Crypto Today: ETFs, NFTs, and Mid Cycle Valuations | Analyst Round Table

Transcript

if you're bullish on the onchain economy growing and ethereum just not being able to scale appropriately then like you can definitely be directionally long Celestia like you can it is good novel Tech and they do have a first mover Advantage TIG and da so I definitely think there's a time and place to bid Tia maybe not on a fundamental like cash flow analysis basis but on a a commodity basis like there is going to be net new demand for Tia the asset nothing said on zerox Research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial

advice Pacho Ryan and our guests May hold positions in the company's funds or projects discussed what's up guys welcome back to another episode of ZX researched I'm joined by Ryan pibbles and effort capital from the blockworks research team to talk about what's happening in the markets before we get started I just wanted to remind all of our listeners that the permissionless free tickets go up in price day by day so if you want to buy those tickets make sure to use code 0x10 and make sure to buy it as soon as possible I am still in the podcast phases where I'm struggling to find topics I think it might be potentially because feel like markets are semi- boring um they're not boring but I feel like we had more fun times in the markets like last month um but I

want to open it up to the floor and basically ask what are we looking at what are you guys doing on chain not on chain what are you tracking for me I'm looking at the ethereum ETF it is probably going Live this week I think everyone is under allocated we're we're talking about an asset that is a third the market cap of Bitcoin the App Store of crypto if you will um about to be publicly accessible by the everyday person person and um I think if you get off the vacuum that is crypto Twitter and you look at this from an outsider

perspective um if we see any sort of flows reminiscent to how the Bitcoin ETF flows were ethereum should go up a lot more the same amount of flows hitting an eth ETF versus a Bitcoin ETF should have a substantial price impact yeah I I feel like a lot of people I don't know if a lot of people are underweight but a lot of people are saying that a lot of people are underweight e um but I agree with you I feel like that like flow should do I also think it's I talked about this last time as well it's just such an easy narrative like digital gold is meh um the App Store of crypto now that's like a narrative that's what the trafi I feel like wants yeah I I um I mean look full

disclosure I would have been completely wrong on guessing BTC flows uh net uh uh I think the net flows on BTC when you correct for gbtc were like 14 billion at today's prices so I wouldn't have guessed that um I think that there are a few open questions with the ETF flows um first like kind of observation is like if you were a Trad if you were a long-term trafi guy and you wanted to get allocation to crypto um and you jumped on in the first three months of the Bitcoin ETF you carved out an allocation there and you're probably up

like 50% to 2x on that allocation so if you haven't changed your position you're overweight um I think that a lot like at this point in the cycle like Trad fight investors are not like they're not stupid right like they see how these Cycles work they see the asset class go up multiples and then crash 70 plus percent um and they're price sensitive buyers it's not obvious to me that if they have a Bitcoin allocation they want an ether allocation in that context they'll probably wait for a greater pullback um I think that there are when you think about a trafi investor they're very much focused on Modern portfolio Theory so they look at the incremental

um upside that they get for each incremental unit of volatility of volatility um adjusted for the correlation to the rest of their portfolio and BTC and eth are highly correlated so if you want like theoretically like from a tradify investor perspective if you wanted eth beta you could just like lever a BTC which is just a more liquid market so because there's not that much of a divers diversification benefit for eth it's like not clear to me like what that adds to a trafi portfolio and um I think if you look at the ibit cap table you see that the biggest players there are ARB players so they're people who are playing the

creation Redemption and Arbitrage game for um the ETF right so they are seeing a difference in the in the value that the ETF is trading at versus um values in the Futures Market or in the spot market and they are creating and redeeming shares to capture that Arbitrage um so you sell like Millennium is a big holder there they are not a long-term investor they can be G they could be done with that position tomorrow and they could be long or short that position tomorrow so um like longterm like of course like I'm insanely bullish like eth flows um but at this point in the cycle giving all given all those nuances um it's not obvious to me that like you're going to break through 4500

on eath um that that's a that's a big number and even on like a flows adjusted a basis like everyone's done the back of the napkin math like we've talked to some investors here eth is whatever some portion of Bitcoin you adjust for its market cap you see the flows that went to bitcoin and you just scale up the returns to e there like you need like five billion in flows to get past 4500 and I don't know how realistic that is yeah I think another leg of this is also the fact that mount go Bitcoin distributions are set to happen so if you look at it as a pair trade the eth Bitcoin chart um should be breaking out here shortly with these Tail wins and

then the head wins for Bitcoin um I just I don't think there's ever been a point in the history of crypto where the ethb case has not been so obvious to the fact that it might be right under everyone's nose and they're going to be shocked in coping by the end of the month I want to go back to that 4500 thing is that like a um immed not immediate but I guess like a short to midterm idea is that it won't be it's not clear to you that it'll go past 4500 or is that something more longterm Brian yeah that's just that like adjusted flows analysis where you take the

difference in market caps and scale up the return per unit of AUM that e ETF would get um I we' we've you know we we sit in a very um advantageous position where we get to talk to like our investor subscribers and they're all like kind of doing the same analysis some are just looking at flows um some are looking in relation to like the mix of etps in Europe between Bitcoin and eth some are looking at uh relative to um coins on centralized exchanges for both BTC and eth when and you know when they get flows um a lot like no matter where you slice

it like it's hard to get past that number like very soon um you need significant capital and last thing before we move on to effort PES that mount gox thing I feel like that's Mount goau the US government's selling the Germans are selling I feel like this is like the big because this is something that's been like a hang on BTC for so long like for so long the mount gow selling as well as the government selling and now it feels like we're getting kind of over it at least what do you how do you think that like after it's done what do you think people come back and say oh now we're going to have like X selling or do you think this is it I don't know I think it could be it unless the uh the the eth ETF marks

the macr top for crypto markets for the next few years and this is all fugazi and it's down from here yeah I struggle to think that the EF is anything but bullish for for the asset the timeline is absolutely upset despite having uh what $3,500 e 63k Bitcoin um eth BTC has been like the favorite pair trade to be short I think for a lot of people in size over the past uh I don't know six to 12 months at this point um I agree with PBS I think it's it definitely there's a lot of Tailwinds for eth there's more headwinds for Bitcoin at least in the short to midterm uh and I'm looking at like one of the best eth beta

options on you know at my disposal obviously institutions aren't gonna be doing that because eth is effectively like Ryan already said um a highly correlated beta play on bitcoin uh at least historically speaking but there's a lot of catalyst I think for for ethereum um not just from the ETF news but Ali Fort H the ethereum road map L2 road map vision WTH is on the horizon at least ref 1.0 just launched from from Paradigm that's can enable like parallel execution much higher through put for l2s which obviously leads like more data being posted down to ethereum as like the major data availability layer for all the all the l2s that settle and leverage eth as a DA solution um you're seeing some you know fault leaders in the ethereum community at start talking

about Shifting the mindset from being ethereum being focused on solo staking at home staking to more um I guess higher throughput machines leveraging the for for for the Lan which I think is bullish and kind of taking some of the lessons learned the best practices from the salon ecosystem um I at the end of the day ethereum has what like 90 Plus percent market dominance on the web 3 developer ecosystem and Landscape um I can't help you I to me I don't know how you can be bearish today especially knowing what the you know the institutions are coming to buy our bags and I 100% agree with you Bachi what you said earlier about the the digital gold narrative personally never resonated with me I'm not an Institutional capital

allocator I personally haven't really held Bitcoin historically despite being crypto for seven years I've had maybe at any point in time $100 worth but like ethereum other l1s our contract platforms like that resonates with me the App Store of the web 3 onchain economy um ethereum being a you know digital asset that generates native yields like that's what institutions are going to go after uh so I think the story is much more compelling um I don't know about $4,500 that's you know short-term midterm price uh you know prediction but I definitely think that ethereum looks relatively undervalued here compared to the wider crypto market and especially like something you can ape into in size um it it looks like a good good buy right here but I'm looking

at op ldo even despite the Securities announcement from the SEC last week unisoft has held up relatively well post fee switch announcement um a month or so ago so and and A's obviously done really well so I definitely think there's some good beta opportunities to be had on the backs of the ETF going live the best eth beta is levered eth fully vested fully vested No One's Gonna no one's going to dump that on me so the best eth beta is lever eth I think I I agree with that I think um I've seen a bunch of what's the best eth beta chatter on Twitter and like you can

look at betas like simple like covariance over variance across a bunch of different time frames but if you dig below the surface a lot of that beta comes from specifically down beta so the fact that alt coins dump more than they go up when BTC like in whatever e direction that is um so yeah I think quantitatively the best um the best eth beta is is lever eth yeah um y i I wanted to do e beta talk but I guess if we're saying that the best e beta is just lever beta I can't really do it but I was just going to bring up like ens is something that's been doing Sprite

well and it's something that I never think about but it like I mean I have some ens domains but that's really it like I'm not particularly interested in I feel like they don't have that much news out coming as well but they're just like that chart is incredible yeah what what ens names do you have I cannot share these probably in public ever I might go to jail I can't uh um one more thing about e ETF so the on the day of the announcement which remember the market was effectively pricing in like 0% chance it was happening then it went to like what a 25% chance a few days prior from like the the Bloomberg

Gods uh their their names are escaping me right now the day of the announcement eth pumped 19% which is ridiculous for such like a high Mark cap asset today the eth is only up 12ish percent and say's Monday July 1st say's only up 12 eat only up 12% from the announcement which I think is low considering that literally again institutions are about potentially come and buy our bags and uh I saw someone not from Bloomberg the Name Escapes me some like well-known trafi analyst I think everyone on crypto Twitter follows that he's already proclaiming that the eth ETF is be the second most successful ETF ever uh either behind Bitcoin or potentially in front of Bitcoin so um I think Ryan what

you you know me or said earlier about um the implied price based on flows I think like that's G be really interesting to see like how close your predictions are that you posted in the in the slack channel uh turnout being like once we go live with it one thing that's interesting too is like like what's your time okay like okay let's say you want to you have to trade eth like on this ETF news or on this ETF launch date what's like your time frame for like putting on that long position because like it's July uh and July and August and tradify like everyone's on vacation and those are the lowest months of volume it's like the dog days of summer right like you can

even look at the way that people manage their portfolios and like they look at Price action like you know price action is Meaningful it's a meaningful input but is people don't take August and July price action seriously because there are so few Traders on their desk so like it's a bad time for a product launch like it's not obvious like it's not obvious to me that you want a long eth right out the gate right like you might want to think about more of like a late August or September time frame after the market has like some time to like digest this new product um because it's it's certainly not a seasonally favorable time as for one thing I wanted to bring up from earlier as well like to what

Ryan said about how just feels like big funds would just lever up uh BTC instead of going to Eve I think that makes sense especially like I mean we were all at D and you talk to people and like these big banks these big funds they're not particularly like Adept they don't really understand e very well I I know like the Digital internet Global bond is it's clear to us but I feel like they might think it's a bit riskier than BTC is and I mean it is riskier than BTC is kind of but feel like they're not that used it's not that they're not Adept it's that they think about the asset much differently than we do at least some investors they think of it purely from a portfolio diversification

standpoint and when you have two highly correlated assets you already own one you're overallocated to it you don't want to you you don't put on the other asset because there's no differ there's no diversification benefits they know the quantitative characteristics they might not know the narrative um but typically like that's what a lot of these guys that that's how they invest but if you're like this is like the narrative for is better and I mean since it's lower market cap it might just go higher than BTC will like it might increase more why wouldn't you just say look like if I'm going to bet on crypto I'm gonna bet on E I'm not going to bet on BTC like I'm already do you know what I mean like

reduce exposure to BTC increase exposure to E I mean I don't like like you said though I don't know how these guys think like to me it's it's not clear um I guess maybe that's why like because of my thinking I won't know how these guys think ever but I think the the implications get broader when you think about okay if I'm Black Rock I want to get into e stanking I'm Larry think I go to my father the SEC and I say look at Leo and Rocket pool look what they're doing th this is so bad I want to do that not them so you you get these uh these notices last Friday because Black Rock wants to get into it you introduce

a compliant staking product that makes the the eth ETF oper or the eth ETF offering more complex you add another level to this trade and it's not just like oh I can get three and a half% yield on eth it's like what's the USD yield on that if eth goes up at the same time what if I'm actually pulling in like 50% annualized on that eth and then how do I look at that from a trafi perspective allocating well what about the Solana ETF that's G to be the market top that's the market top of the cycle not e ETF I feel like link ETF would be Market top or like xar be like the next one do you know what I mean but I mean I

could see it depends on the time I think um it's it's a little ahead of itself if it doesn't have a Futures Market beforehand um also another thing to consider is that we've truly only had salana on the year or on the open market without open manipulation um for maybe one calendar year this is the first year we've seen customer deposits not be used to prop up salana and if you look at the um like the historical precedent of Bitcoin or eth they had a much longer time frame where you could kind of verify the data of like okay maybe this isn't being manipulated but then if you look at

something like the fit 21 bill that passed the house just needs to pass the set Senate now um one of the qualifications for if an asset is sufficiently decentralized is that the um all distributions of the asset are to like open market participants AKA there's there's no vesting there's no Private Sales that are still unlocking and I think that's a huge differentiator for why something maybe I don't even know if chain Link's fully vested but like Link versus salana versus eth um there are a couple characteristics there that need to be taken into consideration if you're thinking about this as a 75y old man who's in charge of

markets yeah that makes sense yeah I think that I mean the dynamic that you're going to see like I'm very much interested in looking at these things uh from a fundamentals perspective from a cash flow perspective um I think that if you are a trafi guy and like you want um crypto data like one of your first stops like might be Artemis and Artemis is going to give you like a nice price to fees um and if you dig a little bit deeper um you might like construct your own model um with artemis's API to like build some kind of price to fees and Mev model where you get these cash flows and you can rank these Assets in terms of

their cash flows and the relative valuations and like um eth is not the cheapest um uh L1 gas token or or L1 L2 L3 gas token right like it's actually on many measures more expensive than something like salana so if you are fundamentals oriented person you think that cash flows matter at least as a floor for one of these assets um like when you think about the salana ETF or if like if you're up the curve quite a bit on like crypto fundamentals Val valuation you think about an incoming salana ETF like do you wait for the cheaper chain with the lower market cap um with the higher growth rate I don't think that that's um like an

unreasonable assumption I will say one more thing just the way just looking at like options data right like how the Market's actually pricing in uh potential volatility of ethereum going into this so May 19th is when um the ETF was pretty much announced uh that there's a high potential that going be get approved uh with I think like the S1 filings uh in June July um right now market like call option this the spread between call options and put options calls are actually getting pretty expensive so like the 25 Delta skew for like uh options that are priced one month out expir from today there's like an 8% spread between uh call IV versus

put IV so historically speaking that is relatively expensive so people are putting on a trade where they're putting you know they're buying calls ahead of this announcement so it could be at Le in the short term I could definitely see something similar to bitcoin uh ETF announcement where that was like a short-term sell the news event but then after it washed out some like overleveraged apes then we you know proceeded to I think have like a decent retrace back upwards um I don't remember exactly what the price of Bitcoin was like right on the day of the ETF announcement like what the week was but week after was but my memory serves me that we had to wash out and then like a move back up please jump in if someone can correct me if I'm wrong there but I could definitely imagine there there

being a similar move uh just the way like I think the options markets pricing but generally speaking I would be surprised if in Q like later Q3 going into Q4 if um if e isn't higher from here okay so we're all bullish e uh Ryan is cautiously bullish e but he's still interested in it this is great news um enough ETF talk I want to bring up something that's on all of our minds including bricks most importantly um where like Celestia that's literally it I just want to talk about Celestia I feel like we we haven't covered this in like three months last time we covered it it was like data

availability is the greatest thing in the world this is incredible and now at least according to I'm gonna put this tweet on the thing and then I don't know how like reliable this guy is he has his um he has a secondary Market basically exchange where people can sell OTC but he was basically talking about how all the OTC price of Tia is lower than it was pre tge which means that it's lower than dollar two and unlocks are coming up in October which I think like 33% is unlocking and we talked about this in the morning call as well but I want to get what your thoughts are on like what's next for data availability

because I talked about this with Ryan before the call as well it's just that they don't make any money you're pricing it the growth at like a ridiculous amount of growth data availability and everybody now says and I feel like this is true and I think you may have said it first originally they effort is it's going to get commoditized like they availability it's it's going to get lower and lower and lower so where do you like when do you think berneski is validated and like people are like okay maybe he was right again um how do you think that plays out like my perspective is CEST Tio probably will go up like it's down what 70% over the past three months like that is bad it is a novel

solution data availability does seem like the end game for a lot of l1s assuming you can't have one Global shared State take on the entire onchain world economy so like Tia Celestia is an Noel solution data availability will get commoditized that's why Tia is starting or that's why SEL Community is trying to generate this modular money narrative that's why they're trying to make it easier for rups to adopt TS G not adopt Tia as gas but export Tia in a trussle s through like ZK accounts which is a conversation being had in the uh uh Celestia Community forums um I mean Celestia needs an ETF it needs institutions to buy the bags in order to buy all the unlocks that are coming up

uh it's definitely not a pretty story but I do think there's gonna be a reversion to the mean I don't I can't say with 100% certainty that's it's like fundamentally undervalued because really nothing in the space is fundamentally undervalued nothing is but like it is an ala solution ethereum will have a tough time at generating the amount of scale needed that like Igan GA or Celestia can do I think on a prior podcast I misspoke and said something like ethereum's end state is like two megabyte blocks I could pull in mpoke there I believe it's actually reading a piece by a16z on data availability actually think it's like 30 Meg blocks but Celestia is on Pace to have like one gigabyte blocks not anytime soon but that is an order of

magnitude more uh throughput so like if you're bullish on the onchain economy growing exponentially over the next decade ethereum is not going to cut it at least today so there is a chance for celesia to still like eat ethereum's lunch in that uh specific vertical but they definitely need to generate demand for a tea of the asset and actually make this modular money narrative grow um I'm not a buyer here I unfortunately sold my ta air drop way too low so like I'm actually glad that it's starting to go down because maybe I can actually buy back at where I originally sold uh I'm definitely a hater um yeah I me that's really all I can add

to that I think like generally speaking I think rups long term are just going to leverage multiple da Solutions at the same time it's so cheap they're paying sub Cent like per megabyte cost um or sub 20 cent me per megabyte costs that's only going to get lower from here I definitely see a world especially because data availability if you share one with another rollup it does help enable trustless interrup ideally you want every your rollup to be share to be interruptable with every single other rollup or other chain in the world um so I see a world where like every chain every rollup leverages data availability solution from Celestia Ian da ethereum and near and aale and nuff all at the same time and it pretty much costs zero to do that um I don't know why you

wouldn't want to do that for redundancy purposes and for when I first met with the blockworks team I was reading all of the research that you guys had put out um this was early in the year and I came across some tweets by Dan uh our top data guy who did the back of the napkin math on how Tia gets to $50 million in revenue and it's via 4,000 arbitrum posting data to Celestia like that is let's assume that the app chain thesis thing happens let's assume that that's like the first principes correct way and that's like the way that wins out in the market um it's going to take a long time to get there um

and uh I don't like how much of your portfolio do you want to allocate to like such a like low earning and like highly improbable bet like the the time frame really matters like let's say okay granted you do get there in a decade uh assuming that the apch app chain thesis is correct like that's a lot of waiting time and the current valuation does not support that um so I think it's A Hard Sell uh you know it it really stinks to see these tokens go down in this way because they were just mispriced to begin with like Tia should not have been where it was like there was this like you could have done a DCF like on like a very um like very optimistic projections for airdrops for what you're going to

going to receive for over a short time frame and like it's a shame that it put Tia to where it is but like this is now going to be a problem for that project um like filecoin suffering this today like I don't know who bid filecoin up to like $ 150 billion doll valuation in 2021 but like it really impacted the project and it will for years um and it's it's super unfortunate like liquid Market participants man um like that's a hot potato to you and I don't know if I want to touch it right now I have no thoughts on TIA because I'm a law-abiding citizen of the United States of America so I didn't claim my air drop so I tapped out right that's fair um yeah I think I basically like agree with both effort

and Ryan that's they they priced it at this point where they felt like oh I'm going to get mid uh four to Mid five figures every month just R from random rollups airdropping and then they also priced it as if like everybody wanted to use rollups all the time and there was going to be a million app chains and life was going to be really good and then I was going to send effort like a message through my slack app chain and he was gonna respond for his telegram app chain like they were all gonna share da but I was say the bul case for Celestia is that ethereum data availability Supply cannot outstrip the demand assuming we do have a handful of rollups that are

currently leveraging ethereum da or plan to use ethereum da in the future and like the cost associated with posting data down to ethereum just is not good enough and like if it's currently not good enough uh it is currently too high um compared to Celestia on the order of like a magnitude of 50 to 100 times more expensive than Levering Celestia so like if you're bullish on the onchain economy growing and ethereum just not being able to scale scale appropriately then like you can definitely be directionally long Celestia like you can it is good novel Tech uh and they do have a first mover Advantage Ty and da so I definitely think there's a time and place to bid Tia maybe not on a fundamental like cash

flow analysis basis but on a a commodity basis like there is going to be net new demand for Tia the asset um I don't know what price that is I I don't feel comfortable saying that but like I do think that relatively close to some type of like fair value assuming exponential growth of onchain demand how do you make something modular like not something how do you make Tia modular money how how can that even work you I mean they did like a like a joint campaign with stride or I don't know if it was a campaign with stride but stride was trying to get people to leverage stake Tia uh in lending protocol

throughout the right and the more um the way you make something money at least in my perspective is you get it to be like the do dominant pairing on all liquidity pool assets you get to be the dominant thing that's being borrowed against as collateral in defi um and you also have to use it for gas for um for paying paying for a service right so that's why if you get rollups to leverage Tia for gas uh if you get rollups to make Tia the dominant form of collateral for def5 purposes um at a certain point it hits some type of escape velocity and network effects stold and then there's a money like I don't really like using the word money

anymore like I think it's like a good Capital asset like using it for Capital D5 purposes is really where the the net new demand for T is going to come because it's definitely not going to become come from data availability anytime soon the only issue with that I feel is like why would you launch your own rollup like let's say especially as like a app chain you launch your own rollup because you want your token to have more use and then but you don't want to use Tia for it like if I'm some random decks and I launch a roll up and I use Celestia da I'm not GNA like also make TM my gas it makes no sense that's the whole reason I launched

the roll like apart from wanting to own the stack which I think is a mid level I think most protocols do it to get the valuation and as well as like the token to be used as gas and like for it to become money the way that you said it it's like how Tia becomes money people want their own token to become money so why ever use Tia as Gess why ever use Tia as the base asset for liquidity pools for defi when I could just do it for like my own perex token stronger it the cosmos ecosystem though kind of played that out and realized that nobody wants to hold 20 different assets for on stargaze no no you know shot at them but nobody wants to bid nfts and stars like people want to bid in like an asset that

is liquid has a high market cap and has high Network effects it's like do it in atom do it in usdc maybe Tia does have enough Network effects uh where it makes sense to kind of R you know tag along uh to me I think like the end state of this is kind of what l2s are actually doing like ARB has no use today op has no use today but eventually you can stake your native L2 token to get uh yield based in the the base layer asset and like that is a good and you can actually do a proper DCF analysis of that like that is like I think a good business that all RS are eventually going to want to do but no nobody wants to hold your token to pay you want to abtract away gas fees as much as possible so I don't want to have

to have 10 different assets in my wallet just to pay gas and different chains it doesn't work this is not going to be a good segue but I'm going to go for it you brought up stargaze and I want to talk about nfds um nfds are still dead punks are below 30 E I have more notes on it that I want to bring up actually that I want to specifically say out loud uh volumes are low but we're still getting like the only buy seem to be people front running some form of airdrop and then you'd like see million dollars spent on Mad Lads and Pudgies and stuff what do you think like do you guys think that comes back

cuz I was looking at some figures this morning and people were like last cycle people were dropping like 30 40 E on absolute like dog like genuine horrible stuff so I think that when you think of nfts you have to think of it differently from when you thought of it in 2020 2021 speculative pfps I think you need to look at it from the frame of something like Zora where it's it's more about like empowering a Creator economy Distributing your work like your creative works and connecting with your fan base and if you look at it from that angle nfts are not dead today when you

can pull up zor dashboard and see they made 30 mil of Revenue in one calendar year during a period where nfts are quote dead it's just it's a different meta and a different way to frame it that is more consumer friendly and is more more Centric around you know like I'm going to pay $2 and support a song I really like like this guy just dropped a new song or this guy just dropped a new artwork I'm gonna pay $2 because I like him and I have that in my collection and I can you know have this like onchain portfolio of like this is cool this is all the stuff I like um versus something like even mad Lads even

though they're getting swept like the art looks like man yeah madlads is like I never understood why it got popular I mean obviously like but still I never understood why it got popular yeah I agree with I agree with you guys I think I mean look the nft thing like the whole framing is like really muddied because nfts are like an implementation detail they are not it doesn't mean like pfp it doesn't mean like LP position on Unis swap so it's like it's really hard yeah you have to be hyper spe specific about what you're talking about I think we're talking about like the 10,000 um like collection pfp nft type things um look I think yeah I I agree I

think that in that context nfts are a really interesting distribution like mechanism for creators that we've seen like Zora and drip really leverage well and the key there is bringing the cost down to almost nothing like that 2021 like nft NF nft cycle like it was like meme coins one 1.0 or maybe 2.0 when we're in 3.0 now um but that was um mostly just you know based on um like meme speculation or cultural speculation and we have a much more efficient mechanism for doing that today which is just like uh you know me meme coins um

uh FTS fungible tokens uh it's much easier to manage that portfolio the liquidity is much deeper managing a portfolio of madlads today for speculative purposes like that is like managing a bond portfolio like with different expiries and like different coupons and different issuers in in ratings and liquidity is terrible like it's really really hard to do um I'd rather I much rather just like punch with and like see where it goes and then sell it whenever I can um so I think that that's a thing of the past it'll be it'll be interesting to see um what new iterations come next but I feel like we're we're too late in the cycle for that at this point and it's more like a next cycle

thing yeah it it's like nfts 1.0 the over the past few years that was like you were trying to make nfts similar to like Robin Hood speculative nfts what they should be is more in line with like an experience you would get Spotify or Instagram it's like these these areas where you can access something really cool but like I'm not opening Spotify every day because I think I'm GNA make a profit on Spotify it's content I generally like enjoy accessing and that's what nfts have to be for Success yeah I um I I've been using Zora more and more every day and I really

like it and I'm really excited to see like I think one cool thing we talked with intuition about this as well this is semi- related to them I think but it's like if I am buying stuff through like a specific wallet on Zora like minting stuff I like the idea that maybe in the future they might do some form of algorithm to recommend to you specifically what type of nfts you might like like I think stuff like that will be really cool like being able to look at your onchain history um and in general like I'm getting like ear not Instagram um we were talking about this with Ben and Natalie on like a few weeks ago on the podcast and it was like it's kind of like Tumblr in the original days

like Zora especially um or like early like early Instagram but like the more artsy aesthetic side of it it's quite fun I I do this I don't think that pfb and FTS are done though that's like my only I think a lot of people are like oh it's like the pfbs are they're not like they're going to just keep going going down the I don't like there's I say they need like they they need utility um utility is bullish for nfts I I disagree shaking head no yeah no like owning to me owning a pfp yes there's a culture side to it yes it could be like the Mona Lisa Von chain economy yeah yeah yeah like there's like three of

those that are maybe like punks are gonna be one of them uh board apes are not it they're going to zero um a canful maybe the maybe bad kids shilling own bag like I don't know but most NF nfts you want to be feel like you're part of a community you need to actually get people in real life to go do things and owning that pfp actually give unlocks the ability to do that like link style maybe like a tangent example but you know you I'm an owner of Link sty I'm able to actually participate at exclusive golf clubs I'm able to they have a pro shop where if I log in with my nft my and onch my my sorry log in with my wallet I can get discounts on link sty gear like that is actually

useful I spent I don't know how much money for the link Stow membership originally but based on discounts and based on their Partnerships with Callaway and other like golf Brands I could actually make my money back easily within a year if I really wanted to use the like nft to its full use and like that is I think how pfvs generate value over time as as a man yes we feel like we need utility but you you underestimate the power of a little guy and my girlfriend loves little guys and a lot of girls everywhere Love Low guys and a perfect example of this is Calico Critters which are these tiny little figurines and they're just these little fuzzy guys and the community is enough

for them they all are ordering these Calico Critters Sunny Angels is another one they just like little guys so we can't underestimate the power of the community of low guys bullish little guys I got that I can I can definitely get behind that that's fair um I don't I don't think utility is ever good for nfts I think it like gets put on some road map and it's like I that's like probably I love youf but that's like the take that I disagree with the most I think the only way that pfbs do well is if they can associate themselves with a specific Vibe or brand or like some form of a community and the clearest example of this is like Bad Kids versus the sloths

sloths are fake like it's manufactured bad kids is like it has been adopted by etherium SL Cosmos researchers academics like Builders Etc and like that's more of a genuine like Community like when you see that you assume that somebody has certain credentials they're part of a certain group the same thing with my ladies if you look at like somebody who's a Mady you assume that there certain credent like they have some form of aura they participate in some form of community it's like a specific person and that's the same with Pudgies to an extent mad Lads no it used to be kind of like that it was like back when Soul was sub 30 if you had a madlad you were like oh you're still a Solana

believer Etc but now it's just kind of like a bit random but that's the only way that I see them working as well as like so you can Flex on people like punks is both a flex as well as like you're a punk yeah I think my my all take is how many of those can there actually be moving forward we're going to find out yeah I I don't think like every new rollup that launches is not going to like have their own pfp collection like coinbase base makes sense because of the brand behind you know the company behind the the rollup but like you're not going to see arbitrum have its own pfp collection as like the punks of arbitrum like that's not going to happen I don't think I could be wrong but but see they had it

it's like small brains they tried it do you guys remember they had exct didn't work out it wasn't Li nobody wanted it what is uh I mean I think the the better question here is like how does an investor of any meaningful size like make money on like this nft thesis um what's the big Market it seems hyper fragmented it seems highly uncertain um if there is a fund that does this I imagine it's going to be like one or two and they're going to most mostly be like digital art funds I don't see like a great way to monetize this other than like some sort of issuance platform or like verticals in nft trading like it's that's those are the only bets that make any that make

any sense to me yeah so the best way to invest would be if Zora had a token and you would just buy the Zora token because the platform itself made 30 mil in Revenue so you expect that to grow but as far as like punting a portfolio of pfps no that never works out it's also like it shifts so quickly like The Meta it's so different from like even month on month I thought blur like blur was touted as that but people aren't really flipping nfps anymore they just we're not like that is done I think like flipping pfbs it doesn't happen anymore so I don't really

see like blur as a like how how what they get like 05% fees doesn't make it Zora is cool I guess V house because it's related if they had a token that's really it before we move on to more exciting topics let's have a quick word from pudy penguins thanks to our fantastic sponsor layer zero what's up guys for this week's layer zero snippet I'm joined by Luca Nets the CEO of pudy penguins thank you for joining Luca hey happy to be here uh you guys have built a really strong community over the past year and like a really good brand as well uh what are some things that you guys did to achieve this I think uh the community has been through every trial and tribulation that

a community could go through in crypto uh paired with us taking over and just giving them what they want uh I think uh the combination of the two is ultimately led us to where we are today that makes sense how does layer zero fit in with FY Penguins yeah I think through a couple of ways you know first and foremost the entire layer zero team is pudgy penguin holder and so they've been ingrained in the culture and in the lore since pretty much day one uh you know secondly layer zero Powers a majority of our technical products uh one of them and probably most notably being our little Pudgies Bridge uh that is actually available across binance smart chain arbitrum polygon uh which allows little Pudgies

to kind of navigate through the multi-chain terrain uh and then lastly uh just our our our backend ecosystem products that are not necessarily as forward- facing is also powered by layer zero so uh from a community and culture perspective they're ingrained and also from an infrastructure layer uh they pretty much power a majority of what we do yeah that's really cool and do you guys have anything exciting coming up over the next six to 12 months hopefully we are opening up the bridge uh to salana and opening up our ecosystem products to the Solano ecosystem via lir zero uh and I'm excited to see what that's going to look like shortly perfect that sounds really cool as well thanks for joining Luka thanks for having me Ryan do you want to

talk about telegram open network a little bit yeah sure so I guess for the last few trading days about a week or so maybe more um you know I I subscribe to a ton of telegram like newsletters or or messaging channels and um those channels are focused on like what are the biggest new what are the biggest items in crypto every day and every day there's something on t um which is great for that ecosystem right so there's you know there's more talk about uh larger investment purchases OTC uh we obviously know about the large panta purchase I think they're doing a second tranch uh they were they were featured pretty prominently in a in a trafi conference it was a Goldman with a bunch of

institutional investors um tvl is up and to the right um there's a really strong um narrative surrounding the ecosystem regarding distribution so um you know ton sits today $40 billion market cap uh it's a top coin in the ecosystem above all l2s it's closing it's half the value of salana um it's getting significant mind share in the industry or you know has a has um has a relationship with tether for minting usdt on on that chain so uh undoubtedly you know it'll continue to be a you know a big topic of discussion um the community there is like um you know they are they're working super hard

to you know build new apps have those Primitives there waiting for new users and to like get this chain to the Forefront um we released a research note on the Chain um and you know when we do these notes we only want to do them if they're like net interesting and we're not going to force them to be interesting but we don't want to write necessarily what everyone's writing about so like if you think if you were to think about like the deep in space like it's very easy to write about how like like the cost advantages of a compute dend Network right but like we didn't do that we took a different different angle and we did the same thing here so like there there's a there's a bull case for ton and it and it focuses on telegram's distribution

specifically this 900 million this 900 million user distribution um and that's super impactful and uh we tweeted about this that if you're bullish on base because of coinbase's eight million user distribution you should be 10x as bullish on ton for its 900 million da or ma distribution um the there there is a bare case for ton that does not get enough circulation on CT and it's that um this distribution is overstated um when you dig into like the Nitty Gritty of that distribution and

how it relates to time um shot on goal as a super app it does not order uh it does not offer the same kind of benefits as say like a WeChat it has very fragmented distribution and um and that the kind of developer Paradigm or like the developer tooling and and native language uh that you would use to build applications on ton it's it's challenging relative to other blockchains right so taking those one by one just like what's telegram's like user count um 900 ma us is fine but when you think about what's important for a messaging app it's dius like

messaging is integral to who we are both personally and professionally if you're using a messaging app once a month like you are not a user in my mind you're very much not monetizable monetizable users are daily active users and when you try to estimate what those users are you can go to similar web you can go to business of apps it's somewhere between 50 million and 200 million and taking that ratio of um of daily active users to monthly active uh monthly active users for telegram is shockingly low compared to competing social apps so whatever you like if you built a model and you were thinking of onboarding as a

function of that 900 million user number like that number needs to be scaled down um the distribution is also super fragmented so if you just look on a country bycount basis like very much unlike WeChat another super app another messaging app an app that uh the telegram team really emulates um you'll find that telegram has distribution into countries and regions that are very much linguistically and socially fragmented so the go to market for a company there is like for a company on ton is very very different than just selling to the single homogeneous Market China right so it's not obvious that that distribution

channel is UM OB that distribution Channel isn't obviously useful for all crypto app crypto app developers um and then like the last point on just the programming language you know we're hearing like the the native programming language is called Fun C which looks a lot like C um it's not as widely used used as JavaScript which looks a lot like solid solidity it's not as admired as rust which is used on Salon it's somewhere in the middle it's NE it's not really well-liked or widely used which is a problem developers in the space um have touted their advantage in this regard right so if they're already developing

their today they they believe that they will face much less competition because they've already deployed contracts and new teams don't want to learn C or don't want to learn fun C then like the other problem there is like there's talk of evm l2s Onan now like you can debate like what the value capture is to ton as a settlement layer but I'm going to take the position that execution is more valuable so if you have um if you have rollups posting proofs to your chain you're capturing much less value than you would if um contracts were being deployed in transactions were being executed directly on your L1 so I think that you know $40 billion valuation it

all comes down to Price Right all those facts aside what matters is the price if ton is like 150th of the price that it is today like I think it's a probably a massive buy I think that everyone in like I think everyone on the call right now would wanted in their portfolio the the real issue like given that the Confluence of that evidence is like is40 billion the right valuation for that asset midcycle today after a massive runup like do as a new investor do you want to buy that thing it's not it's not clear to me that you do I think the argument against Ryan's thesis on T was that like look the distribution of

telegram is still like Leaps and Bounds every over everything else that anyone in crypto Has Done Right like like coinbase look at binance like telegram is still orders of magnitude regardless of its stickiness with it's daus or ma ratio um which I think is a fair point but I've used all the applic I haven't used all of them but I've used applications on telegram on on ton and I am not they're not fun there there's nothing new there there is a higher barrier entry to develop on T ton like what Ryan said earlier um 40 billion is ridiculous like Peak froth uh Cycles last sorry Peak froth valuations of last cycle were 100 to 100 12 billion for layer one um

yes I think the cycle could be bigger than last cycle but you're still looking at you know comparing last cycle l1s to the to telegram to ton this being its first cycle relatively speaking you're talking maybe another 2 to 3x like hey I'll take a 2 to 3x I'm not that's nice but there's def I think you could make a strong argument like Bitcoin alone can do another two to three x from here like if institutional flows are bullish and if their rate cuts and liquidity Prof you know uh overall Global liquidity increases um ethereum obviously can easily do that if the institutional you know if the ETF uh finds a lot of legs in terms of uh flows um there's just a lot better bang for your buck value

plays out there and I don't think T is it yeah I hear all the criticism and it makes sense um one factor that I think that goes contrary to that is if you were able to open ton to us investors tomorrow I think um the speculative nature of the markets mixed with us Capital could inflate this thing another 50% uh just pass the torch to the US investors let the fines actually buy this on coinbase or something like that send it higher but still the underlying fundamentals that were outlined in that report still stand true you know like probably overvalued could get more

overvalued but it is riskier right here if um you're not confident that US capital is about to come eat it up yeah I think the only like actual Counterpoint to Ryan's report is that it does like it doesn't matter I think that's but I feel like that's the Counterpoint with every fundamental look you do in crypto like does it like there's a hot ball of money and it loves growth stories and potential narratives and like I read Ryan's report even I think before it like it was done it was really good and I like his points especially regarding like the

distribution Channel thing to me wasn't very clear so I appreciate that he really dumbed it down for me when I asked him 15 times like why doesn't it work um eventually it clicked and to me like it makes sense now but that's like the like the way that you brought it up effort and was like what's the Counterpoint I think that's the Counterpoint is that there's a hot ball of money flowing around and it's like like pble said like it's overvalued now but it could get a heck of a lot more overvalued in three or six months yeah this is this is a great thesis in November when telegram uh or or January I forget maybe it was October don't quote me um but this is a great thesis back then when telegram like announced

like it was coming back to the table and like renewing this partnership we're up like 6X since then that's tough for that's tough for me to get behind personally yeah agree and a lot of people got upset which is always great if like you put out a thesis and a lot of people like get upset like actually upset then you're like yeah you know what this is this is a good one yeah C deserves to have both the Bull and Bear case um up until last week they really only heard the bull case I do think us as a research shop though is like there's not enough be cases out there written by a lot of the prominent research shops blockworks research

included so I think that this is like our first Fray into this type of analysis and I do think it's okay to be bearish sometimes if the data and you have like a strong like this every you know Equity analysts like make their name off of being bearish or bullish like you can't just be up only forever uh obviously you're never going to time to Market perfectly but I think insightful analysis as to why you are bearish a particular protocol is something that's value at to Market participants in this space and there's not enough pieces out there like that I personally have not put enough enough bearish pieces out there on things I've publicly said I'm bearish about but haven't like done the time to create like an articulate long for report as to why um so I think for Ryan regardless

like whoos to you for I think having the guts to put out something like this um because again I personally haven't seen seen it often yeah and there's there there's also a difference between like there's a a lot of things get conflated in crypto um like you can be bullish fundamentally on the thing but the price could be wrong right or like you can be bullish that Tia is going to be the data available availability solution for web 3 in an in in an in an app chain world or not but the but again the price could be wrong and that's the core of the that's the core of the thesis is that like if you are a new investor you have no position in that in that token it's very hard to

to justify yeah it's also tough to be bearish in an industry where everything goes up 40x every four years and mid cycle you're like ah maybe this one's a little but yeah I agree guys thank you so much for coming on um I really appreciate it oh