How To Position For A Gamestop Style Squeeze on PURR - Capital Flows & Jaymes Rosenthal

Transcript

Give them some love and time. Get them fired up. Guys, welcome to the show. James, thank you just to start off for the $10. That was, you know, you did not need to do that yesterday. Thank you, man. >> Hell yeah, I got to support the other the other creators out there. Now, I'd like it back because I'm poor now because I have a bitcoiner and I'm not sure what to do. So, if you don't mind, I'll send that Venmo request back real quick. >> [laughter] >> Oh, man. What's your Venmo? Thank you for the donation. >> Yeah, thanks for coming on, guys.

>> Been big fans watching both of both of you both on the show. Capital Flows has been following your X account. Just to disclosures, we have a massive position in PER over here as well. So, we have people in the chat that have been very bullish on this. And what really caught our attention was this idea of this gamma squeeze. You know, before we get into the portrait, I would just love to hear a bit about your backgrounds. You know, how long have you been trading? How did you guys get into this space? Give us a bit of a bit of the rundown. >> Yeah, well, I appreciate you guys having both of us on. I mean, I love the I love the energy of the live stream that you guys are doing. I think it's just a special place. I mean, few people can

really pull it off. And you know, we're we're still going through the trial and error figuring it out and we're just having a blast, you know so the entire you know, I I think I started you know, Capital Flows I guess it's in 2023 now. And the entire goal that I had with it is mapping the macro regime and then taking asymmetric bets within that. And it's you know, a very, you know, simple kind of goal and there's a lot of complexity along the way. But at the end of the day, you know, I've always focused on interest rates, macro liquidity, the credit cycle. And I've always [snorts] said to do it from a risk-taking perspective for either hedging interest rate risk,

taking directional views in interest rates, or you know, anything in that realm. And so, there's always been the necessity to say what are the actual drivers, what's my risk, and what are the largest factors that are moving markets. And so, you know, I've built an entire, you know, suite of strategies and, you know, knowledge over the years, and then I started Capital Flows uh in 2023, and that's basically the entire breakdown of the macro regime that we're mapping, and also the main bets that you take within that. Cuz at the end of the day, you know, I I believe that diversification is the enemy of exceptional returns.

Right? It You shouldn't expect to outperform the market or have exceptional returns if you diversify it across, you know, a bunch of subpar assets. And so, that's really the starting point that, you know, I have for everything. And then myself and James, uh James can talk about a little bit about his his story, but, you know, we started actively live streaming more um, you know, earlier, uh I guess this year now, and we've just been focused on taking all the models that I've built, all the knowledge that we have, and synthesizing it down from a risk-taker's perspective to say, "What are the specific bets that we want to take?" Because we're here as

risk-takers. And so, that's really been the the focus, and you know, the thesis that we have been laying out now on Hyperliquid and on Perr the entire goal that that we had was we don't just want to explain the thesis. We want to provide every single tool necessary to execute on that thesis in terms of quantitative models, and then also qualitative thinking. What is the What is the base of knowledge and, you know, even emotional mindset you need to have to go from you know, just having these small swings in your account to bigger swings and what it means to get paid to hold risk.

So, that's really the I would say that the overview of capital flows all that, you know, James add in there for, you know, the kind of experience he's had and all the kind of reps he's had over the years and how he kind of connects that into those those macro research pieces. >> Yeah, so I think I think one thing you guys probably have, right, is you compliment each other well, right? You have a good back and forth. Like I have to stare at a frog every day, so that's a little bit worse for me, right? You guys get to stare at each other, which I don't know what's worse, you know? But I come from more of like a scalping trading. I was a poker player, you know, the the kind of standard poker player

found his way to trading thing, right? And I like to think about the philosophy of trading, the metas, the vibes, the feel, right? And uh Flows comes at it more from a bottom-up perspective from the foundation of the price of money in the world, right? So, he comes from here, I come from there, and we try to work our way towards a very sharpened execution to take big bets, right? And I think that's what we're all here to do, like educated guesses on financial markets and, you know, coming into the content space is pretty interesting.

Um and I I really think it's it's cool. Um it it gives me a little something else to focus on rather than to just be spewing money around all day. I'm sure you guys feel that, too. However, like you go to the bathroom, you buy near or whatever, that's it you still have a little bit of that in you. So, um I think it's I think it's great. >> small position. >> Yeah, yeah, sure, sure, sure. Um but I I think it's super fun. I think a lot of people are getting value out of it. They show up every day, they get to learn a little bit about uh how to build their macro foundation. They get to talk about the execution and the mindset they bring to all of their trades and we all can move forward and hopefully provide that value.

>> Yeah. Well, to everybody watching this guys check out their channel, their X, all of that we'll put in the description and you guys will see it in the after hour stuff. But guys, let's get right into it. People are most kind of taken aback by this idea of this kind of digital asset treasury company per the only one that's you know, very profitable where there's only two in the you know, they're both uh in the hyperliquid ecosystem and people are wondering about this idea of a GameStop style run. And GameStop had this insane run where you know, there was all this shorting and all of this all this call buying and all of these you know, positions being blown

out, market makers having to adjust their inventories, etc. etc. And so you guys have kind of labeled this as the gamma squeeze possibility for per and how there's a couple asymmetric factors happening on hyperliquid the asset right now. And so let's start kind of here and just get a bit of an understanding of what this kind of gamma squeeze is and then we can talk a bit about the other factors as well. Why do you guys believe that there is a GameStop or potential GameStop style run on this per stock and what does that really kind of mean behind the scenes like in the context of understanding how financial markets work?

>> Yeah, I think that it all starts with when you have credit getting issued into the system, a lot of short positioning has to get squeezed out. There is a systematic mechanical element for positioning in the market where equity long short shops, a lot of different factor flows, a lot of different sector flows they are forced to move out the risk curve. This is mechanical in the system, it's very well documented, but the question is when is it happening? And you know, 2021 GameStop, that occurred in the context of a credit cycle melt-up. I think that's one of the most misunderstood facts where, you know, even though you had a short squeeze, short squeeze happen all the time. I

mean, if you're an activist investor, if you're a short seller, if you are operating financial markets, you know, short squeeze happen all the time. You get squeezed out of markets, you get squeezed out of a position, you know, these equity long short shops are always pushing against each other and, you know, trying to move the market around to be able to realize their P&L. But, we saw something even greater in 2021 where it was all major shorts getting squeezed out at the same time and you have to ask why. And that's because there was a surplus of money in the system. And so, first you need to set the context, which is we are seeing almost an exact parallel in terms of the credit cycle. That's why, you know, we quantify all of these macro flows with,

you know, really high-quality statistical models and research every single day on capital flows in the live streams and the research to say, "Okay, what's the context?" So, right now we are seeing liquidity increase very significantly. That sets the context. And then within that, we've said, you know, hyper liquid is the most disruptive asymmetrical bet that is taking place in financial markets. And you would say like, "Well, how in the world do you know that? How can you make such a an aggressive claim about that?" And I think that's a really important question. You should ask hard questions.

And the fact that we have hyper liquid rallying and melting up to an all-time high as Bitcoin is at lows in itself indicates it is differentiated in its nature. And then you add on top of that, we are moving through this crypto regulatory side where perpetuals are a brand new financial product that is already executing and pulling capital in. Every single major Wall Street bank is staring at hyperliquid every single day. If you talk to anyone and I mean I guess you guys are in New York, right?

>> Yep. >> You talk to anyone in New York that's trading on a desk, you know that they have hyperliquid up. You know, especially over the weekend. And so it's kind of like every institution gets to look through kind of the the glass window of what's happening in the market, but they're not able to touch it because of a regulatory hurdle. >> Yeah. >> And, you know, fundamentally the largest changes in financial markets occur when regulatory changes take place. And so hyperliquid is, in my view, on the precipice of getting added, should the entire regulatory environment, which is the largest financial market in the world, and on top of all of that is

where it comes from the PER and the BET and everything. PER, in my view, is the best expression of being long the hyperliquid regulatory addition in the world right now because it is the primary point of access. It is the largest treasury holding company for hyperliquid tokens. And what I love about this is that everyone who has been involved in the crypto space or financial markets, they have this negative stigma toward treasury companies, which I love. Like that's perfect because it pulled everyone offsides and all they can think about is Sailor and MicroStrategy going down and stretch. And I'm just like that's perfect because you're

extrapolating that scenario to this one, which is just going to pull more people in when it actually squeezes. And so PER is, you know, they have leadership that is pretty exceptional overall. They've done what no other treasury company has done, which is buy back their own shares and create shareholder value instead of diluting shareholders. And so, you have all these things stacking up. You have the credit cycle environment, you have hyperliquid, you have PER on top of all that, which there's a reason why Goldman Sachs bought PER and not the ETF, right? Now, add on top of all of that, the option market on PER is the only place in the world to get liquid exposure. There's maybe other niche exchanges or something

like that to where people make a market, but at the end of the day, the most liquid place that if someone wants to get exposure and buy out of the money calls on hyperliquid, it is only going to take place on PER. So, pull all of those factors together and we are already beginning to see a gamma squeeze take place, which simply means that if you buy a call on PER, someone has to sell you that call. And they're going to sell it to you against the inventory that they have, or it's going to be a market maker. I'm not a market maker, okay? But I could sell a call against the core position that I have and take that risk to give some of that upside and the potential that it gets called away.

But broadly speaking, the majority of option flow in markets is market makers. And when you have a lot of people buying out of the money calls and you have all begin to rise and you have, you know, gamma begin to shift, that systematically forces them to buy the underlying stock and hedge their risk, which in itself pushes up the stock. And that's why we have had we had the largest day of volume on Friday of last week into the close as we had the initial push of that gamma squeeze.

Now, we are seeing an escalation of that that is really actually even more aggressive than I initially originally anticipated. And that is escalating because we are having higher strikes listed. So, if you think about it, you know, right now we have we had strikes up to 18 bucks as of yesterday. Now, today we actually have strikes even higher. And when you have those strikes >> Strikes right now are I believe they're going up to 23. >> 23. >> 23 bucks. >> And Capital Flows, where where you seeing uh the the market for for options on this?

>> Um What do you What do you mean? Like where where >> Like Like if we wanted to buy options on PER, where where can we do so? >> Any Any Any broker. Any broker. You can I mean Schwab, TD Ameritrade, I use Interactive Brokers. Um you know, I mean I pull them up on Bloomberg. You can like look at the You can look at the market kind of anywhere. You can buy calls anywhere you would buy PER stock, you could buy I mean I'm sure Robinhood has it. I I don't use Robinhood, but I'm sure they have it. So, I think that what is taking place is we are seeing an escalation of all these factors converging at the same time.

And Hyperliquid has become the only game in town, right? Like everyone in crypto realizes it. Everyone in TradFi realizes it. And if you have this convergence, which we are I mean we're seeing the convergence, we just need to see it in its full effect, where you have credit cycle pumps in more money, which we're already seeing. Cuz interest rates are not high enough. Then add if you have Hyperliquid get added to the United States in a regulatory framework, which I think is very possible in the next 60 days. And then stack on top of that you have this low, really constrained, tight float stock PER that is accelerating its option flow, and it's the only place that people can buy calls.

Stack on top of all of those that like you have incredible meme potential just for PER itself because of the aura around Hyperliquid, and it It is the anti-establishment disruptor of this current time. There's a reason why there's no VC money in in Hyperliquid. There's No, there's nobody shilling it because they're not getting paid in tokens. There's a reason why you don't see it on podcasts. And the fact that I don't see it on podcasts, and the fact that people won't talk about it, is because they don't have a bag. They don't have a position. It's kind of that I did this kind of a post where you know, in like The Big Short, Michael Burry is like, "Okay, well, where are you marking my position?" They're like, "Oh, well, it's still against you." And

then they're like, "Okay, well, we finally marked your position." And he goes, "Oh, so you've established a net short position yourself so that you can mark mine." And she's like, "I don't know what to tell you, Mr. Burry." So, that's kind of like what we're at right now, where you know, we are escalating everything. All these factors are converging. And once we mark Hyperliquid to kind of the true value that it has, once Citadel, Jane Street, all these big market makers come in, it's going to really defy, I think, gravity expectations reality and every single thing.

>> Yeah, and I think you, you know, you said it may go to $350 this year, and perhaps that's a, you know, bullish bullish bull case, but, you know, PERS outperformed by to this I think to the tune about 90% um since early December. And this what we're talking about here now is just basically there's going to be a desire for just to understand exactly the gamma squeeze. There's going to be a desire to buy out of the money calls for people that want to have, you know, strikes in this 18 to 20 to 23 range or higher as the kind of as the stock, you know, climbs up. Market makers need to have an inventory of this stock to be able to sell calls to these

call buyers. And so, the idea of the gamma squeeze is that there needs to be a consistent bid on the inventory to be able to fill the demand of the call buying by a market maker to sell them those calls. And so this just gives you this kind of persistent strong bid based on the demand for these calls in a stock that has very very low float. And so you get this kind of like shock to the system where there's not enough, you know, supply left of the stock because of all the demand for the call buying. Is that like the like the 101 like the high level?

>> Yeah, that's that's exactly right. I think that the the the convergence of all those factors and with the gamma squeeze is is the gamma squeeze is the tail scenario that creates a GameStop-like scenario. That is still under appreciated. I there's some you know, what I traded the GameStop squeeze and I remember it very clearly. We squeezed out all shorts before we made the actual run-up. >> Yeah. >> So we took out the majority of short interest and people hedged their shorts before we even had the actual rally to $120.

But the key thing on AMC, on GameStop, on all these meme stocks during 2021, if you traded them, then you knew that once we traded up to the highest strike in GameStop, you basically sold your position and got out, especially on an intraday basis. And that's what I was doing because you know, once you bid bid up and you hit the highest strike, you don't have a gamma squeeze above that typically. I mean, you can a little bit here and there, but those are the things that create those squeezes. And if you look at GameStop and options that were listed in that time, that's the exact thing that is driving the GameStop push. And I think that there was maybe so much more meme

potential around GameStop and all of the aura around that. The parallel is that there is so much fundamental backing for PER as a stock >> Yeah. >> that almost comparably replaces maybe what we're seeing is we're you know, we're not seeing you know, GameStop go across every news or excuse me, PER go across every news channel right now. It has the potential to do that. But we have so much more fundamental backing. What happens if Hyperliquid gets added to a regulatory framework overnight? We get a tweet from Trump from Trump on it. And then Hyperliquid bids 100%. What happens?

You know, and again, look >> down. All right. >> Just look at look at XRP. Look at at what happened with XRP and the regulatory changes >> James, get your guy here, man. >> [laughter] >> Hey, man. Once he goes, he got a lot of go. You know, that's that's how you do this. You know, you get him on a rant, you let him you let him breathe. >> Yeah. >> But I I mean, I I just want to add though that like I do feel like you know, especially you guys are deep into the crypto streets, right? I I as well. And there is this this apathy, this this uh small-minded thinking right now because of the environment we've been in for quite some time. And I I keep imploring even myself to remember to think bigger, to think outside of crypto, to think of

like okay, hey, PER or Hyperliquid gets added to the states. If the story is told in the proper way, if the Wall Street's bets and the Redditors come around to it, it's the cat thing, it's the whatever. They realize what the buyback mechanism here is. They realize what vaults are and IPO season and uh people talking about trading fees like oh my god, there's a short squeeze potential on it. There's a low float. There's only one place to do that. What are the strikes? And like, wait, we've been seeing trillion-dollar companies every day staring us in the face. Then they're going to come over here, they're going to say, wait a second.

This thing's at a what valuation? And it's being used for what like I just say like you got to think a little bit bigger and remember what is pop We We sometimes forget what is possible and how reflexive things can be. And if you get the reflexive feedback You I mean, you guys just before we got on were talking about the resilience of this sector, right? Like, if you get Bitcoin to have a bid, if you get this um rush into midterms where the administration is throwing the absolute kitchen sink at keeping this thing going, if you get tradfi just rotating money around, like you can't tell me this isn't a possible occurrence here, right? It's not a Maybe it's not your base case or maybe you're not even exposed to this, but like you got to

think about the potential tail that's growing on the right side there. And we just try to keep iterating on that tail, and we think it's growing and growing and growing in a potential situation here. So, >> Yeah. >> Um Cigar says, "Why would the demand be driven by options only if no demand to buy options then there's no gamma squeeze?" I think the answer to that I'll, you know, I'll try is just basically that that's just one of the factors here. The other factors, right, is that we get, you know, Hyperliquid has this regulatory moment or it just continues its run um or just, you know, uh Bob Diamond and David Shames just continue to execute at a very high level. Maybe you guys can fill that in though, you know, if there's no demand for options then obviously this gamma squeeze kind of won't happen.

>> Um >> And I want to ask maybe just uh not an entirely orthogonal question here, but kind of a second part to this is we're seeing more and more uh option not options not the right word here, but vehicles to express uh exposure to Hyperliquid. Um given ETFs, I think Grayscale's coming out with an ETF and we already saw Bitwise. As more options become available for getting exposure to Hyperliquid, does that dilute the potential options volume that we could see on Perp specifically? >> Totally. I think that's a a super important question because to be clear, if if the information changes, we should change our mind, right? So, to your point, if we have factors that change in the flows, then you need to shift your

position. I mean, as as a trader, like that is your goal. What I would say on on the hyper liquid side, and then I'll connect it to PER, is that the baseline for hyper liquid not getting added to the United States is that it continues to print the same amount of money it is on a monthly basis. If you get like you know, here's the thing, if you get some type of regulatory news that hyper liquid is not getting added to the United States, will it pull back a little bit? Yeah, sure. But overall, we're seeing it move in lockstep with the cash flows that it's generating. I mean, we just saw over the last week more volume for HIP-3 flow into stocks and things in yeah, as they're as they're trading you know, IPOs on hyper liquid

you know, more capital has flowed into that and volume has come to that on the hyper liquid platform than it has in crude. So, basically, crude provided all of these returns for the pullback, which by the way, you know, hyper liquid and PER rallied when the equity market sold off earlier this year. That should tell you something. So, that is the baseline, right? The baseline is it continues to provide cash flow, right? So, you almost have this positive carry call option. So, that's that's number one. And then number two, on the PER side, the leadership of PER needs to continue to execute in the same way that they have to provide excess returns above hyper liquid. You know, there's a reason why since the ETFs have been launched,

PER has still outperformed. And I'll give you one easy example is one, the the leadership has actively been buying and selling the shares of the company not to just accumulate more tokens, but to create shareholder value. Very different than what every other that is doing. So, I think that's number one. An ETF doesn't have that optionality or ability to do that. And you you would say, "Okay, well, they would have to have skill to do that. They would have to actually show that they're adding shareholder value." And what we saw last week and you know, part of the week before is that the leadership of Per executed so well in their active trading operations that they added more cash to

the balance sheet at the same time as adding Per uh excuse me, Hyperloop to the balance sheet at the same time and they didn't dilute shareholder value at all. Basically, we they are taking advantage of the premiums and discounts in the market almost like trading their balance sheet actively like a hedge fund. And you know, I think one of the most bullish things is that we're moving into this period of time for Per where everyone is worried about these warrants and the new shares that are going to get issued and and potential dilution on top of that.

>> Yeah. >> What I would say is that we are we are already seen the amount of shareholder value they're adding in and again, this is reflected in Per outperforming Hyperloop not only prior to the ETFs but post the ETFs. We are seeing them um you know, I I believe that they are going to likely trade dilution and begin to execute in their credit facility and basically I don't think they're going to really dilute shareholders a ton. Maybe a little bit. Maybe it'll be a combination of a couple. But what happens if the market realizes, "Oh, we just took the credit facility and bought back all these shares so that it doesn't dilute shareholders. It actually just adds a little bit of

credit risk. So all those shares are not going to hit the market." Now you have them still continuing their active trading operation, maybe adding some more hype if we have any pullbacks or we have a a significant premium. And what I would say is that take all those factors together and the fact that all of them would have you know, leadership would have shares of the company. They're not going to want to dilute it, you know, they're they're still going to execute their operations, but they're not going to want to dilute their own position. Right? They're not going to want to say like what they you know, say like, "Oh, well, if we, you know, go up forever, can't they dilute into infinity?" And at the end of the day, they're not incentivized to do that as long as they hold their position. So, if they start selling their position,

the insiders start selling significantly and exiting, that will be a sign to maybe adjust. But, we're seeing everything set up and stack where you would still want to be long PER as opposed to an ETF, and that's that's what my position is. >> James, anything to add there? >> No, just that it would be really interesting if people are watching PER and hyper liquid, and you start to see PER decouple in a way because of this like technical squeeze action, which is just going to attract more attention to that, and it could kind of feed on itself there just because of this the the structure of it, not because like it's so much better, you know, whatever.

So, I think I think all this is just like all these like notches and chapters to this story, and I think um I think it's just good to think about, and I'm excited. We'll see how it goes. I know you guys are exposed pretty heavily, too, so I'm hoping it works out for you guys. >> As well, we're all in this together. I got one more one more question here. Uh I I It It kind of feels like the elephant in the room. It's It's you know, kind of hyper liquid obviously has all of these tailwinds. PER has tailwinds beyond this. The elephant in the room feels like Bitcoin is kind of weighing us down. And I'm curious, and and capital flows this may contradict something that you had brought up as as, you know, one of the base premises of this thesis is

the positive liquidity environment because rates are not high enough. Why is Bitcoin not cooperating? If rates are too low, why are we seeing Bitcoin melt down? And can hyperliquid and therefore per continue to accelerate into these tailwinds despite Bitcoin's lack of cooperation? >> I think that's such a good question because I think the answer to that is going to provide the framework for signals you want to watch every single day. So, I would say that there's two things to to understand about that.

Number one, um you know, since the lows in hyperliquid at the low 20s, my view is that HIP 3 volume will outpace crypto volume on hyperliquid. And as you have a higher and higher share of HIP 3 volume and now HIP 4 volume relative to the kind of traditional market on or at crypto market on hyperliquid, you are going to have more and more fees come from, you know, HIP 3 traditional markets, perpetuals, especially as we move into this entire IPO phase of SpaceX, Anthropic. I mean, those are going to put way more volume through than a lot of crypto coins in my view.

So, I think I you're you're basically rebalancing all of hyperliquid away from Bitcoin right now, which is why it's diverged, right? There's a reason why hyperliquid is up year-to-date so much and Bitcoin is down and then even on the day today, right? Maybe it's dragging on it a little bit, but there's a reason why per is you know, basically flat to up right now. I mean, that's part of the thesis. Hyperliquid's, you know, maybe down a little bit flat and Bitcoin is is selling off. It's it's an indication of everyone is rebalancing not only their positions in hyperliquid and Bitcoin, but also in their trading capital and saying, you know, what? I want to trade

traditional markets more and we're seeing that. People are going from, you know, a lot of crypto different trades into Nvidia, into Oracle, into all these other things on the hyperliquid platform. So, it's all there. So, I I would say, you know, that that's really key on that side. Um and then Yeah, the the other question you had it was it was on What What was the other question? Sorry. >> Essentially, Bitcoin getting weighed down uh or or Bitcoin weighing down this market. And if we do have positive liquidity conditions, why is, you know, why why is Bitcoin not benefiting from >> Totally. So, I think this goes back to We just did a stream on this yesterday when we talked about the gamma squeeze.

The the entire Bitcoin framework is connected to liquidity, and liquidity has been increasing. But there is no guarantee that that liquidity will flow to Bitcoin. Bitcoin needs to Bitcoin You're the burden of proof is on Bitcoin, right? Like the If it is truly a meta and the asset that it says that it is, it doesn't need anyone else to tell you what it is. It will tell you, you know, who it is itself. And, you know, we are seeing liquidity in the system increase. Let's say we increase liquidity by a billion dollars.

That billion dollars, investors have to say, "Where do I want to put this? Do I want to put it in Bitcoin, or do I want to put it in Nvidia, or do I want to put it in these AI plays, or the robotics play? Do I want to save it for SpaceX?" And, you know, capital is never evenly distributed through the financial system. And so, you know, Bitcoin has not proved itself as a disruptor in this cycle. It has not proved itself as a winner-take-all for the amount of change that is taking place. It has all been about the AI trade, now robotics, now a lot of uh you know, especially capital moving up the risk curve into the Russell, where it the the Russell is the primary beneficiary of all the CapEx spending that's taking place. And that's why, you

know, I think even on the day-to-day, it's outperforming, you know, tech names, other other other kind of changes, as well. So, I would just say that Bitcoin the the burden of proof is on Bitcoin, if it's truly a signal about the state of monetary conditions, it is telling you that it is not providing excess value above the current change that is taking place. And so, we would need to see a shift for that begin to to unfold. And I think that's something that a lot of people don't want to hear, but that's really the the the state of things, especially as software. So, think about it, the most disrupted sector in the financial market over the

last year has been software, and now we're bidding back up in software, and Bitcoin is diverging from software now, which tells you that even when we're repricing some of this disruption in the software space, because everyone realizes you need date better data to train these AI models, even with that change and that repricing, Bitcoin can't catch a bid, which shows its inability to adapt until we move into a new market environment. So, it's not to be bearish Bitcoin, it's just to say that it's not providing enough robustness to the disruption taking place, and it's telling you that in its own in its own kind of testimony for how it's relating to other assets.

>> Yeah. Uh a good friend of ours says that Bitcoin is the most honest macro asset, which is quite interesting as it pertains to what you're saying. James. >> Yeah, just just on that note, I think that was a great technical way of saying Bitcoin is struggling to find the narrative, right? Like, we're always latching onto these new correlations, these new fractals, and then they fall apart, and we go find another one. So, but I like that framing of like Bitcoin will tell you when Bitcoin matters, and right now it's telling you that it's just not at the forefront of a capital allocator's mind. But, to your point, Rob, I think it is important like do you remember a couple months ago when everybody was talking about wow like this was a 7 million

$7 fee day on Hyperliquid. This was an $8 fee day on Hyperliquid. We're seeing two and three million dollar days pretty consistently. But, like if you do catch a bid in the crypto ecosystem, we're going to start seeing those posts again during like IP like imagine Bitcoin bidding, alts bidding, and IPO season. the types of fees that we're going to see out of Hyperliquid. And again, this goes back to what we're talking about. That's going to feed into the UTS. That's going to feed into PERP. That's going to feed into this whole thesis, right? So, I do think it will help buoy what we're doing now. And you know, every day I look up at the sky when I wake up and I think like is this going to be the day? And then I come in and it's just like I've sepuku'd myself at

the desk. So. >> [laughter] >> Man, um you know, one of the one of the things there that people used to say about PERP DEXes, so I could We had DYDX and they kind of had their tokenomics not in the right spot. GMX kind of did some things right, but couldn't get all the all the listings right. Hyperliquid's you know, it's kind of learned from from from a lot of these previous iterations. And um the one thing that that people, you know, would say is that PERP DEXes struggle in bear markets because their fees are relying on volume. But, as we just talked about, right? Like because the because Hyperliquid has diverged from simply just a crypto market, it's it's not gone down the same bear market path as the rest of the previous PERP

DEXes because of this. And this was like easily the most important breakthrough I had I had Shamis here like two months ago in the studio. And he was like the moment that HIP 3 started, you know, firing was the moment that the entire that the entire thesis changed from our fund and our firm and just globally. And so, I think it's hard to understate that. And that kind of gets me to something that a couple of the audience is is asking, which is basically like do we think that Hyperliquid could be impacting or could be comparatively with the CME, the S&P, the CBOE, and ICE in the future? You know, perhaps this is a multi-year outlook and I don't know the timeline for this per position, right?

But, when you guys think about the path that Hyperliquid's on and just generally on-chain perps, like do you do you guys see this as, you know, not comparing to Binance and Bybit, but really subsuming a lot of the global financial flows from some of the largest, you know, platforms and venues today? Is that too ambitious? You know, what's the thought there? >> I think that the I think that understanding, you know, the the CME, Eurex, ICE, all of the major exchanges is super important in this context. But, what I will say is that, you know, Hyperliquid is really not meant to be a zero-sum game between other traditional financial exchanges.

And I think it's set itself up incredibly well for that. I think the only thing, honestly, it's uh a a threat to are the prediction markets. And I think the prediction markets are, you know, trying to figure out how exactly they can adapt to that. And um but, what what I would say is that for for the Hyperliquid side and as it relates to these other exchanges, I think these other exchanges are going to figure out how exactly to operate and adapt in, whether that's through builder codes, whether that is through arbitrage, whether that is through being able to hedge their risk different ways.

I think that the entire environment for Hyperliquid is not zero-sum, especially as long as we have futures as the main product. You know, futures, futures rolls, all the volume that's in there, you know, if you trade the rolls, if you follow all of the the flow that goes across those in the order book, you know that there's, you know, a lot of different arbitrages taking place between different exchanges, between different products, and there is a unique contribution that Hyperliquid has that, you know, it you know, the CME and Eurex, they have advantages that Hyperliquid doesn't have.

And vice versa, Hyperliquid has advantages that they don't have. And so, I think what is going to be very powerful are all of the builders on the Hyperliquid blockchain that understand how to merge the two. And those people are going to make an astronomical amount of money, especially if they integrate it with builder codes, so that someone can actually have margin and have, you know, post margin at the CME or their broker, and be able to have that margin still operate on Hyperliquid or on chain or something like that.

That'll be really revolutionary for how margin and cross collateralization and your your netting out of of of of your balance sheet for your trading book works. As I view it, it's very positive sum. I don't I don't view it as negative sum. And I I think it's only going to add value to the CME and Eurex. >> Guys, last thing for you, I know you guys have had a long day already and you guys do the show every day, so appreciate you rocking with us. I think the Wall Street Journal put out a article today that said, I think the headline was this crypto trading platform has become Wall Street's convenience store. And this is kind of going on what you're saying here.

Capital flows with kind of how they could be like intertwined and mutually integrated in a beneficial way. Like, is that the narrative right now? You guys think is with the largest trading desks, the largest allocators, is that Hyperliquid is kind of like this like toy almost, is like this 24/7, you know, always open bodega, you pop in there, it's a Pakistani guy, he knows your name, you know his name, he knows your order, you know, he's always open. He He You always get the same good bagel, triple egg cheese on rye. Like, how do you guys think about this like convenience store narrative? Closes out here.

>> We're in different parts of town, brother. Um >> [laughter] >> Um >> [clears throat] >> You know, here here's here's what I will say. I think that hyperliquid is still misunderstood. And I think that the the the entire institutional trading space is aware of it, but they can't talk about it. But I think that a lot of people want to be able to get leverage and pay the funding rate and be able to have more efficiency in one getting leverage and two being able to execute and hedge their risk on a different platform, >> [snorts]

>> especially as it relates to over the weekend. And what what what I believe is that the funding rate dynamic on hyperliquid is the thing that and especially with with perpetuals differentiates it pretty significantly because once you have, you know, funding rates are all over the place right now on hyperliquid, right? And that's actually tells you that it's not an as efficient market as it should be, right? Because if those were, you know, efficient, they would probably be closer to the margin rates that you pay either in, you know, in your brokerage account or in future rolls with with futures.

Um and and the and the yield the the um futures roll basically yield extraction that you can have in the premium in that. Um the the entire thing that I think about for hyperliquid is the fact that you have this place to use leverage and it is based on the supply and demand in in market. And the the you know what once you have these large shops come in and start arbing the funding rate in the same way that you have um you know different carry trades or you know the entire um you know uh basis trade in you know treasury markets and things like that.

Once you have that come in, people are going to come in and extract the yield. There's going to be way more liquidity and then you're going to have all of these large players now say like okay, where are we going to you know clear through or how are we going to manage our risk? And I I'll just say this too. We haven't This is kind of more of a technical thing that people aren't really talking about, but if you're a trader, you really care about it is we haven't even seen significant spoofing or you know people trying to float narratives using hyperliquid yet. You know I I I would say that every single informed market participant knows that you know that everyone can see what you do on hyperliquid. And if you think that you know people you know anyone is dumb

enough to say like oh yeah, like let me just go in here and you know be able to you know put up this trade or this risk and now everyone's going to lean against that and it's not arbed somewhere else or whatever that might be. You're going to start having a lot more of those kind of like little changes, especially in markets that you can move around a little bit on the weekend that people you know what once you once you see these other guys and market makers and things like that in there, especially since we don't have you know spoofing laws on chain. You know it's going to be an indication about the development and then you're going to have efficiency around that and you'll have some changes and stuff like that. So I think we are still the fact that we have an absence

of those funding rates are still pretty high. We're not seeing you know that you know that type of sophistication on there yet. All of those things indicate that we're incredibly early, but there's a ton of capital and a wall of capital that's coming for hyperliquid. >> James. >> Yeah, I'll add to that. I I think we've talked uh personally about how we just believe perps is like an amazing product. I mean, if you guys have used them, it's it's so smooth. And one thing I've thought about personally, like as I go into my content game and stuff, is like um nobody's monetized on perps yet. Like, you've had all these people over the years, they get brought to brokerages, they get brought to futures prop firms,

they get all all this stuff that they've been monetized to, but there's still you know, 100 million people who have never even traded perps before. And once they do get introduced to this, maybe the regulation changes, maybe it just grows organically, where are they going to go? Well, they're going to go to like where the leaders are, where the liquidity is, where the best fees are, right? And hyperliquid is kind of set up for that. Right? So, it's like I it's it's hard for me to not think that there's so much growth left in the ecosystem that it's not time to start figuring out like like who's the eventual winner. Like, we haven't had the moment yet where this whole industry boom sticks and hockey sticks to the you know, we like

hyperliquid should be a $200 billion thing. Um CME should have a a deeply liquid perps platform. Interactive Brokers, Kalshi, Coinbase, all these things. It's going to be a competitive fee market where they're like And then everybody's got a perps account. Like, then okay, I get it. You could start picking winners. Dude, like we're just we're just getting started in this and that like that's why I'm like, well, we found the leader. Do you not want to bet on the leader in a growing space? That's like I'm just trying to simplify everything here. And like you know, let's see. Let's go.

>> Yep. Capital Flows James, guys. Awesome. Um guys, you can find them at Global Flows at James Rosenthal. They're live uh every day about 2 hours before us. So, you go straight from them, get the Markets Alpha, come here for the bodega vibes. I mean, it's pretty good morning, if you ask me. Um Kevin flows James, guys, thank you for joining us. Absolute absolute epic session. Thank you for being so spot-on here. Uh and uh I owe you guys a beer and and a dinner, if you ever come to New York. >> Thanks, brother. I really appreciate it. Look at you trying to walk back the bodega thing. Nah, nah. You went to You You You went there, but I I I resided.

I'm from I'm from Upstate New York. I'm from Syracuse, so I I'll I'll get there sometime. I'll come visit. >> All right. We'll see you guys there. Thanks for coming on, gentlemen. >> See you guys. >> Cheers, boys. >> Hey!