Former Barclays CEO’s Big Bet on Hyperliquid’s Explosive Growth | Bob Diamond & David Schamis

Transcript

Introduction

In less than three years, a company with 10 employees and zero external capital have built what I think is the most exciting and probably fastest growing crypto exchange in the world. The only token in the top 10 tokens that has not been around for a decade is Hype. How did it get in the top 10? Because of the explosive growth, the success, the cash generation, the buyback program. All of these things mean this price has real appreciation ahead of it. >> We are solving a scarcity problem by making this easily accessible through our digital asset treasury company that is that will be publicly listed on the NASDAQ.

>> The fastest growing token that is yield generating that is part of the ecosystem with an incredible revenue generation stealing market share from everyone. This is a very very very exciting investment. This episode is brought to you by VANX Semiconductor ETFs. You'll hear more about the Vanex Semiconductor ETF, ticker SMH, the largest semiconductor ETF, and its newer Vanic Fab Semiconductor ETF, ticker SMHX, later in the show. The Blockworks Digital Asset Summit, crypto's premier institutional event, is back in London this October 13th to 15th. You've got top speakers from Black Rockck, Circle, Coinbase, the UK Parliament, and Athena, all under one roof. I'll be there as

well, hosting a live Forward Guidance episode with Quinn and a few others. So, if you want to see us record in the flesh, or meet some of the other legends from the Forward Guidance community, this is your shot. Notable macro names like Michael Howell of Crossber Capital and Jeff Park are already confirmed with more coming. There's also a VIP dinner on the 13th that will sell out fast. That's for speakers and VIP ticket holders only. It's at Old Billings Gate in London. Use code Ford 100 for 100 pounds off. See you there. All right everybody, welcome back to another episode of Forward Guidance. And today I have a very special episode. I have the distinct pleasure to be joined

today by Bob Diamond, former CEO of Barclays, as well as the founder and CEO of Atlas, as well as David Sheamus, who's also CIO, co-founder of Atlas. And the two of you guys have a very fascinating situation that you have going on right now where you've started to announce Hyperlid Strategies, Inc., a new treasury vehicle company that is planning to purchase Hyperlid. And that's a very very fascinating narrative to see. I've been interviewing a lot of folks on the show recently that have been going through this transition from the Trafy world, from the macar world and starting to be a lot more observant and active participants in the digital asset world. So very honored to have

both of you here. Pleasure to have you. >> Great to be here, Felix. >> Nice to be here. >> Yeah, super excited. So for those that aren't aware of both of your backgrounds and how you ended up working towards developing a digital asset treasury company, I would love to hear about that journey because it's something that I've been hearing a lot about and seeing a lot more people that I don't know if you were both skeptics at one point in your career and then made that that conversion or just always been a believer, but I would just love to hear about that story of going from the Tradfire world that you both represented and where you're at today. There's no question we're both have been and continue to be tradi people. Um we've both grown up in the financial services world. Our business Atlas Merchant

Backgrounds: Skeptics to Believers

Capital is a private equity firm almost exclusively focused on investing in financial services businesses. Uh we both started in sort of the investment banking world in different in different ways. But um it's impossible not to have gotten exposure to crypto over the years. I think in 2015 I bought my first Bitcoin. I did it in a Coinbase account that I still have. I should have bought more like a lot of us. A couple years later, Bob and I were on CNBC after we announced a deal that had, you know, nothing to do with crypto. It was an insurance deal. Um, and of course by 2017, that's all they wanted to talk about on CNBC. And they asked us what we thought about it. And I actually said, you know, I am I'm pretty skeptical, but

you know, having a half a percent or 1% of your net worth in in Bitcoin is probably not a terrible idea. At the time, I was kind of laughed at a little bit on the show. And in retrospect, you know, we all should have put a lot more than 1% of our net worth in. So, I would say Bob can speak for himself, of course. Maybe Bob you can talk about circle for a minute but uh we you know we've both been I think healthfully cryptokeep over the years but it doesn't mean uh we were we were anti-crypto as a matter of fact again I owned some Bitcoin and we've done now two crypto deals over the years and you know every investment we make and everything we've done over the years and everything I've

done from the beginning I've been skeptical over. So like being skeptical does not mean being being anti in my opinion. >> Felix, in my case, um it's been an interesting journey. I I joined Morgan Stanley in the early 1980s. It was still a private firm. Um like David at Solomon Brothers, I started at Morgan Stanley in the IT department. So I've always had a tech background, but it was much more around tech, how to process trades. uh in the very very early days of firms like Morgan Stanley growing from uh an advisory business into one of sales and trading f so very similar to the position that that crypto has been in over the last decade. My first job in

the front office in trading was in repo. And again in repo, the short end of the curve, you really got um real exposure to how trades settled, how they processed, how they were financed. And so I've always had a very strong background in the underpinnings of financial services technology and kind of front office, back office in Atlas Merchant Capital. Um, we were early early investors in Circle. Um, our original intent was 2021 to despback Circle. Uh, I think David and I feel good about our vision that we could see what was going to happen with stable coins. that process where we ended up

not getting the spa approved by um really the what we've all seen is the is the attitude of Gary Gendler in the SEC against crypto negative on crypto. No, no, no, no, no. The idea was for the democratization of finance. And I think Gary Gendzer will go down in history as having been so backward that his intent, which was to include more people in financial services, he did exactly the opposite.

But what happened during that time, Felix, is both David and I learned a lot about blockchain. And again, it goes back to our origin is understanding financing technology processing. And blockchain is an incredible technology. And both of us believe that 10 years from today, we'll see that as the underpinning of the infrastructure of even you know the the the convergence of new and existing financial services. And we also learned a lot about stable coins, the digitization of currencies, the democratization of finance, the removal of that middle person and that middle bank to make things 24/7 instantaneous

and uh much much less expensive than they are in the world of large financial services today. Since that time, David and I have probably seen 200 opportunities in what we would call broadly crypto. And the first one that we've acted on was hype and hyperlquid. And it says a lot about the opportunity that we see there. And you know, you look at the opportunity and the exchange and the token. If you look at the opportunity where of the top 10 tokens, the only one that's been around less than a decade is Hype. uh an exchange like Hyperliquid which is unbelievable showing unbelievable growth uh in both uh spot trading uh but it really

dominates um per trading today. So we're very very excited. I'm probably going on way too long from the original question, but that was the background. And I think, you know, if if if we had a vision for Atlas Merchant Capital, it would be, you know, we're referred to by many of the people we're doing business with right now as the suits. We don't want to be the suits. We want to be in the in the middle, in the intersection. And I think we're getting there quickly. we really really are enjoying um and and when you invest as you know you're really you know you're putting your money where your mouth is so you have to really study really analyze and the two of us you know uh WhatsApp each other at midnight some nights and we're both you

know reading new things about the the advantages of of hyperlquid >> yeah I think at this point the the value proposition of Bitcoin has been well understood and established at this point everybody knows the quick quip of digital gold and where that sits within the macro context. But I think what's more interesting for this conversation and you alluded to already with with Hyperl is some of the financial rail innovations that are occurring being powered by blockchain. And so one of them of course is what Hyperlid represents which is these decentralized onchain perpetual exchanges that there's some really interesting innovations just associated with that. There's also the stable coins thing. And so I would love to just tap both of your experience from

Hyperliquid Innovations

you know working in repo and that that sort of world especially is what do you feel are some of the most compelling financial rail innovations and and why are they innovative for somebody that you know already trades in their traditional brokers something like interactive brokers and you know they can already buy most equities that they're interested in. What are some of the compelling financial innovations in that respect that are relevant to them? Yeah, look, I think uh specifically around Hyperlid, some of the thing, you know, they've built this a system in a short period of time, right? They've been around for less than three years, and they built a system that not only works well for them, right? They're we've seen their volumes go crazy. We've seen their fee revenue go crazy in a in a very positive way, but they built the

system where others can build on to their system in a permissionless way. And that's just really interesting and really exciting and really different from like how traditional financial services works. So what do I mean by that? um you know if if you know somebody wanted to partner with JP Morgan if uh I'll use an example if uh Erade you know before they were bought by Morgan Stanley wanted a partner by JP Morgan you know the CEOs have to get a meeting they have to talk through it all and there's weeks and maybe months of of going back and forth on legal terms and and business terms and maybe it all gets up and running and maybe it's a success

and maybe it's not and and there's just a huge inefficiency in all that. Um, Hyperlid built their system out for that kind of partnering, but in a permissionless way. So, when I say permissionless, you don't have to call up Jeff Yan. You don't have to go to Singapore and have a meeting with him. You don't have to take him to lunch and convince him why you're great and others aren't. Um, you got to take the the the way they've set up their code, you got to put it into your system, and next thing you know, you're doing business with Hyperl. So the the best recent example of that is Phantom. Everyone knows the Phantom wallet. It's I think the top one or two wallets out there. Um they decided they wanted to start uh allowing their customers in the wallet

to trade perks. Um they didn't have again they didn't have to go to Singapore and go be nice to Jeff and all that. They literally took some code that Jeff had set up they put into their system and next thing you know they're in the per business. So just think how efficient that is versus what else is out there. And again, one small example of what you say about the rails doing more. I think another example um is what is known in the hyperlquid world as hip 3. So HIP 3 is the ability for others to create per their own per exchanges uh using the hyperlquid backbone with that.

So in other words, you're not using their capital, but you're using their technology again in a permissionless way. you just loop into it and instead of you know your your startup or whatever that wants to get into the per business uh and for some asset class taking you know tens of millions or more dollars to build out the exchange you're literally using their rails and you're building right on it and that that makes so much sense to me the the most interesting one I've seen so far at least being talked about in the HIP 3 world is for preIPO equities being traded So, you know, for years I've been one of these guys that have complained that I hate the IPO process that um

investment banks, you know, they're always pricing things for their buy side clients and not for the not for the company. And you see these big pops in the stock the day it starts trading. And on one hand, that feels good to everybody. Everyone loves when the stock goes up. But on the other hand, that's the seller. That's the the the IPOing company shareholders leaving money on the table in circle uh which was we just did uh the stock IPOed at $31 a share and it popped you know we all saw it pop really quickly. The idea that you can have preipo companies or companies that are not yet IPOed but trading in a per market allows for that price discovery.

Right? It's going to be a lot harder for the next circle if it's trading in the preipo market on like Venuals, which is one of the uh one of the guys trying to do this with HIP 3. Um if it's trading at $100 a share, it's going to be a lot harder for the investment banks to price it at $31 a share. And I think that's, you know, it sounds like, oh, who cares? You know, some, you know, some venture capital guys or some preipo investors making a little more money. What does that really matter? But you know if you take every venture capital firm, every one of their assumptions around exit and you increase it by 25% across the board for every one of those firms, you know, what do you think that does across the country or even across the world

when it comes to new job creation, right? If every single venture deal that's getting done has a 25% pop um in where the investor thinks they're getting out in the future, you know, that allows them to invest at lower costs to put in more capital and that has like a real effect on the economy. Um anyway, so we you know those are like two small examples of what of how hyperlquid specifically is using the sort of blockchain technology to make real changes in the near term in in what we all consider to be traditional finance.

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research. Bob, would you like to paint some color as well on some of the other innovations that are occurring? And I would also love to just hear a bit about you mentioned per there a couple times already. For those that don't know, that means perpetual swaps, which the closest distinction I found in comparison to is something like a CFD of sorts where or like a future without the the the final delivery point. And I would love to just hear a bit about some of the reasons for that sort of derivative compared to some of the more established ones like options that we already have or futures that have a specific delivery date associated with it. What what is the compelling value proposition for that as a form factor for derivatives? Look, as far as I understand it, uh, PERPS was

The Case for Perps

sort of invented in the kind of late 80s, early 90s. I think, again, I've done some research on this by Bob Schiller from Yale. I went to Yale. I took his class actually in 1995. But I think he he invented it or it's been invented really initially to be able to do what I talked about a minute ago, which was create a market for things uh, where there isn't necessarily an easily observable spot market. I think it's become popular in the last number of years for sort of the opposite where there is a spot market and it's obviously in crypto whether it's Bitcoin or ETH or whatever whatever uh token is being traded but it's a it's a very efficient way to trade you know with

leverage um on the underlying um and the whole concept of the funding rate is actually quite ingenious and for people that don't understand it maybe I'll take a take a minute to explain the Herp will trade at either a slightly higher or slightly lower price generally to the spot price of an underlying asset. And what happens is when the per price is higher than the spot, the forward rate will be positive. What that means is the person going long has to actually pay a rate and then the person on the other side of that trade going short actually gets paid that rate. So what happens is that forward rate, the funding rate,

excuse me, you know, is sort of the referee to keep the per price close to the spot price and then when the per price goes below the spot price, the funding rate goes negative. Therefore, you have to pay to be short and you get paid to be long. And I think it's just a very efficient way. It's a derivative, but it's a very efficient derivative to to use to trade in a lot of markets. And obviously um I think it was invented in the early 90s. It wasn't used much as far as I know uh in any serious way until the crypto world. I think Binance is obviously a big perpet trader and hyperlquid really started itself with PEPS.

>> Felix, let me ask you your your touch on your first question there which is around blockchain and kind of expanding more on our our thinking there. In its very simplest sense, if we think of a significant crossborder complex international transaction for banking today, you know, maybe it is one of our investors in Singapore uh sending a capital call to Atlas Merchant Capital in New York for a billion dollars. That's a huge amount of money, a billion dollars. And when that happens, our client in Singapore goes to their bank there and says, "We're going to send a billion dollars." And that

Blockchain Benefits

bank does KYC on Atlas Merchant Capital. They call our bank in New York. They arrange all that. And if the if the genesis of this was on a Monday, maybe Wednesday or Thursday, sometime that transaction will happen three or four days later after all this work by two banks. And guess what? Both of us are paying two to three points for the transaction. A ridiculous amount of money. Well, with blockchain, we need neither of those banks to attest to that transaction. Blackchain is the trusted source. And so when our client in Singapore wants to send that billion dollars, it's

immediate, internet, frictionless, fast and very very efficient. Those two to three points times two are a very very very small spread because this is all done instantaneously uh over uh the blockchain. One of the things that's misunderstood is that the banks are resisting this. Well, that's true. You know, for a decade, the banks have been pushing back because it's encroaching on their fees. I will tell you today, the largest banks like JP Morgan and BFA are spending billions investing in blockchain technology. Jamie Diamond has been very open that they use blockchain in many

areas throughout JP Morgan. And I would say that any bank that today is not adopting and adapting will be left behind 10 years from today. So this technology will be uh adopted by the financial institutions that have resisted it for so long for obvious reasons, right? It was cutting into their most profitable business. But it's just so logical when you walk through an example of why blockchain is going to be the winning technology. it democratizes and um gives so much more self-sufficiency to the actors in the market and takes that power away from the middle person

which has been the large global banks. Bob, I'd love to double click on a couple points there that you made. And I think there's this important distinction between public permissionless blockchains such as like Hyperlquid or Ethereum that you hear about and then also these internal sort of private blockchains like that JP Morgan has already been using for a few years now and we're starting to see this emergence of more what I would just simply call let's call them corporate blockchains and compare that and contrast it to some of these public permissionless ones. How are you seeing the distinction between how they decide which path to take there? Because it it seems like it's sort of a fork in the road in some ways or do you not view it that way?

Public vs Private Blockchains

>> Yeah, I would say I gotta tell you I I I speaking about myself, I think I'm of two minds here. Um on the one hand, you know, two of the companies we invested in or we have we have uh exposure to uh Circle and obviously Hyperlid. um how you know CI Hyperlid started out with its own L1 uh blockchain and Circle announced in their last earnings announcement that they're going to build one of their own. And on one hand, I completely understand why they have their own. Um Circle made the point that, you know, when when people have problems uh with a transaction or whatever, it's very hard for them to go in and audit it or whatever on someone else's blockchain. So on one hand, I get that and obviously Hyperlid built their

own L1 to begin with, which I think in a lot of ways is is part of the beauty of it and part of what you need to enable the things I talked about before. On the other hand, I have to say it's worrisome that we may end up in a world where every one of these crypto companies has their own L1 blockchain, which to me isn't all that different to the world we just came from where, you know, you you know, JP Morgan has their own credit card rails and and BFA has their own credit card rails and and you know, it's it's a different technology, but sort of the same the same outcome. So, I I think I think we are at a crossroads with this. I think it's be really interesting to see what happens. I think Hyperlquid's a good example of someone

creating their own L1 that adds to the sort of crypto ecosystem and makes it kind of better for everybody. I'm sure as more people do it, that won't always be true. And hopefully, I'm I'm being hopeful here, you know, the market will help decide these things. You I don't think it's going to be a government coming in and saying that one's okay and that one's not. you know, the market's going to decide by, you know, doing business with one that they think is done right and not doing business with another that's not done right. Um, but that, you know, that might be a shred of wishful thinking here, I think. >> Yeah. Just to add on that, I think, I think what's clear to us is there won't be one winner. There will be few, not many. And I think the competitive nature of this is, you know, will be a success

factor. if you evolve from blockchain to stable coin. You know, one of the values of USDC and circle is that it is it is available to everyone. If JP Morgan has their own stable coin just for their customers, it can't be used as broadly. So maybe there are some use cases within one bank for a stable coin or a blockchain for a specific use. But as you get into the into the larger market, I think the winners won't be one. They will be few though. They won't be many.

Atlas Value Proposition

>> Yeah, I do worry that, you know, guys are sitting in a JP Morgan boardroom right now saying, you know, of course everybody shouldn't have their own blockchain. everybody shouldn't have their own stable coin, but we should because we're JP Morgan, which is not unreasonable actually because they are JP Morgan. But then Wells Fargo says the same thing and then BFA says the same thing and you know next thing you know um you know we we know how that could end up but I do think the market will >> first bank Rowan Oak and uh and then they have theirs, right? So >> exactly. All right. Okay. Okay, so with all that established, let's let's dive deeper into what both are you doing now with Hyperlquid strategies and what's going on there. So, as we already talked about, Hyperlid exists. It's it's a

permissionless DEX per that's available today and there's a there's a token associated with it that drives it that has a whole bunch of other compelling points that we can talk to. But before we get into that, obviously people can go and buy that token hypothetically, but you guys are coming forth with a digital asset treasury company. Um there's a lot of different name for for what that associates with, but that's the way I I define them and effectively they they serve as a reserve for these tokens where either they they can issue shares and if it's accreated for investors, they can go and buy the token. So I would love to just hear a bit about why you both decided to get into this in terms of the specific mechanics associated with this. you you're launching this as I understand it in partnership with Paradigm um and a

few other partners but would love to just hear specifically about what's what's the plan and value proposition associated with this. >> Yeah, look I would say that a couple things. One uh for anyone who has followed Hyperlquid and it's not a lot of people. It's sort of amazing to me still how few people even people who consider themselves to be very knowledgeable in the crypto world how few people really understand what's gone on here in the last three years. Right? 10 employees and zero external capital, no VC money, no private equity money, zero external capital, 10 employees, sitting in Singapore, have built what I think is the most exciting and probably fastest growing crypto exchange in the

world that right now is free cash flowing, call it between a billion and a billion and a half a year on an annualized basis. Like that right there is a pretty amazing amazing feat. Um secondly, we think the structure they came up with for their token is really interesting. They did an airdrop nine or ten months ago. Um and what they said was they would use the vast majority of their free cash flow to buy back that token. I believe today uh the buyback free cash flow buyback rate is something like 99% might be exactly n 99%. And what's also great about it is it's happening every single day. It's happening automatically in the protocol.

So, you know, a regular company, you know, they generate earnings, they have a board meeting, the board sits around and decides, do we want to use those that that those earnings to buy back stock or do we want to pay a dividend or maybe we want to build a new headquarters building or maybe we want to buy our CEO a new plane or maybe we want to pay people more. There's a lot of things they can do with that money. Here, it's pretty locked in. 99% of free cash right now is going to buy back the token. So, we think that's all really interesting and really creative and very new. Um, you casually mentioned, Felix, that anyone can just go buy the token.

Uh, you casually mentioned that sitting in Vancouver right now. Um, for all the rest of us sitting in the United States, it isn't so easy. Um, as people may or may not know, the hyperlquid exchange, which is really the main place where hype is traded, um, the hyperlquid exchange is not available in the United States. If you go to it in the United States, you'll see a big ugly red bar on top that says you're in a location that's not able to access uh the token or access the exchange. So, for a lot of people, for a pretty big percentage of the investing world and the crypto investing world, um it's not so easy to buy the token in the United States. Um, we can debate I actually enjoy the debate about whether

DATs should exist and whether they create value that couldn't be created on their own. Um, I I I I think they do, but I can frankly argue either side of that one. Um, this there's some real the real need to. We are solving a scarcity problem for a very large percentage of the of the investing world uh by making this easily accessible through our digital asset treasury company that is that will be publicly listed on the NASDAQ uh for people that can't easily do it. >> This is a very efficient way to get exposure. This is also the only way for many people to get the exposure. But I think both of those things are important. And then the third thing I'd

say is that both David and I recognize that wow, what an opportunity here for the investors because of the explosive growth of Hyperlid and Hype. And again, think about that. The only token in the top 10 tokens that has not been around for a decade is Hype. How did it get in the top 10? because of the explosive growth, the success, the cash generation, the buyback program, all of appreciation ahead of it. And so the opportunity for this equity investment to um grow is significant. This isn't just buying a bar of gold and putting in

a public listing. It's very, very different with huge opportunity. And that's what got David and I so excited. >> Yeah. The other thing I would say, Felix, I mean, um, you're clearly well in the crypto world, and I think most people probably listening to this podcast consider themselves to be pretty crypto aware aware or cryptonative, etc. But there are still plenty of people, serious investors with serious money. I was literally having a conversation with someone over the weekend who he said, you know, I probably should buy some Bitcoin. I never have. What do you think? I said, of course you should. You know, we just debated how much. And he said, 'Yeah, I'm just going to buy, you know, the Black Rockck ETF or one of those things. And I said, that's perfectly fine, but like open a Coinbase account and buy some cryp buy some

Bitcoin directly. Like, you know, you're a big boy and you should get the full experience. Um, you know, anyone, you know, you have a brokerage account, it's easy to buy ETFs, but you know, take the extra five minute. So, the point I'm making is there's still a very large percentage of the world out there that find opening, you know, opening a a Coinbase account and buying some Bitcoin directly to be weird and not what they're used to doing. So, you know, to to invest in our company, invest in Hyperlquid Strategies, you won't have to open a Coinbase account. You can go on your on your own brokerage account and and buy the tech. providing access to the fastest growing token that is yield investment. We'll see you know I mean I

think I think the proof is in the pudding but we're very excited about seeing this grow. You know, I think that's why we had the investors that we had with with D1, with with Paradigm, with 683 Capital, you know, so many people who have who have so many different opportunities in this space and so much knowledge in this space and $888 million of value day one is a serious serious commitment to the strategy. It's not it's not, you know, it's not a million dollars or $5 million or $10 million.

It's almost $900 billion dollars from day one. >> Million. But we're on our way. >> What did I say? Did I say a billion? I let that b word slip. David, >> we'll get there eventually. But not >> I was I was I was talking about the forward. >> There you go. Using a similar philosophy to SMH. The VANC Fabas Semiconductor ETF, ticker SMHX, goes even deeper, exclusively investing in fab semiconductor innovators designing AI infrastructure. behind the scenes. We're talking high bandwidth memory, power management chips, custom accelerators, and ultraast interconnects. The critical components that make large AI models run faster, smarter, and more efficiently.

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Go to van.com/smhx Felix to learn more. As always, investments in blockchain technology involve risk terms and conditions apply. Do your own research. Guys, there's there's an interesting insight in there that I think is going a little understated and I want to elevate here which just the simple fact of a token that is generating generating revenues and that there's a buyback mechanism and there's an actual you know you mentioned this idea of free cash flow. I don't think those words have been used to describe a blockchain almost ever before this point now which I think is really important for you know one of the most valid criticisms I've seen over the years for for digital assets and crypto is that okay well there's no there's no claim on cash flows there's no cash flows associated with this so how do I run a DCF and okay well now we're at

Real Cash Flow & Valuation

this situation where we have a we have a project that is forging this path here where there actually is a very B generation pre-cash flow growth as as you said and there's a significant buyback associated with it. So, I'd just love for you to just yeah, paint some color around just how unique that is and and where you think that represents how the industry is going to head from here on out. Yeah, look, I think part of the reason guys like Paradigm wanted us to be in in this transaction with them um is that relative to other tokens, as you said, Felix, there is you can do what I'd call some traditional financial analysis here and look at metrics like EV to EV to you, you know, you know,

price to free cash flow and EVA earnings and things that people people look at and you know, that's the second leg that we haven't talked much about yet, but it's probably implied. You know, the the numbers on Hyperlquid, um, you know, the crypto area these days is certainly known for high growth, but it's not really known for compelling and reasonable valuations, but when you look at where the token is trading today, um, it's a pretty compelling valuation. It's not sky-high. It's not even near like Coinbase's multiple. Um, and there's reasons for it, right? One reason is what we've been talking about, which is that it's not easily access accessible in the United States. You know, that's

it's a pretty big reason. Another reason is that it's a token. Uh, as I talked about before, there's still plenty of people that that aren't accustomed to investing that way. So, there's some good reasons why that's the case. But for guys like us, like we we are we are generally value style investors, you know, uh, you know, we're not a venture capital firm. We don't generally invest at things at 100 times revenue and, you know, infinity times earnings. That's not really our style. It's not what I've been doing for years. As I said before, we're pretty skeptical investors all the time. And this one, you know, we had to scratch the surface a bunch of times to really to really dig in and convince ourselves that this is real. But it's real. You know, high growth, compelling valuation, solving scarcity, like that's

a it's a lot of things. You don't necessarily need all three of those things to make an investment worthwhile and and worth doing. That's what we think is so interesting here. >> What's what's your view on where the industry as a whole will head? Do you think, you know, we will start to see protocols and companies that actually have the sort of free cash flow growth become fairly, you know, or or more premiumly valued versus ones that don't? Or do you see both worlds still living in tandem? Let me just say before David gives you some very very good data points uh on just that question that we are operating in a macro environment where we have an incredibly supportive political and regulatory environment. We did not have that you know prior to the last six or nine months. We have an

Turning Point for Finance?

acceleration real acceleration in retail adoption. But to me, what's more important is more a traditional finance person is we have a real acceleration in institutional adoption. And I think it's like top of the first inning in institutional adoption. It's maybe second or third inning in retail adoption, but it's really really early. And when you think about that and the like you're hearing people today, lastly, I'd say you're hearing people today talk about blockchain in a way that's very very different than kind of the skepticism around crypto and what's going on and what is this and Gary Gendler saying no to everything and this could be dangerous for people and now

you have Jamie Diamond saying blockchain is fantastic technology. We use it all over JP Morgan. This is going to be part of the future. like that is very different. So a hugely supportive political and regulatory environment, a serious acceleration both in retail and to me importantly institutional and a convergence that blockchain is real and it's innovative and it's going to be the future that changes the the macro environment so much. Felix, that's so exciting. You know, look, if if you go out long enough, all technologies converge eventually, but I I I don't think like we're going to wake up

anytime soon and see lots of regular companies issuing securities or whatever, you know, in tokenized form rather than in in normal securities form. Um, I think Hyperlid is a diff is an exception. It's quite different again. um three years old, less than three years old, no no external capital, like that's that's not how you know billion over a billion dollars of free cash flow. That is not the normal profile of almost any company out there. Um and you know, look, we have to be careful also when we talk about new technologies that we're we're not solving problems that don't exist, right? I mean, generally speaking, the

currently, you know, functioning equities markets that we have all over the world, um, you know, you can you can raise a lot of money and trade a lot of volume on the equities markets right now, right? It's not like anyone ever looks at the New York Stock Exchange or NASDAQ and say, you know, there's not enough liquidity here for me. We got we have a problem. We got to figure something else out. Um, so again, if we go out long enough, we may have all this stuff, but I I personally am not predicting that, you know, you're going to be trading Croup shares in tokenized form, you know, issued directly by Croup anytime soon because, again, I think that's that would be solving a problem they don't currently have. Uh, whether people do derivatives off that in different ways and figuring out ways to

to trade derivatives of equities uh on chain, like that's awfully interesting and that could happen. Um, but you know, I'm not sure we're you know, I think Hyperl is going to be I don't know about a unicorn, but it's going to be unique for a while. I think >> that point about not just trying to solve problems for problems that don't actually quite exist, I think is really important. And I think that's a nice pivot into just rounding out this conversation in terms of contrasting going with the 20,000 foot view in terms of the macro situation that we're in in this modern day and age which I would characterize as one of the great questions of our time right now which is who's going to buy all the debt and especially you know treasury debt, US Treasury debt. That's one of the great questions

US Debt & Stablecoins

of this day and age right now. And we've seen some compelling hints that perhaps stable coins will be one of these key unlocks. And I'm curious how you both think about where does, you know, using that as a pivot point in terms of stable coins, but you can take that in any direction you'd like as well. How do you see some of these innovations we've talked start to sit within some of these big macro questions of this day and age? >> Listen, I think the macro question you touch on is the debt levels in the US primarily and that is the dark cloud sitting out there. Um, for those of you that have, you know, students of kind of the talking heads on TV, I've been a part of it on CNBC and Bloomberg and I've been saying since co that let's

just temper all this fiscal and monetary stimulus with the debt levels. You know, until recently, everyone's been ignoring them. But since since the first Trump administration to today, Trump, Biden, Trump again, so bipartisan, we've more than doubled the outstanding debt of this country. And you can't tell me this was a terrible economic environment. It was pretty good, I would have said. So, we have a real challenge. Will innovations and finance be a positive? Absolutely.

Will the weaker dollar which is down 20% over the last couple of months make it even more expensive? Absolutely. So I think separate from all the things we're talking about today and stable coins, you're right, will help with financing the debt and lower the interest rate, but we can't just deal with at the margin the rate and and kind of the liquidity and and those issues. We also have to deal with the fact that we've had every administration since Bill Clinton has increased the outstanding debt of the United States, the wealthiest, most innovative country in the world and doubling the outstanding debt in the last, you know, two

administrations. Unacceptable and needs to be dealt with. I didn't give you a solution. Um but but I think there are solutions there but it starts with with a desire to recognize that this is a you know the dark cloud. >> Yeah. I got to say I I think think you know thinking that stable coins are going to solve the US debt problem seems you know highly optimistic to me. Right. Like anyone who has $1 in USDC today, likely before they had that USDC, they had a dollar deposit in a bank or they had a money market account in a in a brokerage firm and those deposits and and and money markets were going

somewhere and the money market was probably directly buying US debt. So, you know, maybe you can make an argument that if if more of the world moves to the dollar because they're putting their money into USDC or USDT instead of in their local currency, that'll help on the margin. But like it's not exactly a new idea to say the US dollar might be the reserve currency for the world. Like if anything, people are worried about it going the other direction. So, you know, I'm going to go back to my normal skeptical self now. I think it would be it's highly optimistic to think we're going to solve at least the US debt problem because you know people are going to have money sitting in stable coin.

>> Yeah, I think that's very very reasonable take and definitely agree with the the vast majority of it. Guys, really awesome to have you on the show and explain this. I think it really represents the the zeitgeist of this day and age, which is just seeing these two worlds collide together. So, absolute honor to have both of you on here. I would love to just, you know, feel free to tell tell the crowd here where where they can go to hear more about what you guys are up to. >> Bob and I have both become pretty active on Twitter, uh, because, you know, in the crypto world, you have to be active on Twitter. So, you can find us both there talking about a lot of these things. Our website, atlas merchant capital.com, uh, we have a news and and other things we put out. Uh, whether

Final Thoughts

it's us talking or different releases of ours, so you can find there. But, you know, we're a private equity firm by definition. We're not super public. And you know, you got you got to chase us down to find the cool stuff we're talking about. >> Well said. But but worth worth the chase. Check us out on next. >> Exactly. >> There you go. Worth the chase. >> Worth the chase. >> Awesome. Yeah. Love it. All right, guys. Well, thanks so much for joining the show. Really enjoyed that. >> Good stuff, Felix. Thank you, man.