Bitcoin Breaks $95k, Crypto’s Valuation Problem & The Path To Real Onchain Users

Transcript

You just cannot justify the valuation of most projects in the space. And it's a classic Silken Valley meme of like never show revenue, always sell the dream. Crypto is no longer the main character, right? It's AI. So from a momentum driven trade over from a valuation fundamental trade over, too. Like Ethereum as a $400 billion asset, AI, Jonah, in what right mind would you buy this when it's cranking out one to two billion of of fees that are not recurring that are going to dry up in a bare market when liquidity is there? like you're churning through most users and liquidity very, you know, every month when people get liquidated. I just cannot make a case to buy Ethereum. I'm not getting paid enough. I'd rather punt AI.

>> This episode is brought to you by Zcash. You'll hear more about them later in today's episode. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed. Today's uh today's a day. Uh the last time we recorded, Bitcoin was above 100,000. Today we're recording Bitcoin's at 94 and and things are dropping precipitously. It looks like the

timeline's very anxious. Um so in order to assuage those fears, uh we brought on our professional market mani. Uh thank you for joining us today. Um >> you Jonah, thanks for being thanks for having me on. >> Thank you. >> No, this is awesome. I you know I think uh you Jon and I have talked about this a little bit high level on a bunch of podcasts where we basically just keep saying hey uh the market is changing dramatically and I think it already has changed dramatically a bit and then you put out a blog post this morning which I'd highly encourage everybody to to read which really tackles like the issue of of valuations in crypto um and why we

might be experiencing some of what we're experiencing right now where things things just keep kind of coming apart. Other than Bitcoin, I mean, if you look at this cycle outside of Bitcoin, uh very few things have actually performed well. Most things are down. Um even though we've been in a quote unquote bull market and you know the the things that are down are kind of the things that we've always made made fun of a little bit, but they're also things like Salana, right? like Salana's sort of sideways for four years now. Um, Ethereum is sideways for for for four years now. And uh, you know, when you when you looked at it on the on the grand scheme of things. So, I guess that's that's something that was top of

our mind that um, basically like what what's what's happening like why are things not going up? Look, I mean when you look at a at a fundamental analysis like you just cannot justify the valuation of most projects in the space and it's a classic Silicon Valley meme of like never show revenue, always sell the dream and perhaps that's like the greatest credit I'll give Ripple which is they've done a phenomenal job. If you go out walking the street, you ask people, hey, what do you think about crypto as a infrastructure, you know, this fintech opportunity, they're like, oh, it's Ripple and it's not maker, it's not unis swap, it's not, you know, anything really. But like zooming out a little, it's like, do you always as an investor, it's like, is it priced in? And it's a

hard question, but I think the market already told you that it it very much was priced in. You had every narrative that you could have imagined, every headline imaginable to the point of JP Morgan launching their own deposit token on public infrastructure called base. Prices are not moving, they're going down. Now, Bitcoin is a is in a camp of it of its own. You know, I think that's like there's reasons why you want to hold it. I think the macro thesis, the hedge, you know, digital goal narrative is intact. Like it's less than 10% of gold's market cap. You want to kind of have it in your portfolio. For everything else, it should be valued as a like a technology play.

A crypto is no longer the main character, right? It's AI. So from a momentum driven trade over from a valuation fundamental trade over too. Like Ethereum as a $400 billion asset. Avi Jonah, in what right mind would you buy this when it's cranking out one to two billion of of fees that are not recurring that are going to dry up in a bare market when liquidity is there? Like you're churning through most users and liquidity very you know every month when people get liquidated. I just cannot make a case to buy Ethereum. I'm not getting paid enough.

I'd rather punt AI. >> Yeah. I mean, that's been that's been a huge issue I think for just crypto traders in general is that the I mean, outside of this crazy ride by Zcash uh recently and I guess the meme mania of six six six to eight months ago, uh trading the stock market has just been infinitely more fun and profitable than trading crypto. And I think we all know that a tremendous amount of value is derived from the fact that crypto was a very fun place to trade and like it was it was a place that you could make a ton of money. Um, and now that's starting to dissipate. And what actually kind of worries me more is um [snorts] also crypto was like the one place that you

could get a ton of leverage to go. Let's say you had a small account. You had like a you had a thousand bucks. You could lever that up 10, 20, 30. You could go 100x long on uh on on BitMX. Um and you could only do this with with crypto. And now I mean Hyperliquid's introducing introducing stocks. I would wager like in the next in the next two to three years, you're going to be able to trade stocks on pretty significant leverage as well on these on these platforms. And then and then that's like another just punch in the throat uh for for all like the the stuff in crypto that isn't real. Um and mind you like there's some stuff in the stock market that's that that that's real. Like uh there there people minting money on

buying rare earth minerals because we're in a we're in a you know rare earth mineral war with China. There there are people that had minted money on buying small cap drone stocks. Now that drones are much more important in warfare. like you can actually put your mind to work >> uh in in in the stock market whereas in crypto it seems like >> um I mean obviously there's real stuff being built it's just less so. Yeah, maybe maybe penny stocks are the new crypto. Sadly, um we keep >> always always have been. [laughter] >> I mean the the crypto's always been good at because in the early days it just has created this public infrastructure like 24/7 365 markets for everything.

Um so like no one's really kind of disputing that. I think they there's a there's a real industry behind that and same with the Vegas is a very real industry in Macau. My question and where I come at it is should it be worth 1.5 trillion today? Like excluding Bitcoin, should that opportunity be worth 1.5 trillion? And if it is, can we actually support the valuation? Because when you look at it on a revenue generation, value capture standpoint, it's only going to get harder for most of these chains to capture value. And so I I get very nervous uh when I think about that.

And um it's I think a lot of people in crypto come at it like bank something you said earlier just banks are going to use this and you're seeing all these headlines. The the problem with that is was it priced in because the market's not stupid. It will play short-term games. It will you know be momentum driven but it's not stupid. And I think it's it's one of those things where yeah, AI could be in a hype phase, but at least you can look at something like Nvidia and it's trading out, you know, 30 40 times earnings and Ethereum is trading out 200 times sales. Like make it make sense.

>> Yeah, it doesn't make sense. I mean, I think one thing that my old boss Don Wilson of DRW told me is, you know, when I was asking this same question, which you could have asked in during any of the previous cycles with these ridiculous valuations on certain altcoins, like why why is this how how is this token so stable at such an, you know, multi-billion dollar valuation when it's obviously vaporware? Like the team has literally packed up shop. They're not shipping new code. They're buying villas in Sardinia. They're not doing anything. Why is it still worth what it's worth? And the answer I got from Don, which I think is kind of precient, was hey Jonah, tokens don't file for bankruptcy. Like these these valuations can just be sustained for a while. And I took that as gospel because at the time it was true. But I think

what needs to be realized now is that we're entering a new paradigm. Like you talk to any crypto investor about shorting tokens, they're like, "Ooh, that's tricky. Can't do that because it's been so hard." Right? Maybe now is the finally the time where you can just sell stuff because you know if if sentiment on on CT is any indication of how people in our space feel. What was supporting those valuations was not um revenues to to use your word. Uh it was the dream as you said right it was the dream of of future revenues that was supporting them. So now participants, insiders, crypton natives, bag holders are throwing in the towel. And that, you know, even though the project itself might not file for bankruptcy, that can certainly take uh all coin valuations

down a lot. So maybe that's the trade. Maybe we're supposed to suck it up and short stuff. >> Look, I was sitting there in 2017 and 2020. You could have heard me say, "Hey, the top 10's going to change." Like, how is Cardano still a top 10 coin? There is a part of market psychology where it's a meme. And so there is credible flows attached to that and their social value and and I'm not here to discount that. It's just as an investor I get worried when I have concerns around the broader market um valuations not just in crypto and so will I be willing to hold this thing because you just know liquidity dries up and markets really and and these things really tank 80%. And so more from coming at that standpoint, like building a long-term position in things, I just I one is a a speculative

gamble as you go to Vegas on a weekend. The other one is are you an investor? And I think like there's always been a part of crypto that is very much speculative driven. And look, I'm not here to fight or assort irrational DGEN behavior. However, I think something like Ethereum and Salana and some of the other networks. Look, it's just a ask folks, you know, the Ethereum maxes, the Salana maxes, I'm not here to just take a stab at Ethereum. like Salana as well, pretty much every L1, L2, like look at it. But like double clicking on Ethereum for a second is you constantly have this like investors, even the most successful funds out there, well, you read their LP letters and they're all saying kind of the same regurgitated thing, which is

it's a world supercomputer. Uh, all this flow is going to get tokenized and it's going to move on chain and and like I don't think anyone is discounting that. Larry Frink is not discounting that. Jaime Diamond is no longer fighting that. The regular is not discounting that. The question is you have all those headlines and prices start going down. So it was very much priced in it was it was and so there was zero margin of safety. The question is from a as soon as you start showing that traction the market was like oh okay yeah but still from an MEV standpoint most of these networks are not capturing 100 times more fees and you need to kind of see a path to where it's growing the user base a 1000x and the users and the and the fees attached to that a 1000x which is

not here yet. So, why would I go out of my way to buy something that is priced to perfection? Because it takes a mouse fart from Powell and Nvidia's earnings to be down that quarter to blow up that thesis and be down 80 50 60 70% of the position. I just have no no interest in doing that anymore. I' I've been around this game far too long that I don't want to roundtrip all this stuff. >> You could thousandx users very quickly without thousandxing prices. I mean, I think you're, you know, shout out to Inversion Capital. You guys are kind of proving that, right? Like launching new blockchain tech is commoditized. Um, so Ethereum and Salana aren't like digital New York City anymore with limited real estate

where you have to own ETH or Saul to capture, you know, economic activity on chain. Like, you know, you're building new economic activity on chain on your own chain. Um, and I guess what does that mean for the rest of the space? It's kind of like, all right, maybe this is when the valuations compress and then we'll get another dip to buy because I'm not giving up on you. I think users will come in way faster if the valuations are normal. Um, you can see that from token launches like when a token launches at a fair price, uh, the community thrives a lot more over the long run than when people buy the absolute pico top and get dumped on. So maybe >> 100%. I mean, you saw you saw that a lot with with with Hyperlid.

This episode is brought to you by Zcash, the decentralized digital cash that is encrypted to ensure agency and safety. With a fixed supply of 21 million and proofof work consensus, Zcash is encrypted Bitcoin. Buy, store, and spend encrypted Bitcoin using the Zcash powered mobile wallet, Zashi. To find out more, visit their website or click the link in the show notes. Thanks to Zcash for making today's episode possible. Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield.

No empty emissions, just [music] real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, Katana [music] is launching with notable ecosystem of primitives, assets, and partners like Morpho, [music] Chain Link, and more. Katana's 1 billion CAT campaign is live. [music] bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk terms and conditions apply.

Um I do like want to go back to the original uh thing that you were saying which we were talking we were talking a little bit about like the dream like all all these tokens their valuations are driven by the dream and that Jonah you said tokens don't go bankrupt and we've all probably had this idea somewhat okay well yeah in 2022 things got totally out of control but people made a ton of money things went up a ton we said this in 2017 oh ICOs most of these are useless but and Cardano sticks around. And so everybody's question always becomes um how why are you not wrong now? Like what is like what is happening now that makes it so different than everything else before whereas

realistically you could have made the same argument 8 years ago. Oh, valuations are going to come in. I will say like it does seem like things are changing right now. One thing that really stood out to me recently is that EOS got delisted from Coinbase and I think that was the first time I've seen like a truly like next gen at one point EOS was the hyped. It was the next generation blockchain. It was the thing that was supposed to eat Ethereum and it just failed massively and it turned into a massive value extraction event and there was a lot of I think real estate bought in Sardinia because of that. So that that was nice. But it was it was >> largest highest purchase price in Italy was bought by brand. Yeah. Like for 160 mil. Um but it's like it's nuts because

now we're starting to see, okay, I think it it kind of starts breaking the spell a little bit when something like EOS goes down where you go, okay, you can raise four or five billion. Uh you can be faster in theory than Ethereum and it doesn't matter. it doesn't potentially matter. Um >> I wouldn't argue this time is different. I think this it's like every other cycle. There's huge draw downs in the space. Even though the top 10 composition didn't change, you have huge draw downs. I mean, Bitcoin, I would argue, is graduated now. Like the ball in in Bitcoin probably continues to go lower as you have more like institutional flows and ETF products, but for the rest, you're you're sort of nothing changes this time around. You

should expect to see 80% draw downs, 90% draw downs on these things from majors. And it doesn't change because again, it's all self-referential. You're in this loop that it's all like crypto is a great capital formation vehicle. 24/7 365. Anyone that does XUS can now invest in NAS lever NASDAQ plays and yolo and roll the dice in the casino. Great. 24/7365. I don't think that's worth 1.5 trillion because you churn through that constantly like you know in the same way that people like punt their paycheck to paycheck and so you see these draw downs severe draw downs because there's no real economic activity beyond speculation anchoring the valuation of these things and and like liquidity really does dry

up like when you're in a macro bear you need like stimulus checks to really get people to come back and like punt your altcoin of of choice and so I don't think this time is any Now the position that I take is the the most important metric to follow is active users on chain and A16Z came out with a great report on that and that's really the the silent the elephant in the room is when are we going to actually break and grow the active user base on chain because that number hasn't really gone up. Yeah. And the same with the people there's only so many people that can go into the casino and survive long enough because the longer you exist in the casino the higher likelihood that you're going to be served a drink, you're going to get drunk or you're going to get

liquidated. The VIG is pretty good too. A lot of transaction fees. >> One, two, 5% per [clears throat] trade. >> Totally like like the the ME of networks like Salana. I'm what I tell people is I want to build the largest chain in terms of active users. That doesn't mean that my chain is going to be the largest in economic activity, the largest in user bases because we'll acquire businesses. will bring those businesses on chain and may and the value extraction like the that the the fees that how I monetize users is very likely going to be lower than how you like the me attached to memecoin trading that's very very extractive and and and you're churning through that user base right um so [snorts]

>> yeah it's not good I mean the other thing that's cannibalizing at least ETH is L2s we haven't talked about that yet Everybody wants to talk about mega e. I think >> we got we got well I got specifically flamed for that because >> people people people weren't happy by me saying oh it's uh you know we don't need another L2 the issue is not throughput the issue is activity. >> Uh and I I mean I I do think those two things are correlated but I don't think that we are bound by throughput right now and I mean at some at some point we will be but it's not right now. Um but but people people were coming after me for calling uh Mega Ethan L2. Um, I read I there's this guy Brett who kind of

like puts out who who's I guess I guess part of uh part of Mag Ethan and and he he sort of wrote wrote a rebuttal to me um that I think like I I really respect him for for for trying to for trying to engage engage in good faith, but I think at the end of the day it's still like hey like we're we're trying we're trying our hardest to bring people onto our chain, but I can't show you anything that's like actually real that will be used a substantial amount more than the current applications already exist. So it's like >> I think yeah look I'm I'm an in early investor mega and I think I'll I I'll always on the venture side be interested in investing in people that want to solve some of the problems the last four years like to your point

block space is increasingly a commodity and the price of the block space has come down a lot you're no longer in a state of affairs where you're paying $1,000 for a transaction. No one in their right mind really would want to use the L1 when when fees like so so Ethereum is kind of cooked from that standpoint. Uh the analogy would be imagine to your point around real estate or federal government. It's like Ethereum acts like a federal government wants a valuation as a federal government but only collects state or city tax because most of the tax is being collected by L2s. And so and so the revenue generation of an Ethereum the L1 no longer supports a really valuation like a credible 380 $400 billion valuation for ETH.

And so that's kind of cooked. The the point around me is true for most teams that I sympathize with. It's like you have really smart folks trying to like push the limits on throughput and decentralization consensus. That's fine. Like again, we've invested over 100 billion on infrastructure. It's like in the internet phase, there was overinvestment in fiber. You need like the smartphone, you need consumer applications to actually like eat up that excess of infrastructure. So blogspace, I think people just need to update their providers. Like blogspace is no longer scarce. How are you going to fill that? And you want to fill that with quality demand for it, not pure speculative activity that is highly

cyclical and self-reerential. So just to the point about quality demand for blockspace and what you were saying about how it's about to get very illquid as people get sort of ejected from the casino or liquidated or they go bankrupt or face ruin basically or or just rage quit crypto which we're seeing a lot of lately. Those two things could kind of converge and there might be an interesting trade from the long side. um hyperlquid I think you know provided there there is economic activity going on on chain there that isn't pure memecoin gambling like again levered to to your point levered trading of both stocks and tokens is a useful innovation for retail globally. Um, so if they're buying back, if you have like

a third participant, which is the Hyperlquid Foundation, using trading fees from real economic activity to buy back tokens in an illquid market, I could see that thing squeezing pretty hard to the upside, maybe. So maybe that's what's going to happen. We're going to get like the dark fiber phenomenon of tech in the 2000s, to your analogy, where most tokens go down. maybe things quality assets like hyperlquid which could be considered like an Amazon or a Google of crypto uh get sold hard and then the real economic activity um jacks it up over the following uh you know the subsequent months and years. Just have to you just have to stay solvent to be able to play

for that and not get you know get long at whatever it is wherever it's trading 37 bucks right now and have it go to $5 on you because of some collapse. >> Yeah. I mean, look, I'm not disputing like the long-term promise of of these technologies and like tokenized stocks and you see it like opening financial markets and tokenizing stocks for the rest of the world is a massive massive opportunity. You could probably make a solid argument to your LPs that, you know, Hyperlid is a $40 billion asset and, you know, it's all the burns are there. just you know I come from a world of investing in enterprise software and so you have contracted revenue on enterprise

software multi-year you can really underwrite behind that it's recurring you can't really get behind run rating pull up the blockwork's dashboard like rev of these networks like over the last 30 days 90 days you know go through that list salana over the last 90 days 150 million of of of reb total revenue revenue not earnings right Ethereum similar hyperlquid is you know 5 million so a a lot of analysts in crypto or or investors just look at that and say I'm going to run rate that the peak you know and it stresses that all I'm saying is how do you think that cast that revenue

stream behaves in a down market because we're not in a down market yet I think people are feeling the crunch you you kind of listen to earnings of like Chipotles of the world and the consumers feeling a pinch you know other than x AI everything else is kind of in a slog like not just in crypto. You need to really get behind like crypto is a hyper macro asset class because you really really depend on liquidity flows. It's like you you have to believe central banks inject money into the economy and that people have enough money to come in and gamble in the casino whether it's poly market to whatever it is that that they're punting stocks memecoins fundamental tokens, whatever. And and so that's where I think most of most of investors in crypto play the relative value game, which is, hey man, Bitcoin's

a tenth of gold's market cap or less than that. Well, that there's room to grow and Ethereum is only a fraction of Bitcoin and it's, you know, worth 400 billion. What if it gets to Bitcoin and oh, by the way, Zcash is only 10%, you know, it's only a fraction of Bitcoin and then you go down and Salana is only worth, you know, a fifth of Ethereum. And so, [snorts] again, you know, maybe on a relative basis, you outperform, but the name of the game here is to your point around staying solvent. Are you making money? >> Million-dollar question for you, Santi. Let's say that you're right, which and I agree that you are that this $ 1.5 trillion, let's call it non- Bitcoin space is should not be worth 1.5 trillion and you could see an 80% draw

down. Let's say that or or maybe let's just make it a little bit more benign. Let's say that it goes from 1.5 trillion to 700 million as the vaporware gets revalued by investors and you know dumping. What does that do to Bitcoin if anything or can it occur exogenously? I think I think there's a credible stance here and and you've already seen that the cycle Bitcoin holds and it's less volatile and it's just a different class of its own and I could see a world where Bitcoin may go down to 80K or 75K u and then but the draw down on the rest of crypto is much more severe and there's a world where Bitcoin rallies and tokens just don't move as much and you're already seeing that the cycle. So like you're just Bitcoin is

like a commodity, right? It's very different than than I would characterize everything other than Bitcoin as a tech stock and that's a valuation. You're competing for attention and flows against AI against other parts of the market and you're constantly believing and praying that those flows continue to show up and people continue to fly into Vegas and punt and we built a 247 365 casino and and that's you know pretty good. But just to give you some perspective um Open AI has 800,000 users. It's a trillion, you know, likely IPOs at a trillion. So, you know, on a per user basis, that's that's I think the math you got to do, right? Crypto 1.5 trillion excluding Bitcoin and you have 40 million users. So,

you're telling me you have 20 times more users for OpenAI and and the valuation is not too dissimilar like like that that's the gap that we have on active users, right? And if you tell me Jonah, hey look, crypto is say say crypto doesn't move from now and we wake up one day and we have actually 500 million users on chain. You're like, okay, I can actually start to get behind the valuation for the rest of crypto. And mind you, some of that valuation 1.5 includes stable coin circulation. So again, you know, you want to see certain things show up, but the most important thing is just active users.

while it's moving money and where they're going. The beautiful thing of this, you will actually be able to underwrite that with high precision because you'll understand where flows are going. You'll understand if they're using Poly Market versus, you know, Hyperliquid versus Uniswap or a gaming application like Gonzilla. I I don't know. I mean, but the the quality and the activity also needs to be diversified away from speculation. We're nowhere nowhere near yet. I'd rather candidly buy OpenAI at a trillion and go long that than hold any position in crypto. And look, there there's there's always like gems in a bull or bare market. Like there there's pockets of crypto. I'm not suggesting like categorically just chop everything. However, um you know, I I I think there are certain protocols in

DeFi and Deepen that you can wrap your head around evaluation and say, "Okay, gosh, you seems to be overlooked and maybe with regulatory clarity, you'll able to connect the token with equity and do all these things." I think it just takes longer the regulatory clarity. And so, why would I? Again, it just goes back to I never want to underwrite something with like stacked assumptions. X Y Zed needs to happen. I want to make sure that Jensen Hang doesn't puke. I need to make sure that Powell has a good day and that regulatory clarity shows up and there's no government shutdown and that and then people continue to want to punt this and that, you know, so like probability of A B C D happening. You stack all those together, you're likely going to be

wrong in your underwriting process. It's not a clean bet. >> Yeah. No, I'm I I personally I'm willing to take that risk on the regulatory clarity right now. That's that's I think that's that's the only part that I'm uh I'm pretty I'm pretty happy about like we're seeing we're seeing unis swap move forward. I guess the question that you know Jonah and I try to answer a lot and that we think about is there there is a shift coming like we we believe that there's a there's there's a massive shift coming where of that 1.5 trillion in outside of Bitcoin a substantial amount of that is held in sort of the quote unquote wrong areas. But when you look at things like unis swap or you look at things like hyperlink good or a

there are a defi protocol is that if you take the take the revenues and you look and you look at the pricing it's like okay these things could be act actually fairly fairly fairly reasonably priced and so one of the things we're trying to think about right it's like in a in a in a draw down like this like when stuff starts going lower can we get a period of time and my answer to this is is is yes but I'm curious your answer, but can can we get a period of time where you get things like syrup and a hyperlquid and these other assets are going up while the rest of the market is going down because everyone's just like, "Okay, like I'm I'm out of Cardono, right? Like I'm I'm out."

And this is where I'm probably midcurving it quite a bit because this is where I've been wrong the most which you know sitting there investing in DeFi in in early 2020s and you would have you would have like really under and we were successful underwriting that thesis but still the entirety of DeFi was worth less in Dogecoin. So this is where like markets have become hyper financialized and I I'm not here to discount the social mimemetic desire like that's I think a huge part of the valuation under underpinning that and maybe someone can come in this plot and say dude that that guy is crazy because he totally doesn't understand how flows and crypto markets work. It's like total midcurve 1.5 trillion for memes is is very supportive

and you could probably construct some analysis behind that and some think good calls but you have to believe on like it it it's fluffy and I can't really wrap my head around that. I'll go back to cash flows and I'll go back to activity and it just makes me nervous because I think we're like in the second half of like broader market cycle like valuations everywhere. The market's gone up for a couple years you know your mean reverting is something that I constantly think about to just analyze and make investments in crypto and markets and wherever like I can't and so I I'm a bit more cautious now. I think I want to be sure that the things that I'm holding, I can say, "Hey, look,

this thing is actually cranking out, you know, x amount of cash flow and I can wrap my head around that and if it falls 20, 30%. I'll actually put way more on the line and and double the position and triple the position." I struggle with um valuing and creating a reasonable framework for memes, even though I think they're super important and they could be worth 10 trillion, God knows. I mean, I constantly am surprised of the degenerate energy and activity in crypto. >> This episode is brought to you by Zcash, the decentralized digital cash that is encrypted to ensure agency and safety with a fixed supply of 21 million and proofof work consensus. Zcash is

encrypted Bitcoin. Buy, store, and spend encrypted Bitcoin using the Zcashpowered mobile wallet, Zashi. To find out more, visit their website or click the link in the show notes. Thanks to Zcash for making today's episode possible. Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back [music] to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, [music] assets, and partners like Morpho, Chain Link, and more. Katana's 1 billion CAT campaign is [music] live. Bridge and deposit directly into vaults in one

simple click and [music] start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk, terms, and conditions apply. >> So, I guess just zooming way out for a second macrowise, um, the reason why I'm pretty darn excited about Bitcoin and the broader landscape for crypto is that I think that, you know, I do think we're going to get it like affordability is the crisis of our time right now. That's what's being communicated via the recent elections. That's what the Trump administration is focused on. Inflation is global. Basically, um, people are

struggling, you know, some people are, a lot of people are struggling to afford daily life. So, against that backdrop, there's kind of two routes that governments can go to solve it. One is socialism, that's bearish for everything, uh, all assets. The other is stimulus. And I think that the current political backdrop in the West is still, you know, you're looking at governments that are run by people who are going to lean towards stimulus, not like Paul Pot or Mao style redistribution. Um, and so I think that in general that plus the fact that blockchain has already disrupted financial back office applications and just hasn't been allowed to proliferate until 6 months ago when it went from being illegal to

now legal. you're sort of setting up for a, you know, shortterm cash inflows that should buoy all assets, including speculative ones like our space, as well as like a longer term mega trend, maybe tech in 2000 where it doesn't just happen. Oh, you don't go to 2025 level tech prices overnight, but you're you know, you're at the beginning of a 25-y year um you know, just sort of upswing in in crypto, maybe stable coins or things that are hard to invest in, but just adoption of crypto. So like broadly I'm constructive the current price set I agree is is challenging. So against those sort of two conflicting um features of the market Santi I kind of wanted to just ask you you're about to or maybe not about to you're at some

point you've talked about launching a token and you're launching a blockchain. How are you thinking about doing that in such a way that you know token holders benefit but you don't you know have to get forced to give up too much of your FDV in a bare market. >> Yeah. Look, excellent question. We get asked this a lot like why would you launch another chain? We don't need another chain. And I'll say for a very specific reason. Um we'll go and acquire businesses and plug in this technology to make them more efficient. We'll cut costs. will approve unit economics. We drive all that activity and settlement to our chain because we don't want to leak that value. Like there will be apps in the Ethereum ecosystem, stable coins

and DeFi protocols and Deb protocols that are going to benefit from bringing a user that has just not existed in crypto before. It's a user that doesn't care about speculation that's not here because Bitcoin's at 100K. It's a user that doesn't even realize that crypto's working on the back end. They'll feel the impact. You know, they'll get a loan. The rate is lower. you'll get a stable coin that for all intents and purposes for them is a dollar and they're earning yield like a money market account and and I think that's where we see a path towards becoming the largest chain in terms of active real economic activity. Our KPI is can we buy businesses where there's there's a core service like mobile or some other utility and

make those businesses you know financialized becoming banks right and bringing that activity on chain and I think that's where again going back to why we have this issue in crypto I think is I want to bring a not casino flow into our chain I want to bring real economic activity and I think the multiple attached to that chain should be very different than the multiple that you have in other businesses that are in other chains that are just very cyclical. Um, and that's why we have a chain right? >> Yeah. >> As we think about like this idea between tokens and equity, look, it's very simple.

>> I want people to look at the chain and say, gosh, these guys own a hundred businesses and those businesses are there's a stream of activity coming through because we own the user relationship. We'll direct that flow to the chain. And so you can underwrite that from a if there's a billion dollars in fees that is generated by our chain, you could say, "Yeah, these are real businesses. They own them through their fund." Um, and other businesses that can plug into the chain. And you say, "Okay, I can actually underwrite that from a reasonable multiple perspective and people can come to their own conclusion about that."

>> That's why I asked the question though because like Sorry Aby, I won't ramble too long. I just I I asked not because um our listeners our listeners tend to get upset when we try to go into like the lore behind blockchain development, but more just like you're you're familiar with trading, you're familiar with tokconomics, you're familiar with all of this stuff and you're launching one right now. So basically listening to you, I hope that our listeners walk away with some idea of like what's in an idea of an example, a concrete example of something that's investable in this market, you know? >> Yeah. Um, look, we'll we'll have a private equity fund acquiring real businesses that you have to be accredited. You have there's a number

of, you know, constraints there, but we'll have our inversion chain and we will have an inversion token. Um, and we'll use that to, you know, to to settle all the activity on the chain. Um, we raised around earlier this year for immersion labs, which is, you know, we're building a blockchain. We're hiring kind of like a palunteer model. We have forward deployed engineers, product people that parachute into companies and and do the transformation. I was just with one of larger um investment banks here in New York and they historically have been very anti-crypto. And now I was talking to their investment bank, their private bank, and they're saying, gosh, a lot of business owners call us today and say, "How do I use stable coins? Like, I want

to implement this. I hear Stripe's doing it, and I hear JP Morgan's doing it." I can tell you from our standpoint, we don't have a problem of sourcing demand for companies that want to get acquired or want to utilize this technology. Um, so we're going to focus on that and you know, of course, as most projects in the space do, you know, we'll launch a token. How we do it I think will be we're paying a lot of attention to a the regulatory environment how to map out you know all this cash flow that can be generated as you make businesses more efficient and how we connect that to the chain but in a very simplistic way you'll have a lot of a lot of durable recurring fees in in terms of me and and blockchain fees settling so you can

think of it like if you want to do apples to apples to a network like Ethereum or Salana you will kind of do this analys is right and you know blockchains you can inspect in real time hey how much is me being captured how much of fees are being captured here how many users do they have what type of activities on this chain so I don't know if that answered your question like of course we got to be guarded but you know paying a lot of attention to >> no I need to know exactly what company you're buying right now so that we so that we can go in there and bid it up >> we've looked at public but that but that is that is sort of a real question is like what type of business benefits the most like like what type you know

>> today look long term it's like you're sitting there in early 2000s and saying every business is going to use internet software and that that's a trans that's just what's going to happen over the next 20 25 years businesses are still running on spreadsheets especially like small businesses um like middle market businesses a lot of those we're looking at family-owned businesses like they just technology is not core to what they do but they can be made more efficient with technology but just for Fun hypothetical fun exercise here. It's too big for us right now. But Western Union, you've heard me say talk about Western Union trades at four times P ratio.

Now you tell me >> better than crypto. >> Again, this is like price dictates a return that you get. The core thesis that I have personally after I'm I'm a huge techno optimist. I love technology. I think technology is what makes businesses more efficient. However, I think because of this, the market is drunk on that sort of techno optimism and leaves certain businesses for dead. So, hyon marks talks about price being the main determinant of returns. Now, market pendulum and momentum swings in the extremes. Business fundamentals kind of don't deviate as much.

So again, you know, steel mill operators that are going out of that were going bankrupt traded at eight times P ratio. I look at a business like that, I get excited like I I'll start doing work and say why is it trading at four times when the market is trading at 25 30 times again mean reversion and and I think margin of safety is the name of the game. And so we look at a business like a remittance operator and then you start digging deeper and say okay they have a lot of trust. Western Union is a very recognizable brand. If you're an migrant, if you're an immigrant in the US, you're likely going to go want to go to Western Union as opposed to Moon or whatever.

And so, can you make that business more efficient with technology? Can you make that business more efficient with stable coins? Then you start saying, okay, well, they pay most of their fees. You look at their cost structure and say most of those fees are source of liquidity in local markets. If you obby want to send money back to Israel or whatever, well, they're going to charge you two, three, 4% and they're going to hose you on the FX conversion rate. They'll kind of hide it in a very interesting way and then they'll have to pay a local merchant, convenience store, whatever retailer in Israel to source that liquidity to go back to the Israeli uh currency.

Well, what happens in a world where on the back end your family member doesn't h doesn't want to actually go to local currency because now they have a digital wallet. So, you basically now c can cut that big part of the cost structure for that business. Cutting cost is the name of the game here, gents. It's like I I don't ever want to underwrite that. We're going back to like financial engineering and private equity thing has been a thing, right? It's like, oh, let's buy a business, put a bunch of debt on it, fire half the workforce with AI and >> debts. That sounds like financial engineering.

>> Yeah, financial engineer. Look, that that that's not the game we play. We simply can first look at a business of does it have scale? Does it have distribution? Does it have trust? If it has trust, you can do so much with that business. >> Okay. So, here's a follow-up question. Sorry to interrupt. Um, so a lot of chains are trying to do what you're doing, but without the private equity angle. So, instead of buying businesses and putting blockchain into them, they're just there's a blockchain angle and they're building a business. like Maple Finance is a great example. Plasma is another great example of that, right? They're building a stable coin network uh which is, you know, supposedly going to have real economic activity and there's a token too. But anyway, like I guess my question is um what what's the difference between you

know as investors look at inversion or other tokens in the altcoin space that's very fraught with risk right now when they ask themselves hey okay Santi says there should be real e economic activity in order for me to invest in one of these tokens fine we're all in agreement there digging one layer deeper the question for you is what like what's the different okay if there's some economic activity if that box has been checked. What's the difference between being like an equity holder or in your case like a private equity LP and a token holder? Does it have to be like hyperlquid where the token needs or the project needs to say all right 95% of these this real economic activity is going to buy back the token in order for it to be you get the green light on it as a token

investor or is there some other way that you're going to link real economic activity back to the token holders? Yeah, look, in a perfect world, you map out all the cash flows that you make back to the chain. Um, we're observing the regulatory environment and and we'll adapt based on that. Uh, we got to work what we have. So, very again going back to hyperlquid. If we have one user, a whale in hyperlquid, it's trading, right? It's using hyperlquid, it's generating fees. Think of our go to market in a a company that we acquire is that whale. that company is bringing massive amounts of flow that by the way is sticky because we control it unlike Maple for instance a lot a lot of the

RWA protocols are doing the BD game they're convincing they're finding they're underwriting business and look all the credit to Sid you know they go out they underwrite the deal they'll bring it on chain I think there's a kind of a principal agent dynamic there we're putting equity on the line like we're putting our money on the line to buy the business and we control it and because we control it we can direct flow to the chain And so there's a very clear connection right in value creation story which is we're the incremental business that we buy brings more value more stream of settlement fees to the chain right so that's a simplistic way to to to think about it I'll tell you why I guess a lot a big part of starting inversion was going and

talking to a lot of the projects in crypto and look this technology's come a long way the UIUX has come a long way the biggest problem that we have as an industry is the go to market right convincing businesses convincing users to come into the and use this stuff is very hard and a testament to that is we haven't really grown the number of users on chain so I went talk to you know coin business of the world and building distribution is very hard time consuming and expensive I want to acquire distribution at a really good price again if I buy a business like Western Union hypothetically it's like four billion okay you know that they already have a existing user base that we activate without them thinking about all these things like we can extract away

all that complexity and so so again it's customer acquisition right and it all really boils down to unit economics right if it were easy to convince businesses if it were so easy to convince users to come and use this technology then I wouldn't be wanting to acquire these businesses and take a private equity approach but it but it just isn't if you look at the evolution of technology it's kind of really hard to convince these businesses um so like there's a couple of things that never want to assume like changing consumer behavior. People are lazy, man. They don't want to switch bank accounts. They don't want to try new Um and and it's a fair question to ask like if you're a skeptic of crypto, I think we don't have a good answer when someone says, "Hey man, look, I hear you once.

Coloss brothers are hyped up on they say it's room temperature semiconductor is greatest thing." Now you let me know why we haven't we don't have more than 40 million active users. If this if stable coins are truly amazing and everyone wants dollars, you let me know when we have a billion users use using this stuff. And so again, as you think about relating it like, so how do I invest in in this thesis? Because stable coins are going to continue proliferate. I think you invest in this thesis by again investing in companies that are going to use this technology and benefit from it. In the same way that you can build a thesis around AI like who's going to build more value like the AI startup or Facebook or uh you know some company that can you like a law firm that can

use AI to fire half the workforce and like you know be 10 times more profitable on a per employee basis like that's where the things like value acrruel historically has been like it's going to acrue in the infrastructure layer but I think user aggregation theory is very true like if you control the user you monetize that and then you utilize this infrastructure that is open, public, decentralized and is lowering the cost to become a financial services company and you can capture that flow. And so that that's my thesis here like the last 10 years have been succinctly the last 10 years have been 100 billion invested in infrastructure.

If you were early Salana, Ethereum, Filecoin, whatever, you would have made a ton of money. I don't think that thesis and that that strategy works over the next 10, 15 years. I think you want to now think who's actually going to capture more value, Robin Hood or your new startup stablecoin issuer. Who's going to capture more value? Um, >> yeah, you know, >> I think this this happened a little bit. Sorry. Good. I thought you were wrong. >> No, no, I think the point was made. >> Um, no, I'm I'm I'm I'm I'm with you. I think uh I think one of the things that I I realized probably a a few years ago is that at the end of the day like you need applications that are driving a substantial amount of activity to a

platform. And the reason that people were investing in infrastructure from my personal perspective is that there were no applications to invest in at the time or you didn't necessarily know what application was going to win. And so people viewed it as an easy safe sort of catchall like let me invest in the infrastructure at some point. this this will give me exposure to the idea even if the specific investment does is not the thing that works in 10 to 15 years it gives me access to the idea of of crypto and I think what we've sort of come to now is an understanding that it's it's about the actual and always has been it's about the actual applications like people used to make um sort of uh you know they they they would say things like well you know the the

underlying crypto network is like the underlying email uh protocol and that to MU is always like a really bad argument because the underlying protocol like shouldn't make a ton of money in my personal opinion long term like it should be the things that live on top of the protocol that end up making money and then at some point yes uh the underlying protocol can make money but I think uh when you look back also to like the early 2000s and you go you you think of you think of the internet internet boom there were obviously today tremendous amount of company value created by startups that were the first to implement internet technology.

However, there was also a ton of productivity gained by companies that had nothing to do with the internet that just ended up taking like like restaurants, right? Like setting up a website. I'm sure the bookings went up for for for individual restaurants cuz people were able to find them and go to them and see them. That's why like food and beverage spending is up in the United States. It's easier to go find these things now. um like over versus versus versus 30 versus 30 years ago. And so I think that's kind of what you're doing and thinking about in crypto is that yes, there are companies that will be created crypto first and will win and will be huge, but you're missing the forest for the trees and that there's like a huge other sector here where you're going to have to

actually integrate crypto at some point one way or the other. And I can take advantage of that. Now the the question is like in crypto um like everyone I I think is still focused on the wrong stuff and I kind of figured this out with the mega ETH and then everyone's really excited about Monad and I'm just not same as you like I'm just not excited about these things anymore. I'm excited about what's being built on top of them and then maybe by extension the thing itself. Um, which again is why like I know Plasma has gotten a really really really bad rap uh recently just because it just keeps going straight down in a straight line [laughter] and that tends to make people upset with projects when they go straight down in straight lines. People get very upset.

Um, but at least like you know they they're they're b they're basically trying to build a neo bank and I and I and I respect that they're trying to build a company not necessarily a platform. If you look at the you did the tech analogy just now like if you look at what happened after 2000 everybody did the same thing like Cisco was had was that like the biggest company in the world for a hot second. I mean the craziest thing is it's it's playing out exactly the same way in crypto where everybody thought you had to invest in infrastructure but what actually came out of that sort of tech bust and subsequent 25 year super cycle was um the things that really rallied like Google and Amazon were apps. They were applications. they were real use cases.

So I think to try to like sum sum all of this conversation into one like little nugget, it would be the paradigm has shifted, ignoring Bitcoin for a second, the only thing that's investable here on out is the is basically killer apps. And if you're investing in infrastructure, you're investing in Cisco in 2000, AT&T in 2000, whatever else garbage like nobody local local broadband cable providers in 2000. Like the stuff that didn't,000x and I guess, you know, Santi, you're trying to buy killer apps.

Somebody else might make one. Maybe Hyperlquid is, maybe it isn't, but like that's what we got to look for is killer apps and probably not at current prices because they're terrifying. Mantle is pioneering the blockchain for banking, a bold new category combining traditional finance with the power of web 3. With UR, the world's first onchain money app, users can manage fiat and crypto side by side using a Swiss IBON account in euro, [music] US dollar, Swiss Frank, and RMBB, all posted to the blockchain. Backed by the Mantle network, UR is the access layer that unlocks a purpose-built vertical platform for onchain payments, trading, and asset protocols, including ME, TH,

MI4, and functions FBTC. All economic activity within UR will be captured by Mantle Network to further drive value to MNT token holders. Follow Mantle on X at Mantle_official for more. As always, investments in blockchain technology involve risk. Terms and conditions apply. >> I am kind of bullish on Bitcoin still. Like I'm I'm still I'm still bullish on on BTC. Like I I I do think that just just to like throw a little sprinkle of trading in here. Um I I think that we've gone down too far too fast. And like regardless regardless of anything, like you probably see a bounce soon cuz it's

it's very rare that everything goes down. I mean, gold is going down, NASDAQ is going down, like AI is going down, Ford is going like uranium is going down, like every single thing is going down. Um, and what that tends to mean is that it's just like general repositioning and deleveraging. Uh, and then once that's over, you get at least some sort of bounce. Now, like how high that bounce goes is sort of like I personally don't think the stock market bubble is over by any chance. I wouldn't even necessarily call it a bubble. Um, I do think that we're we're gonna have a good we're gonna have a good end of the year. When it comes to crypto, I'm out XBTC. I'm a lot less uh optimistic. Like I'm, you know, I'm back to being an ETH hater.

>> I'll say a couple quick points on that. Like John, you're absolutely right. Look, Cisco never recovered from it all time high. And I think it's one of those things where I think a lot of these things are grossly overvalued and that's just a downtrend that is hard to overcome. uh you have some fundamental architectural issues of value capture like we discussed here on Ethereum. You also have just over valuation. The most important thing to solve is distribution and people like let's not forget this is open public decentralized infrastructure and stripe launching tempo is kind of a warning shot. It's like you know I get the Switzerland model but you know this could be co-opted this could be forked.

Um and and so I think it it just to your point Avi I also agree with you like I feel very comfortable holding Bitcoin. I think Bitcoin serves a purpose in pretty much everyone's portfolio. Getting off zero, you're going to continue to see that trend. I I'll underwrite that. Like I actually like Bitcoin here. Um I'm rotating a lot of stuff in a Bitcoin and I want to hold it in some measure in my portfolio. Um but as I like as I spend, you know, the I love this technology. I love crypto. I think the most important thing is the value capture will happen to deployers, not infrastructure. And there's still going to maybe be some incremental protocol that creates a better kind of mousetrap, better infrastructure. You know, I'm not totally discounting that thesis on the early venture side, but there's just an

overinvestment on infrastructure and and what we need is I think more value be captured by the Apples, the Googles, the Amazons that realize, hey, 2000s are very different than the '9s. We actually can use a lot of the software and internet and the price of that technology has come down dramatically. And again, block space has come down dramatically. So what can we do with that beyond speculation? >> Hopefully uh hopefully make a lot of money. >> Not not a lot of money >> for everybody involved. >> Not a lot of money out there right now from the long side. People are hurting.

My gosh, the sentiment is so dire. Although I what I will say is like and Santi, I want to get your take on this too as we get toward the end of the podcast. I think I like Bitcoin too here. Um I'm not a short-term trader as everybody knows. Uh, but I I will be adding if it trades down below 90K, which we're getting close to. I think that the OG selling is not going to happen here. I don't think we're going to get forced that selling of Bitcoin. And I think that um I I I I do believe in the Bitcoin to a million thesis. I think that we're going to get like the affordability crisis is bigger than crypto and governments are not going to solve it with communism or or socialism right now. We're like, look who's in

charge. We the guy wants his face on Mount Rushmore. He doesn't want his He doesn't want to be the next Herbert Hoover. We're going to get something big and I want to be holding Bitcoin when that debasement occurs. >> Yeah. And and even if it goes to a million, you'll be still at a fraction of digital gold. And look, something like Bitcoin is the perfect meme. It is. And there's only one real digital gold here. Maybe people can argue Zcash is, but um yeah, you know, I think I think you're absolutely right. and and you know, institutions can't really pronounce Lana or Ethereum. Uh they definitely now understand Bitcoin and you know, they're going to continue. I think I think that that is a secular trend that I'll get behind on over the next couple years. And so I I'm I'm

there with you. >> I got a great question for you. Um you're talking to institutions. You're doing like cryptoxfi stuff dayto day. We on this podcast, Avi and I are constantly going back and forth about how as the infrastructure eats financial plumbing, flows will come into crypto. What does that look like? Like when you talk to institutions, are they like, well, you know, in order to, you know, replace some some payments rails with crypto rails, I'm going to open an Ethereum wallet and buy a billion dollars worth of ETH. Like, obviously not, but or or is there something different they're telling you?

Like, how do you how do you view that inflow occurring? It's an trillion dollar question, I would say. I was this morning just with one of the larger banks in the world. Um, very very old school traditional. They historically have not wanted to get exposure, not even offer Bitcoin products or crypto ETFs to clients. Their board last November said, "Hey, we got to figure out something here." And now they're offering ETFs to clients. So, I think like it's again it goes back to distribution. Like what are these financial institutions going to want to offer their clients? Like one of the paradigm shifts here is Wall Street can make money off of this industry. So Larry Frink is the perfect evangelist.

So this is my point around you had all of these perfect headlines and prices are going down. That just tells you everything you need to know about where we are. Like just there's a massive overinvestment and overvaluation in some of these networks. Um but yeah, I I think you know JP Morgan launching uh the deposit token on base is pretty telling. Like I don't know exactly what went into that thought process but it was something probably along the lines of they've had an internal team working on blockchain since 2015 Onyx then Kexus they've been you know experimenting with that and most banks have teams dedicated teams internally to try to figure this out like hey repo 247 365 like settlement over the weekend like these are some pain points that they want to

solve. um they're looking at figure, you know, what they've done there to like streamline a lot of that workflow. Um where they're going to deploy uh I I would get behind the argument of like most of them probably look to Ethereum first before anything else and likely just stick to Ethereum. U you know JP Morgan launching on base is probably like hey you know >> but that doesn't mean they're buying ETH. That means they're launching stuff on base. >> Yeah. And and this is again it's a such a nuance take but it's a super important one because just because we have more adoption doesn't mean the value capture is going to be there like Ethereum okay you launch in Ethereum where in Ethereum did you

launch well JP Morgan launch on base okay what do you need to believe for bass to acrew all sequencer fees well it doesn't have a token okay you can't invest in that so maybe go buy coinbase stock okay is that trading reasonably well um okay what do you need to believe to support the price to sale ratio of Ethereum coming down from 200 to 400x. Like I want to buy stuff at like 10x for the sales. Like you know what I mean? Like Ethereum is 400 billion. It's generating maybe one or two billion in in revenue, not earnings. God damn, you need way more Larry Finins and Jamie Dimes of the world to get behind that to So again, it's not there.

And the last point I'll say is like you saw this a lot in the tech uh boom. like you businesses like Uber just didn't have good unit economics and it's one of those things where like great service but don't confuse great service with a good investment. Uber penetrated markets expanded rapidly delivered a phenomenal service to people but it wasn't profitable in the indoor economic spaces because it the customer acquisition costs were so goddamn high. They were offering incentives to people and that goes back to my point earlier which is building distribution even for a beautiful service like Uber that competed against taxis which provided terrible service was goddamn very very hard and they it took them they just barely started becoming

profitable in core cities like San Francisco and New York. Some cities are still not profitable. And so again, everyone's a genius when rates are zero. And there's so many businesses that like got off the ground because we were in record low interest rate environment. You needed that. But building distribution, whether you're in tech or crypto and any other business is very very hard. And so I I'd be a little bit cautious to just do the simple math around the institutions are coming. They're going to deploy an Ethereum over any other network. This is a path to a trillion. It's like not really, man. Like the value caps is not there for Ethereum.

Yeah, poor Tom Lee just eviscerated him in his uh in his Ethereum thesis. But yeah, no, it's I I think those >> it get clicks, man. But like, you know, I'll say this. Just because just because your guy in the bank like listen to bank list and and and somehow believe that, you know, this is a world supercomput. Yeah, man. You know, doesn't mean that Ethereum is going to be worth a trillion dollars. I'm sorry, guys. It it maybe is worth, you know, at this price, like 10 times sales, maybe. You you you know what it is? It's like it's it's a holdover of what crypto used to be like in 2021 and and and before where you just you joined a camp and you stuck with it and you whatever the actual reality of the situation was didn't didn't matter. It was I got in through

Ethereum or I got in through X or I got in through Y. Like I'm a chain linker. I'm a Ripple holder. I'm a Ethereum holder. And it's like that's what the DATs are kind of like reintroducing in my in my opinion in a way. they kind of like need need that to be true. Like Tom Lee needs it to be true obviously to make a ton of money, but it's just not true uh in any in any meaningful way. So no, I'm I'm I'm with you. I'm back to being a hard I I made I made I made a name for myself over the last two years by being the biggest Ethereum hater that's ever existed. Um two two and a half years ago, I I said that Ethereum was going to be the ripple of this cycle. Uh, and I think I think it's like

kind of heading that way, except Ripple's actually done pretty well. Um, >> we even got an angrily worded letter from both of the Bank list podcasters. >> Yeah, they they they they [snorts] said they sent us a cease to desist. That was pretty funny. >> Oh, wow. Look, man, I I'll tell you, I I'll leave you with this like price to sales because when you look at me, these dashboards, they all kind of say me, you know, those are that's a revenue of these chains, right? And they confuse that with earnings. Like they'll they're they're juice they'll throw in there like staking rewards. I'm like that's that that's not that's not revenue.

That's not earnings, right? Um look at cash flow of these businesses. You know, you have category killers in the public markets like anything above 10 times price of sales is growing dramatically. It has contracted revenue. like the even the the the best SAS companies in the world, you know, they have maybe 10 to like 10 to 15 times a arr recurring revenue make underwrite a thesis if you're Tom Lee. I mean I think he's a very good like you know public speaker or whatever but like fundamentally walk into a committee and give me the reason why I should buy an asset that is trading at you know 100 200 300 400 times price to sales when revenue is not recurring.

Even though even though you could say it's high growth like maybe maybe you get behind the growth piece because all the institutions are coming all great you know but again it's it's one of those things where you just got to stay disciplined man and rule number one is never lose money rule number you know two is don't forget rule number one and this is why I titled my blog post today I said you know thank you dear LPS we outperform Ethereum but the fund's still down 80%. How many times? How many If you have fund managers, how many times has that goddamn letter been written? >> Too many. Hopefully. Uh and hopefully never again.

>> At least not by any of us. >> This time is not different, Tommy. >> I know. I know. I know. It's it's it's we're we're going to go back there. But at least at least for now, we got people like you coming on podcasts like this, spreading the spreading the truth to people. So, um, we we do we appreciate you coming on, man. This is this has been fun. This is awesome as usual. >> Yeah. Amazing. I learned a lot. >> Please all the please forward all the all the the the criticism and whatnot. Uh, >> oh, we will. Don't worry. You think I'm taking You think I'm going to hold on to that for myself? [laughter] >> It's going straight to you.

>> Yeah, I appreciate what you guys do. Thanks for having me on and really good discussion. >> Likewise. Let's do it again sometime. Thank you, Santiago. >> For sure. >> Take care. >> Thanks, John. Take care.