back on the show. He is one of the most plugged in investors in crypto. He sees every major pitch deck. He talks to founders, investors. He's really got a front row seat to what's going on in this industry. We are also joined today by a friend of the show and fan favorite Jesse Eckle, who's been on the show many times. Everyone in our Milkro community loves him, so we're glad to have him back. Today, we're going to be diving into crypto market cycles, DATs, developer reports, what you need to know to prepare for 2026, and a whole lot more. This is going to be a great episode. We're going to have a lot of

alpha in here. So, if that sounds good to you, make sure you like and subscribe. Share this episode with someone who is down bad and needs to be up only. Uh, and as a reminder before we get into things, we are kicking off our Black Friday offer early for the next week. You can get up to 40% off on all access. That's crypto, macro, and now AI pro all-in-one membership here at Milk Road. Check out the link in the show notes to get in on that. Today's episode is brought to you by Bridge. Power your business with instant stable coin payments. No friction, no banks, just global finance made simple. Block trust IRA. Let AI outsmart the market and grow your crypto while you sleep. Reserve DTFs. get exposure to the entire crypto market in a single token. And without further ado, welcome to the show,

Avichel and Jesse. How are you guys? >> Doing good. >> Awesome. Well, I'm glad to have you here. I always that's always an awkward way to introduce two people at once and then both people have to say, I'm doing well. Um, so let let's maybe start with you, Jesse. Uh, crypto feels stuck. Price action is stagnant. There's a lot of chop, a lot of uncertainty, confusion, frustration. What are your thoughts on where we are in the market and and what should investors be be thinking about at this time? >> Well, I I I've been pretty consistent that I think a lot of the issues we've been going through have mostly been plumbing issues. Uh that have to do with being the fact that we're in a late stage tightening cycle. So, uh we've been tightening since 2022. Uh things got really choppy with the TGA rebuild,

the government shutdown, uh and everything around that. Plus, we had the liquidation day, uh the huge liquidation event. And so things got choppy and that's led to some really depressed sentiment and it just all happened to coincide at the exact time when you know everyone's thinking it's time to exit because of the four-year cycle. And so uh with with all those things converging together, yeah, we saw a pretty big move down. Um but it doesn't change the the bigger picture for 2026, which is we have the midterms coming up. Um Trump and Besson are flipping already into what I call midterms mode. Um they have a lot of things lined up for 2026 uh including changes to the the ESLR. We have POW out in May. Uh we we currently are sitting at like 80% odds we're

getting a rate cut in December. And so there's just a lot of stacked odds towards like more liquidity, more money uh flushing through the system. Uh plus, as we'll get into a little bit later in this episode, on the crypto side of things, I I really don't think things have ever been more bullish. Uh there is so [laughter] the the picture in in terms of crypto is just absurd and kind of like bigger than my wildest dreams. And so couple those things together, I think 2026 is going to be a really really good year. And I think a lot of people are jumping on this four-year cycle bandwagon. It's like literally everyone, if you actually look at it, it's like everyone in their mom is like, "Oh my gosh, I perfectly timed the cycle four year cycle." They're like planning on selling the next pump up. they're

like, "Wow, we're just going to follow the the old road map from, you know, past cycles." And, uh, it never works out like that. So, um, yeah, I'm really bullish going into 2026. >> A vichel, what are you thinking? >> Um, I think a couple things. One, I generally agree with everything Jesse just said. A couple things I would add. Um, you know, we're not uh kind of kind of by the nature of our business model, we're we're long hold on stuff. You know, we we tend to be early investors into companies and and protocols and then we're we're on that journey for 7 to 10 years. Um, and so, uh, you know, we're not traders and do a bunch of Bitcoin trading or anything, but I actually still think of Bitcoin and and ETH and and some of these, you know, top level assets as very long-term venture

holds. Like, when you start running the numbers on these things, like, I don't know what happens in 26. So, I don't know what happens in 27, but you look at the macro backdrop and you look at the technical backdrop here and and it just seems to me that it might go up, it might go down, but 10 years from now, it's probably worth a lot more. Um, and this is the sort of the digital gold narrative. And I think once you start putting numbers against it, it becomes real. I remember back in um 161 17, we used to we used to talk to people and say, "Hey, one day Bitcoin is going to a million." And you could reason through that. You would you would say hey you know if it's one to one with gold each bitcoin is worth 400,000 and then you you know figure it might be a little bit

bigger than gold and 20% of the bitcoin have been you know lo the keys have been lost in Satoshi's coins and so on and so on and you could reason your way to like 750 to a million today if you do that same math with the market cap of gold each bitcoin's already worth more than a million right so uh like just because gold market cap has gone up so much right and um and so I think over the long term this is probably one of the easiest places to put money in my opinion Um it's not financial advice obviously you know but it's like I think there the long term is much the takeway is the long term is a lot easier than the short term in my opinion and the backdrop reason which is um again sort of like a zoomed out version of what

Jesse just said is if you think about the situation that most countries are in right now um the way the demographics are set up in almost every country say maybe India and Mexico you're going to have more older people than younger people and what you have already is fiscal dominance you have debt sort coming on and and that becomes a major driver of kind of where money flow has come from is sort of the need to pay for for these social services. And so you kind of have four paths going forward, right? Option one to try to figure out how to not just be under 200% debt and like sort of be stagnant for 20 years.

Option one would be you somehow have to cut these kinds of entitlements in this in this sort of social spending which is really hard because like you got to pick winners and losers and no politician wants to do that. Nobody nobody in democracy wants to do that. Option two is you try to raise taxes and tax raising taxes is actually extremely unpopular in most western countries. Um and so politically also not feasible really to get done. Option three is you debase your currency which is politically feasible and so that's what actually everybody's going to do. That's what they have to do u because the first two options are not viable. And option four is you grow your way out. um which is hopefully you get productivity growth which allows you to like support the debt load and and sort of a rising tax base even with fewer younger workers and

uh and as a result maybe AI and robotics and crypto like sort of let's grow our way out. So if you just look at that long-term backdrop over the next 10 to 20 years across like all of the western world and and you know China, it's sort of seems to me like there's just there has to be currency debasement and that's that's kind of the only way forward. And so in that kind of a backdrop, I don't know how you can't stay bullish about crypto. >> I appreciate that longer view. Yeah. Right. There there's a longer term view there. I think a lot of investors are really concerned about this month and this quarter and I want to kind of get your guys' thoughts on this. It feels like right now there are two major camps and you guys may differ. So if you you

have a different view of this, let me know. But there there seems to be two camps. One is saying that the four-year cycle is playing out as it always has in the past and we are about to enter a year-long bare market. The other is saying that they believe in this sort of lengthening cycle idea that we're going to have bullish activity into 2026. Um and it seems like there's there's evidence to support both thesises right now, but the market hasn't really made up its mind yet. What is your thoughts on the these two different views and which camp do you guys fall in? Jesse, I'd like to start with you on this one. What are your thoughts on that? I think you're pretty clearly in we're going to have bullish activity in 2026, but like yeah, tell me more about what you think about these two camps here.

>> Well, the four-ear cycle in the past lined up perfectly with like big pulses in global liquidity. And so, and it's not um everyone I always point out everyone uses the normal global liquidity chart where it just goes left to right. What I'm talking about is year-over-year momentum in global liquidity. And if you actually just overlay that on the cycles, it's absurd. you can like see the crypto cycles on the on there even though it's just tracking global liquidity and so uh really I I think those big riskon environments are just a a byproduct of that and and that big um big flushes in liquidity and right now as I pointed out since 2022 we've been in a tightening phase and that the longer you tighten the more cracks appear in the system and that's what you're seeing right now with all these things it's like oh this

credit thing you know oh my gosh we're worried about the carry trade unwind and it's like every every other week there's some crisis somewhere and that that is those cracks in the system. Things have been too tight for too long and and it's forcing policy to go the other direction. And so um typically a crypto cycle ends at the height of an easing cycle. It's when easing is credit conditions are really loose. It's when there's a lot of froth. It's when everyone's bullish. Every other cycle has ended with everyone like mega bullish that you know buy the dip, buy the dip. This is the only cycle where every single time that we go up, everyone's bearish. And it's it's just weird. It's not normal. A lot of the structural drivers of what's pushed up the market has been more market

structure. It's been these ETF flows and the narrative around that. Uh and as I pointed out with the stock market, it's been a lot of AI. A AI buildout's been what's pushing everything higher. And so, if you look at the wider economy, like it's it's in the it's in the dumps. It's not looking very good. And the Fed's just kind of ignoring that. They're just saying, "Hey, that, you know, I they're cherrypicking the data." And so with this with such a long tightening cycle, you you're forced policy makers are forced to ease. Um, and that's where we're headed. And and we're heading that and I think it's accelerated in 2026 by the fact that we have midterms. And the only way the Republicans win is by making everyone feel rich. If everyone feels poor going into midterms, the Democrats will sweep. Like utterly

sweep. And so Trump has one move, only one move, and that's to make everyone feel rich. And that's why he's pushing so hard for the Fed to cut. That's why he's pushing hard for these stimulus checks [laughter] next uh summer. But also, you have things like, you know, some people are talking about balance sheet expansion from the Fed and and and maybe that happens. You know, maybe the Fed's really loose with that. Um but the flip side of that is uh Scott Besson's been talking about since early 2025, um loosening the regulations around private credit. And so um uh post 2008 we we we clamped down to the banks pretty hard because you know everything that happened in 2008. And so banks have not been lending like they were before 2008.

Um but lending is a form of money creation. It's a it's a private uh liquidity, right? So the Fed's been the one QE and all the stuff that's pushing liquidity into the market. Well, Scott Bessie wants to say take it back and say, "Hey, we want the private markets creating liquidity, not the Fed." And so that's where you have these ESLR changes and things like that. and and so any which way you cut it, I think 2026 you're going to see a lot more liquidity flushing into the system, whether it's private markets or balance sheet expansion. Um because they they they have to that that that is their only option. Um and so yeah, I'm I'm very bullish going into 2026 and possibly even post that.

>> That sounds like we're we're all going to be in that camp. Uh Vichel, you tweeted that bull markets end on good news. You can respond. It sounds like you had a thought there, but I'd like to hear your you elaborate on that uh that tweet. Bull markets end on good news. What do you mean by that? What what what is what is the the thesis there? >> Oh, that was that I'm trying I was trying to bait people. That was the day that Nvidia announced uh really good earnings and the stock went down 3%. I was like, "Oh, this is a bad sign." >> Um >> uh so that's what it was intended to sort of get at more than crypto. Uh but also kind of on the flip side, it was, you know, uh we haven't had kind of amazing amazing news on on the on the

crypto side. So, I'm kind of looking at as like, you know, you're you're climbing this wall of to to Jesse's point, everybody's just down all the time and every and it's like generally actually good news and you're like, "Okay, this is kind of weird." And so, I'm actually looking for the inverse to happen uh sort of, you know, just as a sentiment indicator, which is once everybody's like, "Hey, this is a new paradigm. This is going to be going up forever." Like, you know, it's game over. The institutions are here, yada yada. Like, you need that that sort of thing to happen before you really are like, "Okay, this is this is the real the real top in my opinion." Um, two things I would add to what Jesse was saying. I think on the on the top down Fed side, um, everything he said is

right. I agree with and and I think um, the the a little bit of alpha is if you just go to poly market and you're like who who does everybody think is going to be the new Fed chair. It's like Hasset, Bessant, and Worsh I think. Um, and uh, you can look at their public statements and it's very clear what they would do if they were Fed chair and what they would push for. Now there's like a board governor thing. you got to go to a bunch of votes and so on and so on. But um but I think I mean they're very clear on which direction that might end. I think a strong Fed chair coming in. I think there's an argument um that you know in conversations I've had with with um actually some some of those folks um that I know um it it to me feels like um

it to me feels like the Fed has been split in a really weird way publicly which is like atypical like you don't you don't see them marching to the same narrative right now which suggests to me that Pal has kind of like lost control of the situation. It's like a lame duck situation. And so whoever the new chair is that comes in kind of has to clean that up. And I think that's actually going to inspire markets because it's kind of like people markets don't like mom and dad fighting. And right now it kind of feels like the Fed is there's like a bunch of infighting and then they're kind of like fighting with the president a little bit and they kind of don't want to cut just because the president is telling them to cut and and they're like ah we're supposed to be

independent so we're not going to do it just because you said to do it. It's just like it's people markets don't like that. And so I think that not only will sort of the policy change, but I think like the temperature will change with the new person because the relationship with the president will get reset. Um and I think the relationship inside the the the Fed will get reset a little bit. And I think that's actually going to be really confidence inspiring for for for markets. That's the top down. I think the the other thing to think about um from more of like a a market structure perspective is the market structure has really changed. I think people in in this industry are used to retail flows.

And when retail flows, it just like it slams in and it like slams out and you're like, "All right, I'm out." Right? And and you sort of like you see this massive swing. That's not the way institutions work. That's not the way sovereign wealth funds work. That's not the way pensions work. That's not the way mutual funds work. What those guys have to do is is have an allocation target, get it through an investment committee. That takes six to 12 months, right? So we're great, we're like 18 months after the ETF, but you know, it's going to take like a year to two years for a bunch of people say, "Oh, we got to do this." And then the question is what do you do? Oh, I have like a 50 bit target. So now I'm going to leg into that. Um, and then if the price changes,

my exposure changed. I got to add more, right? And so I think the there's an argument here that the market structure itself has changed in terms of how the money will flow in and and who it's coming from. And that bid is a really different bid. They're not going to slam, you know, all you know, their entire stack in because they see it's going up and it might go up another 2x. Um, they're going to DCA in and come in slowly. One analogy here is if you go back to the gold markets when like GLD was launched 20 25 years ago. Um I'd have to go back and look at the numbers, but it's some crazy stat. Uh the Bitwise guys told me this once. It was it's like the first 12 years of the GLD uh ETF every single year had more inflows than

the prior year. Um and and so there's just sort of this like structural rotation needs to happen when institutions come in and the way that they come in is really different than what people are used to. So, I think there's an argument that that the inflow really changes the four-year cycle because the part market participants fundamentally underneath it all have changed. Now, >> stable coins are the biggest use case in crypto right now. But, let's be real, using them on chain is still way too complex. That's exactly the problem Bridge is solving. Recently acquired by Stripe. Yep, that's Stripe. Bridge helps businesses send, store, accept, and launch stable coins instantly. Explore the future of global financial infrastructure at milkroad.com/bridge.

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>> Yeah, and now that there are different market participants, there's going to be different market behavior. Uh guys, really helpful thoughts on all of these things. I'd like to move on to the next crisis. Um there have been reports that MSEI might change some of their rules to say that companies that are holding more than 50% of their assets in one asset are funds, not companies. um and that they might remove some of these digital asset treasury companies from their indices. Um and you know, Avich, I'd like to start with you. Um what does our audience need to know about this? How might this impact digital asset treasury companies? Could this lead to a bunch of force selling or is this sort of a nothing burger? What are your thoughts on this situation?

>> Um I think mostly a nothing burger. Probably the only one that it might impact is Micro Strategy just because they're so large that they're actually included in a bunch of these indices. Um, and so to me it feels like maybe MCI is uh getting ahead of potentially other guys getting so big that they they have like a forced inclusion problem and so they're changing their policies in advance of that. Practically speaking, I think um very few other DATs are going to be included in very few meaningful indices and so I I think it probably is a nothing burger from that perspective. Um, >> I was going to ask, do you think that this is like a I mean, like there's a bunch of tinfoil hat stuff going on about this, saying this is like a coordinated attack by these institutions against Micro Strategy and that, you

know, uh, J uh, JP Morgan has announced that they're going to be launching uh, Bitcoin backed bonds, which kind of competes with some of the preferred offerings from from Strategy. Like, do you think there's anything to that or is that just like kind of like, you know, conspiracy theory nonsense? Like, what do you think of that that idea? No, I I I actually uh I mean I think it's hard to be in this industry and not be a little bit conspiratorial like [laughter] you know it's like every every time like >> well I mean like the whole the whole thing exists because like some anonymous guy wrote a white paper on the internet right and like for all we know that was the NSA or you know like who knows right and so it's kind of hard to and and if anybody knows the history of

cryptography right like you go back to um I don't know if you guys know this you know that you know the um what was the company called it was a Swiss company but I think it was literally called C crypto AG. Do you guys know the story? So like after World War II, like the world's cryptographers, you know, the Enigma machine happened and sort of you got like firstg um encryption. Um and so after World War II, all the governments of the world were like, "Hey, this is awesome. We can have encrypted communication." So now we could like have our generals on the front lines and talk to them or we could have like our spies overseas and and like communicate with them or we could like communicate with our embassies.

This is awesome. So, there's this company in um in Switzerland called uh I think it was called Crypto AG. Yeah. You know, it's like AG being like inc or whatever. And so, we'll just call them that for now. And they were like the world experts at at making cryptography and like encrypted communications devices basically. Um and then the CIA secretly went and bought them and put in a back door. And so then they were just like listening to every like all the governments of the world's communications. [laughter] Um so like this whole space is like you know you can't be non-conspiratorial and ended up in this space. Like there's just so much history with this stuff. Um, so I don't know. I kind of I kind of look at it and I'm like, you know what?

Like I could totally see he's, you know, it's like the person who's deciding the policies at any index place went to college with the other person or is like roommates in Manhattan with like the guy who's going to do the, you know, the bond offering from JP Morgan and it's all kind of incestuous and they're like, you know, everybody's sort of that's how that whole world works, which is why why I think DeFi is so interesting, right? like transparent and composable and like if I have liquidity I can come in I can see what's going to happen I can see where the fees are going to and that that's like kind of the whole promise of the whole thing exactly for this reason right there's like two buddies that like you know we're best men at each other's weddings and he's like hey I'm going to

make a bunch of money if I can do this like micro strategy thing can you like hook me up make sure like we cut off the demand over there or like don't take their business next time like take my business you know that's that's kind of how that world works which is what is is like frustrating to so many people about it because it's so incestuous and blocks people out so I don't know I'm kind of in the camp of yeah probably. >> Yeah, there's there's something to that. Uh Jesse, I'd like to get your thoughts on this uh from a bit of a different angle. Digital asset treasury companies have been very bullish in general for the space. There's there's been a lot of attention on that and and capital going into those products um or those companies. Um but there has been some

concern about these digital asset treasury companies having to sell in in certain market environments. A few of them have made moves and and done that to defend their share prices. Is that something you're concerned about? Is that a like an existential threat to the digital asset market or is this kind of another nothing burger that's overblown? What are your thoughts on some of this? >> I I think whether it's the indices or them having to sell or whatever like DATs are one investment vehicle and they're really going to be a small fish in the grand scheme of things when it comes to for one you're just talking about the institutions and that's a really valid point that most of these ETF flows are not institutions they are boomers. they are boomers buying via their uh you know uh investment advisor.

Okay, that's like $86 trillion worth of wealth that crypto is now tapping into uh that they're they're just dipping their toe in, but that exposure is going to keep going up uh till some point it's not going to you know it's not going to go all 86 trillion, but you get the idea like that's a huge on-ramp of capital. And so um and like you mentioned uh earlier or or like we talked about earlier, they don't buy um they don't know about the four-year cycles. They're not thinking about anything like that. They don't know about like they're not thinking about DATs or anything like that. Their investment advisor is just like, "Hey, do you want to have some Bitcoin exposure?" And they're like, "Yeah, you know, we'll do 3% or 5% or whatever." And so you have those ETF flows which are slated to grow year over

year over year. And if you have seen that chart um that he was talking about, it's absurd. It's like the the the inflows go like parabolic. It's like a Bitcoin chart but for ETF gold inflows. And so and that is what's typical. So you can expect year-over-year those ETF lows to go up. And I think if you were to cut off everything else, right, um liquidity, you know, um bullishness about the the the Fed, you know, uh changes the ESLR, all that kind of stuff, you could be bullish on just the single fact that these ETF flows are going to grow year over year over year over year. Um but on top of that, institutions are really slow. They're really, really slow. Absurdly slow years. Okay. Uh but that that is going to keep um ramping up and we just saw that with like you talked about with JP

Morgan uh where they're doing you know all this I don't know the Bitcoin bonds or or whatever that's just another new product but you're going to see so many of these products so many of these new on-ramps um so many new like solutions here and and uh banks offering this or you know institutional clients offering that and so all of that I think is just this mega mega whale and then you have like this minnow of like the DATs which like maybe they survive maybe they don't but like there there's so many other vehicles that I [laughter] I I really don't think it matters. >> Uh Vichel, I I wanted to bring you in on this too. Electric Capital partnered with Ethzilla, which is a digital asset treasury company, to help manage and deploy their ETH. Um there was a lot of attention on ETHZilla when Peter Teal

took a a significant stake in the company. Um and so it's clear that these digital asset treasury companies are attracting a lot of attention from investors, not just boomers, uh in their retirement accounts. Um so tell me more about this story on ETHZilla. what differentiates this from other ETH DATs and or what's the the unique offering here that that got a big investor like Peter Teal interested in this and yeah tell me more about that relationship with Electric Capital there. >> Yeah, totally. So we um a couple couple things there. So we're also uh we're investors in Etsillo, we're investors in Tom Le's uh BMR. We're uh we're investors in um ESP with Joe Luben. Um so we've done a few of these. Um uh we did some on the Salana side. we helped

um some of the other ones get off the ground. Um and kind of the way we thought about it at a high level was was kind of similar what Jesse is saying. It's just like this is another piece of infrastructure and plumbing for another part of the market. And the ability to have those capital inflows come into into this space is strategically important and valuable. And so if we can facilitate that that's that's good for the space. Um it's just another part of the market that can access this exposure in some direct or indirect way. So, for example, you know, if we can get um Bitcoin and ETH and soul and a bunch of these higher quality assets um to be considered valuable collateral and then the debt markets are willing to lend against them, you've now unlocked an entirely new market. Uh not just for for

for like the public markets with a DAT, but like now all of a sudden you can actually go to like a Goldman or JP or or your local bank and say, "Hey, by the way, I have I have some some assets. Like, will you lend against this?" Right? And that's just like doesn't exist right now. And actually, that's a valuable thing. So that's at a high level the way we thought about it is like look this is a structurally important thing to try to figure out how to get different parts of the financial system to flow in here. Then the question is okay well what's going to differentiate these things. Um and I think they're going to be basically three strategies that people try to take. Strategy one I would call like the Tom Lee strategy or the the Michael Sailor strategy which is you you're a

zealot. You're going to say this thing is the only thing that matters. Um, and you're going to make so much noise in the media that you're you're going to get this sort of retail bid. And if you get the retail bid flywheel going, every now and then for a short period of time, maybe it's a month, maybe it's 3 months, maybe it's 6 months, you're going to trade above your your the net asset value of of your assets on on your balance sheet. And when you do that, you can print more shares. So you can print shares for a$120 or $150 um for the assets that you have. And so in in a creative way, you can go buy more assets on the balance sheet. And there's a sort of flywheel there. That's sort of strategy one. Strategy two, I would sort of put into the um the uh like uh esbet

kind of camp and I think some of the salon ones are doing this too, which is you're going to have some collection of really productive assets that are thematically connected and you can use that underlying asset productively in that ecosystem. And so I think um the Joe's over at ESBET have done a good job of of sort of tying in line um you know there's there's uh because Joe Luben has consensus you know you can imagine like MetaMask tie-ins and consensus tie-ins and um and so they're doing a good job there and and so sort of like creating a flywheel with like hey we have this almost like permanent capital vehicle with um with ETH and we can sort of create a flywheel there and so I think you'll see that model is like option two which is we're going to tie in a bunch

of operating stuff here um and and the ETH is a useful piece of that that may also happen through through acquisition. You can imagine that like people start rolling together companies like um security companies, audit companies, um you know, staking businesses. There all these businesses that are it's really hard to make them publicly traded companies, but like a in aggregate together, es especially if you have like a permanent capital base, it could be really effective. Um and then three, I think you're going to see people that say, "Hey, this is um a set of assets on top of which you can generate very significant yield in addition to the operating business and because of the fun a function of the size, you can have really outsized yield performance." And so this is the approach that Esola is taking. Um and so we're just the asset

managers on that. So I'm not on the board or you know in the operating company at all, but um you know there's a lot of stuff you can do if you know what you're doing on chain um to be able to generate outsized yield. And so I think the the the um numbers that were announced at the last earnings call um were I think uh I have to go back and look but I think it was like 7% annualized yield. And so when you start comparing that to sort of ETH exposure in an ETF you look at it and you say oh this is this is better because we're not constrained the way an ETF is constrained because the rules around ETFs are very very tight right it's like yeah you can stake but there a bunch of rules about what you can and can't do.

Um, and we don't have those, right? So, we can use that ETH productively. And so, if there are parts of the market that are strategically important, like we we um we we set up a a strategic tie in like Etherfy and Puffer on the LST side. Um, there's some other interesting ones in the works. And so, we can start to move that E ether around on chain to help facilitate parts of the ecosystem and really supporting them. So, I think that'll be the third strategy. So, so even this idea of like a that I think when you start poking into it a little bit, there's actually different different strategies that people will have. Um and and and hence as an investor you sort of look at that and you're like okay even if I have ETH exposure do I want something that's like generating outsized yield relative to

just holding the the underlying asset and the staking do I want some sort of like operating business kind of exposure in addition to you know the ETH exposure directionally and do I want to take sort of take this bet that this person is going to run this like retail flywheel the way I think Tom Le put on a master class over the last year on how to do that but they're actually you know they're all called DATs but they're actually I think different strategies. Yeah, and I think that that's really helpful to hear that spelled out. Um because that they're not all created equal. They're all on different assets. They're using different strategies. And this is one of the reasons why at Milk Road we've been focused on this because there's a huge education piece that goes into this for investors to just understand this. And it's one of the

first times that we've seen real institutional capital get access to DeFi and and see how that plays out. Um so I I wanted to kind of use this as a pivot point um into something else. Electric Capital is is perhaps most famous for its annual developer report um detailing development activity in web 3 and in crypto. A few days ago, you made an announcement that you're going to be sharing this data a little bit differently this year. Um I'd love you to tell our audience about what changes you're making, why, and uh just like what what they can expect from this year's developer report because this is what I always know Electric Capital for. This is the thing I always read closely every year. So yeah, tell us about that.

>> I appreciate the tea up. Yeah, we've been doing this since um I believe 2018 is when we first started it. And so back then when we were first getting off the ground, the thing we were wondering again just as long-term venture investors, Curtis, my co-founder, and I um were kind of kicking around the idea of like, well, where where does fundamental value really acrue? And so we said, you know what, I think that where the developers are spending time is a really good signal. Um, and it's a proxy for where is there interesting value that will be created over the next two to five years. Um, there's that uh there's that saying, I think it's a Chris Dixon saying, but don't hold me to that, but I'll credit him anyway because he's brilliant. Um, I think Chris said something to the effect of what the

software engineers do for fun on the weekends is what you'll do for a job in 10 years. Um, and and I think there's a lot of truth to that, right? Uh, and so we said, "Oh, we should go figure out what the engineers are doing. Where where where is that activity?" And then we said, "Okay, well, where is that? Like, how would we even figure that out?" And we said, "Oh, that that's probably on GitHub and GitLab." Like if people are just checking in code into their repos and it's like affiliated with whatever ecosystem or it's a toy project or it's a hackathon, there's like signal there. And so we built a system that could that could sort of crawl a bunch of sites including GitHub and GitLab and a bunch of social media sites and just try try to figure out like where are where are real developers

actually spending their time um and where is their code? And so we fingerprint something like I think at last count it was like 750 million lines of code like unique lines of code and we can tell you like who wrote that code first. So there's like a lot of copying and pasting that happens and forking and stuff and so we can trace it back to the original. So we built a pretty robust data pipeline and data system that sort of tracks this and it's just always crawling the internet um to uh to get all this data and then and then once a year we would share it uh sort of with uh their electric uh developer report. What started to happen um last year with last year's report especially and a little bit the year before that so 23 24 was we started to realize that that it

was getting really hard to figure out where things belonged and how to kind of classify these things like are L2s part of Ethereum um is some is is a part of Ethereum because they also have deployments on these other chains now like how do you count that and like how do you how do you sort of do attribution of well these two developers only wrote code for suite and these two only wrote code for ETH or for this L2 to and so the attribution problem became really gnarly and the methodology got really really tricky. Um and you could look at a bunch of data and sort of interpret it two different ways and and and depending on kind of how you wanted to sort of position it. Um in addition to try to sort through all of that we were spending more and more time with the

foundations. So we spent a lot of time with ETH foundation, Salana Foundation, Near Foundation, you know, go go through like the top top 10, top 20 foundations and and um and a lot of teams in those ecosystems. And so really if you look at the the contributor list, I think it's at this point like several hundred people have contributed to the repositories that we have and to the um to the data structures that we have and the taxonomy that we have. It's probably it's probably approaching like a thousand people have contributed um which is pretty remarkable. It is like a like a good community effort. And so we were looking at that and we're like, man, this just gets so hard to to even figure out where the lines are. And then as as somebody that's sort of sitting in between, are we really the right people

to adjudicate like, hey, this protocol should go into Salana or this protocol should go into Ethereum or how do we even think about that? Um, and so we said, you know what we should do? We should just hand it over to the community. like we'll open up the data, people can run their own queries on it and then if they think that the analysis says a thing, like publish the data, publish the analysis because the data is open, anybody can go verify it. And then as a result, we can have an open conversation. And so now what you've done hopefully is get all of the foundations or any developer or any data person out there that wants to go like poke around in the data to go poke around with it and publish their findings. And then and then as a group, as a community, we can say, "Yeah, I

agree with that or I don't agree with that analysis or hey, I would classifi classify these things differently." Um rather than us trying to be the arbiters of all of like where do these different things go? So, we open that up. It's called open dev data. Um if you go to my profile on Twitter, you probably see a retweet on it or somewhere um or the electric profile, the electric capital Twitter. Um it'll be up there. Um and so yeah, it's available now. So, we worked um with the Ethereum Foundation to publish some stuff and they did their own analysis on top of the data. Um we're working with um basically all the other major foundations to sort of publish their own data um and uh and see what they find. And so yeah, it's sort of um it's a little bit of like an exit

to community but without a token. We we don't want to anybody. So the data is there. If anybody wants it, go, you know, come find us and we're happy to share the data and would love for people to do analysis on top of it. >> I love hearing that backstory on that and just knowing how it got to this point and I love the idea of giving the community's data back to the community. Um really really helpful to hear all of that. Jesse, I wanted to bring you in on this. Um, you perhaps more, well, I think a lot of people do this, but you stand out to me as somebody who does a lot of deep dive research on altcoins that are maybe falling through the gaps or getting overlooked. I'm really curious how you think about developer activity when you're evaluating projects or investment opportunities in web 3.

How much detail do you go into on these things? How much importance do you place on this? What are your thoughts around developer activity uh as a as a a factor in investment decisions? I I think invel developer activity is like the single highest signal that you can get in in terms of like especially when people are like hey you're never going to get like an alt season again. Uh because they'll say there's too many tokens. And my argument against that would be like if you actually like boil it down to like real teams building like real products there there's like not that there's not that many in crypto. Like there's not millions. Not like everyone's saying those are like memecoins. Um there there's like I don't know I don't know how many there would be. Uh, but I imagine those kind of signals will be higher and higher value

as time goes on. Especially because when you do have a lot of dilution of tokens, you need sort of a way to sort them because you can't just like yolo into, you know what I mean? Like there's five tokens, you could buy all five. If there's a million tokens, you cannot buy all a million you all millions. So, you have to start like differentiating them. And so, I think developer like quality uh and activity is one of those things. So, when I'm looking at a project, I I I definitely like um like to reach out, talk to the the person behind it, and just kind of see how smart they are, like what's their background, what's their experience, um because, you know, sometimes for me when I'm like betting on on some of those tokens, um it's really hard cuz most of them are nons

like 99.999% of them are just vaporware. And so, you you really have to find somebody who's talented behind the scenes who like just randomly happen to have, you know, has a token. And that's becoming harder and harder these days because a lot of those tokens, you know, do a a traditional like VC launch. So, um, yeah, I think that's critical and super important. ETFs provide investors with a structured, disciplined, and diversified approach to crypto, which is cool, but the world is moving on chain. We need a crypton native equivalent. That's exactly what reserves decentralized token folios, DTFs, bring to the table. Reserve ETFs are rule-based baskets of crypto assets packaged into a single token like Coin Market CMC 20, crypto's version of the S&P 500. Go to milkroad.com/reserve to find out what's on offer. Yeah. Okay.

So, I I wanted to kind of bring this all these things together um for a conversation about innovation and what you guys are excited about that's happening in crypto and and going forward from here. Um I want to start with Jesse on this. um at Milk Road Macro and at Milk Road in general, Milk Road AI, Milk Road Crypto, we've been focusing a lot on this intersection between crypto and AI and we've written pro reports on this for our community. So, if anybody wants to read those, I highly encourage you to check those out. But I'm curious what you're seeing happening at this sector because it seems like it was kind of one of those things you're saying. There's like a million different projects, but that they're trying to figure out product market fit. And I'm curious about what you're seeing at this intersection.

What's got you excited? You don't have to plug a specific thing. I'm just saying like people are trying to figure out what that intersection looks like. What are your thoughts on that space right now? >> Most of the crypto projects that I come ac like 99% of them are just stupid. [laughter] They're just nonsense. It's like somebody >> free revenue, please. >> Yeah. Yeah. And but but obviously AI is like going to be the single most transformative technology. Like I I'm a believer in that. I think people are crazy that don't believe that. They're like trying to compare it to railroads and stuff and I'm like you guys have lost your minds. I think the problem is most people use like the base models.

they'll use like chat GBT 5.1 or they'll use like you know you know like the the really the free models. Once you get up to the higherend models like GBT Pro, um Deep Think and some of these other ones, it's crazy what they could do. Um like it actually blows my mind. Um and and so yeah, I I definitely see it being transformative. I'm sure it's going to intersect with crypto. There are good projects that are that are trying to do that. I'm not saying there isn't. Uh but you know it's just like anything in crypto with the metaverse or whatever like the the vast majority of them are going to be tacking onto that narrative to kind of try to pump their token [laughter] but yeah there's going to be huge huge disruption in huge innovation eventually as time goes on.

>> Yeah. >> Yeah. So watch that space. Avichel I wanted to bring you in on this question too. You're the chairman of the the crypto council for innovation which is something I think does a lot of great work but that most retail investors don't really know anything about. um give us a little bit of a high level view of your role here and and what innovation are you seeing in crypto that you're excited about? >> Yeah, so CCI is um is an advocacy group and an education group. Um it's uh Electric Capital, uh Andre Horwitz, uh Paradigm, uh Fidelity, Block, PayPal, SoFi are on the board, and then uh I'm chairman there. And then um we have a bunch of uh foundations and protocols that are that are members. And we focus on um both uh state, federal, and international advocacy. So we spent a

lot of time with the regulatory bodies. Um spent a lot of time in DC uh working with um with the the legislators and their staff. So senators and congress people um and you know a couple years ago it was mostly just education was like hey let's just explain like what is a stable coin and and why does that have national security implications increasingly um because of a lot of the good work of of the team there uh G Kim is the CEO Sheila Warren was the prior CEO um but but the policy team there is really really top-notch and so it's it's like a serious policy institute and so they spent a lot of time with the staff uh on on the hill and um I think were very instrumental in helping a lot of the key provisions in the stable coin bill. They're working very closely on

market structure right now and uh and answering some of these questions about like where do we draw the lines between what is and isn't a security or where does the SEC have oversight, where does the CFTC have oversight, and how how should how can we have clarity for developers and builders in terms of what is and isn't allowed and and how do we try to structure that in a way that allows us to have good good innovation um and and empower developers. Um and so things like developer protections are an important part of that too. So, you know, you can't uh you can't we shouldn't be sending people to jail for writing code. Like, I think that's that would be a bad precedent to set. And so, trying to work some protections in on that kind of stuff. So, it's it's pretty it's like um pretty gnarly like really

in the weeds legislative stuff, but really important to get right. Um because that that structurally then is what determines who wins in the space ultimately. And you don't want to create a system where like the big banks just come in and win again. I think that that would be sort of a huge miss. So, it's really important work. It's it's a lot of behind the scenes work. It's a lot of just like grind it out, have one-on-one conversations with people. I will say probably, you know, when I started doing this stuff about about three or four years ago is when I really started engaging um around policy stuff and just spending time with senators and their staff and Congress people and their staff and the White House and stuff. And um I think a lot of people look at the state of things right now like in in BC

or wherever and and they might be disappointed or dismayed. I've actually become way more optimistic having engaged here. So, I'd actually encourage people to engage. Um, because the thing I realized was when everything is 50/50, like everything is like so polarized that you're like right, you know, everything's just split down the middle. Um, all you have to do is convince like one or two people and then all of a sudden everything tips. And that's a way more attractable problem than than actually like how do I make sense of like if everybody's kind of in the middle, how do I get everybody to converge on a thing is actually harder when everything's like polarized.

Actually, all you need is like two people to flip over. Like you kind of saw this with the Epstein files. Like once Marjorie Taylor Green was like, "F you. I want to like vote the other way." Then it just tipped, right? Then a bunch of people all across the line and they're like, "It's over." Um, and so it actually made me really optimistic because that's a tractable problem. Like you can go have lunch with somebody on somebody's staff and like walk them through why they need to do a thing like rationally. And um and this is the reason it works I think is it turns out for all of the like uh you know egos and grift and self-interest and all that kind of stuff that you that you see with politics. Um there's still enough good people that care. There's still enough people where

if you go talk to them um they'll be like, "Oh yeah, this is actually really important for like US national security for example." So like let's take something like stable coins. Like I literally had lunch with somebody who who later became a senator. Um and uh and the conversation we had was like how to think about stable coins. And this person was a is a former is a veteran. They were in the military. Um and they're a Democrat and uh and they switched their vote. Like then we had like a SAB 121 vote. We had a stable coin vote and they they flipped. Um and it's because they like sat down and tried to understand the thing and like once they got their head around what stable coins are and like how the dollar is really important in the world, they switched their vote. Um, and so I don't

know, for for me it actually the the process has been extremely empowering. I'm like, "Holy moly, actually you can go have conversations with people and they'll change their boat because there's still enough good people in there that that you all all you have to do is like find five of them and then convince them." And finding five people and convincing them over lunch or dinner over six months is like a totally doable thing. >> I am really inspired to hear that and encouraged in a lot of ways. Um, and I I do want to just ask the second piece of that question again, which is like in crypto in web 3, what innovations are you seeing that you're like really excited about uh right now?

>> Yeah, there's so many. So, one of the things we thought about when we were starting uh electric, you know, we were very deliberate in picking the name. So, we didn't we didn't call our firm block something or chain something, right? It's or token something. And and that was a deliberate decision because our belief was that 10 years from starting, right? So some somewhere by like 2028 or 2030 um all of the technology would just fade into the background like you wouldn't even call it crypto anymore. Um you wouldn't even call yourself a crypto company. Sort of the analogy here would be if you went back to 2010, you might have called yourself a mobile app company, right? If you're Instagram, like that might have been like in your pitch deck, you would like, oh, we're a mobile app that does XYZ. Kind of the

way today people are like, oh, I'm a crypto company that does XYZ. And at a certain point, you just say, I do XYZ, right? That's just like the first part of it goes away. You don't need to lead with that anymore because like, well, yeah, of course you would be. And and so I think we're getting to that point now where if you're a fintech, like why would you not use stable coins? It's just strictly speaking better, right? So now you don't need to say I'm a stable coin company that like does you know reinsurance or I'm a stable coin company that does like payments for for you know remittances between UK and Africa. You're just like no I just do remittances and when you probe into it you're like oh you use stable coins that makes sense right and so if you look at

it through that lens I think there's actually a litany of technologies that have gotten to the point where they're actually usable. So like ZK proofs are starting to get there. Um the baseline cryptography just like you know out of coming out of Ethereum people don't realize this there's a company called Spruce which is an electric portfolio company. They power the California DMV app and so you can you can like go through TSA on your phone with with your driver's license and they have deals with with several other states and and um Department of Homeland Security. Um uh and you can actually go through like government facilities with these things and like the the the cryptographic curves that they're using literally are the same as Ethereum because the company started as signin with Ethereum. Um nobody knows that, right? They don't talk about that. It's just but it's

literally the exact same stuff. Um you look at distributed systems tech that you can just take like an SDK off the shelf. Um you look at um things like privy so like everything just become which is also an electric portfolio company right they're now a part of stripe um that's just a now like every app just becomes a wallet you just have money sitting in your thing and you just move it around you don't have to think about it right so like I think we we started we're at like the very cusp the very beginning of um wallet tech uh all the all the cryptography the zero knowledge proofs for privacy the distributed systems tech where I can just like spin up a distributed database and like store you know have global state visible stable coins um are are just starting to get, you know, they're

just protocols now and they just kind of work. Um and and I think people are starting to figure out that we don't even need to lead with the crypto piece of it anymore. Let's just lead with the utility. Um so I think that like a good example of this right now is X42, whereas this protocol to pay um you know over over the wire for for API calls. Um and I think a lot of people don't realize that that that came out of Coinbase and and sort of like a bunch of crypto people pushing on this. Uh, Cloudflare has now picked it up and actually a bunch of people in the AI community are excited about it because this is how you can get agents to pay each other, right? It's actually an internet native way to be able to pay because what you do is you send a

request to some API endpoint. That API just comes back and says, "You got to pay me to do this thing and here's how much you have to pay me and here's how you pay me." And now because everything is stable coins and wallets, you can just pay people, right? And so now you can pay for a little bit of data. You can pay for a little bit of compute time. You can pay for access to that one article over an API call. Um, and that just wasn't possible before, right? and and crypto makes all that possible. Um, but the AI people are excited about it and and nobody talks about it as a like crypto technology or crypto company. It's just like a thing that works. Um, so I think we're actually there with a lot of these components. And so a lot of where we're spending time now is um if

you understand those technology pieces, what problems can you solve? And if you do it in the right way, you actually wouldn't even call yourself a crypto company. You would just go to market and say, "We solve a problem." And everybody would be like, "Oh, that's awesome. Like how did you do that?" And then you would dig into it and realize that it's a bunch of crypto tech behind the scenes. Guys, this has been great. I I've learned a lot. There's so much going on in digital assets that I I feel like I I feel like I learn more every time I try to get caught up to what's going on in the news. Um, but yeah, this has been a great conversation. We we're running up on time here, though, so I'm going to try to land the plane with a question here. Jesse, I'd like to start with you.

And you know, look, I I asked you about AI, but if there are innovations that you are excited about, I'd like to hear that from you, too, because I know you spend a lot of time in the space as well. But the the question I want to end on is in the next six months, like short term, you know, obviously we talked about some of these long-term changes that are coming. What's the next catalyst that you're looking for that's going to reignite retail and institutional interest in crypto that's going to like kickstart the bull run, bring the good vibes back? What are you looking for as the next catalyst here? >> That's kind of a hard one. [laughter] Um I I think it's incremental gains in like liquidity and things, but I I guess maybe you could say um PAL going out could be a catalyst and like people

build the narrative around that could be the market structure bill uh where people build the narrative around that. Um but but I think it's it's more complex than just like a those would be like market like narrative catalyst. Um but the the bigger picture is there's a lot of little things that kind of come into place in going into 2026 um for everything to really take off. So, um, stimulus checks, PAL going out. You know, I don't know what's going to be like, oh my gosh, retail's wanting to yolo into crypto. Um, but, um, yeah, I I'm I'm really bullish on 2026, and I I feel like I'm one of the few left that that is, but I I think it's going to win out in the end.

>> Well, me me and Jesse with the last the last two bulls left. >> That's the thing is I'm I'm still bullish, too. It's just like, all right, it might take a little bit. Um, all right. But Avichel, what what is the catalyst in your mind that you're looking for to? Is it the the Clarity Act? Is it PAL changing? Is it just this incremental build that we're seeing? >> I don't think it's any one thing actually at this point. I think it's it there's an old Ben Horowitz blog post uh that I remember reading uh when I was a founder, which is there's no silver bullets. There's only lead bullets. Um, and once you sort of realize that as a founder, you're not like there's not like one thing that you have to do and then all of a sudden your business works. There's just like one thing and

then the next thing and then the next thing and the next just a bunch of lead bullets. I kind of think that's where the industry is now. It's not going to be like clarity act happens and then we win or um you know like uh there's a new fed chair and then like all the money flows. I think it's just like lead bullet after lead bullet and then you wake up 5 years from now and you're like holy crap like everything worked. Um I think we're like right at the beginning of that. So I don't I don't know how the next year plays out. I'm I'm like not smart enough to call the markets and it's none of this is financial advice. Nobody should ever listen to anything I say. But but I'm pretty sure that like I see all the lead bullets that are about

to get fired over the next 5 years and it's like it's it seems pretty straightforward to me from there. >> Guys, I really appreciate the the the insight on this and thanks for being on the Milk Road Show today. I hope our audience got a lot out of this. If nothing else, I think everybody should take away from this that we're becoming a real industry and not hype chasers and there's a lot being built that is behind the scenes that's not making headlines. So take this opportunity to do some education, research, follow up on these things. Um, Vichel, where can we send people to find more of you and your work online? >> Uh, just add a visual on, uh, on Twitter is probably the easiest or electric capital on Twitter is probably the easiest. We have all the dos, so electric.com, electric capital.com, and

developerreport.com. We we try to we try to do the coms, so but we're pretty easy to find. >> Jesse, what about you? Where can we send people to find more of you? >> Same thing on XJ. >> Awesome. Well, guys, I really appreciate you coming on the Milkro show. Stay bullish. We'll see you all in 2026 or hopefully sooner. Um, but yeah, like take care of yourselves. Thanks for being on Milk Road Show. >> Yeah, thanks for having us. >> Good to see you. >> If y'all are making swaps or trades right now, highly recommend you check out Milk Road Swap. This is a DEX that we built in partnership with Cow Protocol. Why do we build it? Not to make money, just honestly so we could have a place to do our swaps for the lowest fees that we could find. This is the fees on Ethereum, Arbitum, and Bass

are only.15% fees. Uh this is a huge difference from uh other centralized exchanges that charge half a percent or even up to 1.2% fees on their swaps. Also, you can swap on Salana all at swap.mmillgrow.com. Check it out today. You won't be upset. And you can join me in my favorite place to make swaps on chain. Want insights on what's moving crypto markets [music] and how we're trading each event? Subscribe to our channel and join the Milk Road daily and pro newsletters and start investing [music] like the top 1%. This show is for educational purposes only.

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