It’s A Bull Market But Not The One You Wanted With Rob Hadick & Santiago Santos | Weekly Roundup

Transcript

Like let's just get back to the core of what we wanted the core principles of you know what Satoshi wrote about and honestly you and I cut our teeth in this industry really in DeFi and that was what got us really excited about how that DeFi could change the way financial markets worked and that continues to be the best use case and that is what I continue to be excited about alongside everything that goes in with that transfer of value. This episode is brought to you by Geodet, the world's largest decentralized RTK network delivering real time centimeter accurate positioning around the globe. You'll hear more about them later in the episode. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the

views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests, and the Blockwork Works team may hold positions in the companies, funds, or projects discussed. Welcome back everyone for another segment of the roundup. Uh we are joined now exclusive with Rob who's taking over Yano's seat. I think permanently pretty much. Yeah. No, I could I could never replace him. Uh how's it going, Rob? How are you doing?

Good. I'm excited to be here. I uh am now in the back of a you know a weekend with beautiful weather in con and now back in New York where it is hot but less beautiful but excited to be here. There you go. Um so Rob, you've been on the road for like four weeks. It sounds like you are now the stable coin person. So I feel like you're going around all these conferences uh talking about stable coins and it look you and I were talking about this earlier in Khan where we met up. It feels like it's moving much much faster. Uh so why don't we start there? Like I of course I'm wearing the proof of attendance for ECC. I'm coming back. Um but tell us like what what is the sentiment in the room? I mean you were at Goldman's conference a couple weeks

ago. You're at ECC. What's u you know some insights there? We'll love to just start there. Yeah. So if you're thinking about stablecoin specifically, I will tell you uh at Goldman's event, so this was last week, I think it was last Wednesday, I spoke on the first panel of the day. It's just, you know, Goldman clients primarily and it was standing room only. And I've been to this Goldman Sachs, you know, digital assets event three years in a row. And this was by far and away the the most well attended. And so you look around, there's 400 people, family offices, trading firms, like big asset managers. And they really only want to talk about a few things of which number one was circle and stable coins. It's like very clear that this has caught the, you know, it's in the zeitgeist

right now. it is in everybody's uh mind and really at the forefront of how they're thinking about you know the future of this space and the thing they want to put money into. It it's not surprising to me considering you know how circle uh you know how well it has done in the public markets. But then maybe what has been surprising to me to your point is just how quickly you know we're seeing like the banks move just how quickly we're hearing large corporates talk about wanting to be you know involved or using stable coins and how they think they can do you know call it crossber like global money market uh movement. Um that has been I think the the real surprise to me because these are places that typically do not move quickly. Now all of a sudden they're all looking around and they're saying like

oh [ __ ] like I need to get on top of this. And and in fact I was talking to someone at Goldman and they were saying the exec committee is now asking us like are we deep enough right like this has gotten to the very top of Goldman and they're saying do we know enough and are we playing in this space enough to be effective in stable coins and and that's what's happening everywhere and so it's it's really the topic to jour I guess of like this is not new you you guys have been investing in stable coins for a number of years um anyone that's been in crypto has used stable coins it's sort of like you stop using wire transfers, you fund most of your deals in stable coins. What's changed? Like for anyone that's just kind of waking up and like, you know, stable coins have

been around for a while. What was the inflection point? Are there one or two catalyst? What would you point that to? It was Stripe. I think we all owe Stripe like a debt of gratitude a little bit. No, but but but even more seriously than that, you know, 18 months ago, I would say, you know, and I see all these companies to your point, we've been investing for a long time, so I've talked to a lot of people. 18 months ago, if you went and looked at stable coin volumes and you had a good insight into what was happening, it was basically all trading activity. Now, it is still by far and away the majority of trading activity. But I can tell you for a fact today that there are hundreds of billions of dollars worth of actual economic activity happening in stable coins at businesses every month, right?

And so, uh, oh, sorry, not 100 billion every month. Hundreds of billions annually. And it is growing every month. And we're starting to see, you know, everything from payouts and payins to, you know, simply like trade finance and just like global like treasury movements as well. We're starting to see a real excitement about the future of programmable money. That's what's changed and that is on the back of Stripe going in telling everybody this is real and everyone looking around like, oh man, Stripe's the best payments business that exists in the world. So maybe we should, you know, take a look at this and maybe we should do this too. Yeah. Yeah, I mean certainly like when when Stripe card bridge for 1 billion to me it felt like the Instagram Facebook Instagram acquisition um you know Stripe has just so much distribution is so

embedded in so many businesses and so when you try to like really push this to enterprise to your point like it's going to get adopted much faster and then of course they've extended that vision now acquiring Privy. Um how when you talk to enterprises um do you get a sense that they really truly understand how this is going to be used and embedded in their workflow or is it just a directive like people looking at circle trading at where it's trading at and the multiple it's trading at and it's sort of like let's scramble to get our act together or or do you find that enterprises have been thinking about it are thoughtful is there a coherent strategy in these organizations to like embed stable coins so it really depends I I think some people are really thoughtful they've been working on on it for a long time. I

I will tell you some of these things that are happening though are like complete nonsense. they're just like just headlines and and I think the broadly so the crypto market you know or if you're you're on cryp crypto Twitter people see a headline and they're like this is awesome and you know this company with distribution and these customers they're going to do stable coins and then you go and talk to that person or you think about you know what that that person does and they have absolutely no capability to go and actually transact or to build a business that transacts with stable coins and so I I actually put um and maybe I'll get a little bit of hate about But all and I actually put this like Fiserve headline out there like okay Fiser is going to issue their own stable coin and they're going to

distribute through all these community banks and they're going to do it with Salana and for a day everybody was tweeting like oh this is like a gamecher and if you actually take a step back and you think about okay like what is Fiser like they're old school processor and banking core provider and their banking core like falls over all the [ __ ] time. It is terrible non-clative cloudnative tech stack. The community banks themselves have no ability to actually transact in a 24/7 market with programmability in the transactions themselves. Like there's no way that these community banks and and fiser go and build a big stable coin specific you know linked business. What will happen

instead is that like you know some startup will come and replace them and that is what we're we're we're going to see. And so everybody's like, you know, acting like there's going to be um all of this inflow from these businesses, which I think is trying to happen. But what I expect instead is they're just going to be a replacement of a lot of those businesses. And that's what uh where I think the real kind of like tailwind and see change happens. Yeah. You have a great blog post uh titled Stable Coins and the collapse of the legacy payment model. I would encourage everyone to uh to take a read at that. I'm curious like um what are some of the things that people in crypto get really wrong about stable coins because you often hear you know stable coins are going to transform the

financial system and the reality is it's more nuanced than that like you still have to interact with certain pieces of the legacy system and conversely I'm curious to get your thoughts around what is something that people outside in the industry get wrong about stable coins so maybe like just Yeah. Yeah. So I think on the cryptonative side people are starting to understand that like if you have to transact within fiat that for a lot of things like stable coins are actually more expensive like if there needs to be a swap back into fiat due to the effects and liquidity concerns and due to the compliance there it can be more expensive than traditional rails. And so this continuous like conversation around like oh stable coins are you know essentially like lowcost you know direct transfers doesn't really take into

account like how payment flows work and so that I think people are starting to understand a little bit but what does that mean it means we need to be more on chain right and I think that gets to uh you know what do you know call it traditional people misunderstand about stable coins on the other side which is that there is a world in which like we don't need to be in fiat right like a lot of payment flows can happen on chain right Like there's um a business called Rain right now who issues cards, right? They issue cards that are stable coin backed by stable coins that are in your wallets. They do just in time receivables financing and securitization with a protocol called credit coupe and they pull that capital when they need.

It's much more capital efficient and then they uh settle with Visa in stable coins. And so there's this is a payment flow that does not need any sort of fiat uh interaction and all it really needs is it needs ex you know more credit and so that's like kind of the the the the elephant in the room and because you're replacing the bank and what banks really do is they provide credit you need to get these alternative lenders in there but if you do that and it's entirely onchain payment flow now it is a lot cheaper but and there is a world where we we can go there and we can be entirely onchain and So I think it's really kind of bringing those two people and those two points of view together.

Yeah, definitely. like we we've been looking a lot of like crossber payments which I think is one of the areas that um you know it's really picking up like like for instance the US Mexico rims quarter it's it's actually really efficient because there's just so much volume but where what we have spent a lot of time on is consumer behavior right if you're the end user and you're interacting with Western Union you know Western Union's built a pretty decent mode because they have just a very robust network of agents where the convenience factor is people care about right I want to be able to withdraw my cash and withdraw it immediately once my relative in the US tells me that he sent the money. Now what I you know in conversations with bridge and a couple other providers they're saying there's been a pretty big shift in consumer

behavior where now you don't have to offramp right because you you receive like Western Union would force you to offramp to pesos the local or the local currency but now you're able to maintain dollars a stable coin in a digital wallet might earn some yield and and so that has been pretty powerful. I mean it sounds simple and it's kind of crazy that people are not able to do that but it's a it's a very big shift in consumer behavior. Um so that's to your point around if money stays more digital and you don't have to offramp then you just kind of are able to unlock a lot of these efficiencies right because where where there exists a lot of friction still is in the on and off ramping and creating like a network where you you need to you need to be able to offer

that same convenience to the end user. Yeah. all of the co extra costs are at the off-ramp and the on-ramp, right? And so it's it's a significantly better product experience if you say onchain. That's what people we need to get to. I mean, it's also I mean, I know we'll talk about this later around like the tokenization of, you know, some of these other assets, but the this this like hybrid model that people are trying to solve for where there's like this off-chain piece and this onchain piece, like these are the worst of both worlds. Like these suck. Like you you you really shouldn't pick one or the other if I'm being honest. And the the goal is clearly to be onchain. And if we can get to being entirely onchain, like it's going to be uh much better for everybody involved, it's going to acrue more value

to the retail users. It's going to disintermediate the banks. And it's just going to be a better digitally native or internet first experience. Yeah. So give us like your one year, 5year forecast on stable coins. Like everyone now is trying to launch a purpose-built L1 that has, you know, focused on this the stable coin chain. Then you're going to have JP Morgans of the world issue their own stable coin. Who are the winners? Who are the losers in this kind of tectonic shift of financial rails? You have to own the customer or you have to own call it the like the compliance and like KYC KYB and banking uh tech stack. So why do I say that? That's

really those are basically the two end points. So I talk about this a little bit in that blog I wrote that you mentioned, but uh basically the entire middle of the transaction flow is getting completely collapsed. Somebody like a Stripe who today is already the merchant acquirer is already the processor and gateway. They can also become essentially the uh card issuer. They can become the token issuer and they're essentially the central bank and they're the issuing bank in those cases. And they can also if it's entirely onchain be essentially the the the network, right? So you know you don't necessarily need a visa maybe a visa for O but you don't need it for you know all of the settlement piece and so if you if you are able to collapse that entire middle piece then the people who win are

the people who own the end points. So what that does that mean is like you either need to be like a big global bank or someone with a big with a lot of big global bank relationships who can understands how the complexity of KYC KYB work or you have to own like the end of the distribution right like you have to own the end customer and so I think what we're going to see is we're going to see somebody like a stripe who or um you know maybe a a more cryptonative newcomer that kind of looks like a stripe who really is is is really good at product and tech that will be a huge huge winner.

you'll see maybe the most digitally native bank be a huge huge winner and then you'll see the people who own the end customer in you know maybe it's a new bank or maybe it's a digitally native uh cryptonnative new uh global fintech right and those people are going to be going to be uh the big winners yeah on that point uh Peter theel this week announced with founder of Oculus and I think Andreal um the a crypto friendly Silicon Valley bank rival Uh any insights there? Any kind of immediate reactions when you saw that?

Yeah. So so I knew it was happening. They um you know they this is called Arabore which is a weird name for a bank but let's put that aside for a minute. Yeah. And it's renamed and they've had a couple of iterations and they they've done a few things. Um, and people see like clearly, this actually goes like beyond crypto and it goes back to my my earlier point, which is that the bank core and the bank tech stacks at the vast majority of banks is like a complete nightmare and [ __ ] show. Like digitally native banks, not just crypto native banks, but digitally native banks have been taking market share and continue to take market share. And being stable coin first, clearly there's a way to go win a market and banks are, you know, they're they're great ways to make money, right? So there you see it kind

of in fintech more broadly but you know every tech company eventually wants to become a bank and every bank essentially wants to become a tech company and that's because the banks make way more money and the tech companies get way better multiples well this is obviously trying to solve for that right and so I listen I I think considering who they are they're probably going to build a humongous fantastic business and like I I don't know how you would get in front of that train considering you know their their experience and and their relationships. Yeah, I mean a lot of this like path dependency it's like are you able to attract talent and it's very self-fulfilling like they do have an unfair advantage. Um so so so yeah. Um anything else on the stable coin front?

I mean there's just a lot to impact. I mean we've covered at length but um people should go and read your blog post. Simon Taylor is another really good one. There's an analyst I think at um what's another fund? Uh I forget which one. Ultim she's been tweeting a lot about tokenization and stable coins, right? Yeah. Yeah. So people are like it's we talked about this in the podcast um that you were on a couple weeks ago which is this is the benefit of more crypto companies going public for better or for worse. There's just more attention. There's more coverage um and it just brings more legitimacy to the space. Now, you know, if you want to draw attention at the board level, it's very easy to point to a public company like now Coinbase or or Circle and say,

well, you know, you got to pay attention, right? It's just a it's just a very in-your-face kind of thing. I I mean, I think people have to understand like how are decisions made at these big companies? They're made at that board level, right? And the board is going to tell management these are like the three, four, five things that you need to care about and these are going to be the focus for the next few quarters. It's much easier for them to say, "Yeah, stable coins need to be a part of that thing that you do or that you focus on and is a a core strategic initiative for us when they see Circle go out and trade up to 60 or 70 billion equity value at these crazy multiples."

And you know, now all of a sudden it's like, "Oh man, the right thing for shareholder value is to have stable coins in my business." Yeah. Last spicy take cuz Rob um you know, doesn't shy away from that. you tweeted a couple days ago. Um, so JP Morgan, which is an underwriter and I don't know if it was lead left, but it was, you know, top under. I think they're lead left. Yeah, they're lead left. Yeah. So they, um, the equity, uh, this guy Kenneth Worthington, he is also the analyst uh, that covers Coinbase and has been doing for a long time. They put out an underweight initiation report on Circle with a price target of 80 bucks. And and you're I I quote, I can't emphasize enough how crazy the Circle IPO has been. And now with an unprecedented initial coverage report from the lead underwriter that

has a price target almost 60% below current. Not sure I've ever seen the elite underwriters initial report be this bearish. I mean but but the funny thing about it is $80 would have seemed so bullish. Uh I don't think anyone was under like expecting $80, you know. No, nobody was underwriting 80 bucks. And then you know if you're to be fair I don't envy his job because as you're the sellside analyst and I get you know there's a Chinese wall etc but these guys feel pressure to come out and put out like you know pretty nice reports around people that they just IPOed and so he's sitting there being like [ __ ] what do I do and how do I like stay true to who I am but also you know um account for how the market has reacted and the

market did not care whatsoever. I think it's 188 bucks again today. 187. It's up 5% today. Yeah, exactly. And and but the funny thing is there's also a lot of crowding. I think um GS who was also an underrer $883 price target. I think there's a bunch of people around this 80 mark who are just like trying to figure out like how not to uh make themselves look like idiots, but also to uh try to stay true to some set of like fundamentals. Well, you know, ladies and gentlemen, if if you're complaining about low float, high FTV coins, well, let me tell you, it's no different in Tradfi because like, okay, so so objectively speaking, like there's this lockup period, right?

So, people that are like totally unaware of how this works, like there's only so many shares that are offered and it's it's, you know, not super thinly traded, but there's not a lot of shares that go around. And so, you know, if you want to short this thing, you can't actually get much because there's not that many shares out there. And so it lends this dynamic during the during the lockup period where you can have these crazy spikes in in uh in price. But um you know we'll see we'll see what happens after the lock up. I think it's 90 days give or take. Uh I believe yeah I I believe we're actually mostly 60 days in this one. I have to go confirm but I believe it's mostly 60 days for circle. Um the the the one thing I would mention is I was

talking to like one of the companies uh or a company and a founder who would know about a lot of the flows and was actually like looking at the tape and saying like figuring out like where all the flows are coming from in circle and he was like they're all the retail brokerages like this is all retail bid. This is not institutions coming out and saying yeah like we need access to you know payment stable coins today. It is like it is basically a memecoin. Uh, at least according to this person that that I talked to. Yeah. Yeah. I'm not surprised. I mean, and this is kind of um, you know, it IPOed to what, six billionish?

Yeah. So, 31 bucks was a little over was a little over six. Close to seven. So, yeah. I mean, this just like it doesn't take much capital to to push these things up. And and in a similar way, like, you know, everyone's now charting M2 and Bitcoin price. Like as much as crypto's grown to a, you know, pretty sizable way is a two plus trillion dollar asset class, like it doesn't take much capital to push these things up. And like like there's a dynamic where like if you're a large hedge fund, I I don't know if they're putting a position on Circle or not, but like there are all these arbitrary thresholds that you can't like if you're a massive fund, you can't really invest in anything sub 10 million 10 billion and then once it crosses 50 billion. So these all these weird things like when

Coinbase got listed into the S&P 500, right? you know, it just the the flows movement just is just ripped, right? Yeah. Uh I got my first couple uh like emails like, "Hey, I'm you know, I'm leaving Circle. I'm, you know, looking for my my next opportunity. Might take a little bit of time off." And I think the the employees are are excited about what's happening. Yeah. Funny enough, I was looking at the data, right, because I was close with one of the early investors in Circle and I remember going back to 2014, 2015 and and and my whole thesis was like, does it actually outperform Bitcoin? because that's I think always the barometer which is whatever you're investing in crypto it it should you know outperform the underlying and it it didn't as much as it's been a fantastic return for them like you know it didn't

outperform Bitcoin uh and and so you wonder like as an allocator of capital you are um you know uh what you you know where to park your capital it's it's very very hard to outperform Bitcoin yeah but who was the biggest shareholder in in circle like I think it was Marshall Right? Cuz could Marshall Waist have gone and like bought a bunch of Bitcoin in 2018 when they did that deal? They couldn't have. Right. And so this is General Catalyst and Brier Capital I think were seed round bunch of money in in like 2018 through 2020 I think.

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Carefully consider the extreme risks associated with crypto before investing. As always, investments in blockchain technology involve risk, terms, and conditions apply. The institutional allocators are prefer to invest in startups with like legitimate teams that they can underwrite, go to committee, and there's this like, you know, they could pay to do that, right? And and I I think it would be hard to like put a couple billion or whatever how much capital Circle raised in just Bitcoin. Um, beyond that, by the way, there's also like my LPs want to hear me talk about, you know, who my founders are and like why we invested in them and they're not going to pay me 2 and 20 to buy Bitcoin because they can just go to do that themselves. The question they have to

answer is like, do they want to put money into my fund or not relative to just buying Bitcoin? But once they put money into my fund, like they do not want me to do stuff like that. They want me to go and tell them like what is changing the way financial markets work and why do and how do they have exposure to that? Yeah, maybe as a side note on that, like has the conversation with LPS really changed over the years? Are they more focused on this type of stuff or do they take an interest in particular areas? I'm kind of curious if there's general insights that that you've observed over the years. Yeah, it's definitely changed a lot. The LPs, you know, call it in, you know, pre2021, they didn't really have any access to the space. You know, some of obviously the more sophisticated ones had bought

Bitcoin, but the institutions hadn't. They didn't really still know the story. Maybe they had, you know, thought about it a little bit in 2018 when we ran up to to 19K or or a little bit earlier, but they just didn't know that much. And you you really had to walk them through what was happening, why it was happening, why blockchain rails, and why crypto were, you know, a good asset class for them to be investing in. 2021, they everyone got just so much FOMO. There was just they were looking around. They were looking at the price action. and they were looking at the CNBC headlines and they were like, I am going to get fired if I don't actually get some exposure to this thing and I've got to put money in as quick as possible, but there was still extremely little amount of knowledge about like why

blockchain rails were good for money movement, like why there was a reason for DeFi to exist and how DeFi could potentially replace certain types of, you know, traditional financial instruments. Now, today, frankly, all this all the LPs pretty much get it. They understand the story. They may or may not believe you. They may think I think you're full of [ __ ] But what they do believe is or they do understand why it is going to exist. And almost all of them believe in Bitcoin at this point. And at least that Bitcoin will continue to be a store of value whether they think it should be or not because they for some ideological reason. And so now it's about telling them like this is actually the future of money. This is the future of capital markets. And if you want somebody to get you exposure to

how capital markets are going to exist 10 years from now, you have to invest with me because I'm the one who has that expertise and and understanding. And so it's a different it's sort of the same story, but less education needs to happen. Yeah. Yeah, definitely. Uh transitioning to something else that has been ripping is Hood. This is Robin Hood stock. I mean, it's been on an absolute tear. uh they were I mean we're here to talk about insights and news stories of ECC. There's really just one and that was Robin Hood announcing this tokenization of like certain private um you know uh companies stocks. Uh should we just spend a minute? I'd like to just the next chapter of the segment just

covering all of that. Um, so, so for for a little bit of background, feel free to jump in here with the particulars, but like Vlad was in Khan and he was unveiled this opportunity to for Robin Hood users. I think it was only EU users. So, it's only EU users. So, Robin Hood EU, which is just Bitstamp, which by the way, before we even go into the specifics, how good did Vlad look in that, you know, that suit? So, you got a little man. You could kind of see through the shirt like he was he was he was he was he was uh like he was a a pure cappo there. I mean someone I saw someone comment of like uh Vlad went to his stylist and said make me look presentable and they and somehow they made him look like a crypto scammer

but look we appreciate it was boiling hot in can I don't know how he was like weathering that but uh there's a lot of people in that in that event you're starting to see how companies like Robin Hood like we talked about Stripe and how forward-looking they've been Robin Hood again founder le organization Vlad has been all over it and it's not new the Bitstamp happened a while ago. They've been integrating that. Um let's let's talk about that. Like so so I think there there's a lot to unpack but like at a high level this gives people an opportunity to have exposure to these private companies and I think it was like OpenAI and SpaceX and maybe a few other companies, right?

So So there's two different products that they announced and so like let's maybe we'll we'll level set on two of them or or both of them. So on the uh they announced the public company side like tokenized like public equities and I think I got a little confused and I even tweeted about this a little bit um that with the XStocks announcement which was also what you know uh Kraken and by bit and gate and a few others are doing on Salana but maybe on the Robin Hood side basically what they announced was that they're going to do a or allow you to enter into a derivative contract with them that trades 245 so still doesn't trade on the weekend cannot be taken off platform. So they'll give you a token, but it looks in your wallet like no

different than if you just own the equity itself. They're charging a 10 BIPS FX fee. So because of your your Bitstamp or, you know, Robin Hood Europe user, you have Euro, but then they're swapping that euro for 10 bits into USD and then they're swapping with up to a 50 bit spread to go buy the token itself. It's they're it's still a T+1 settlement on the FX side. And they're, you know, it it looks essentially in every way on platform like it's, you know, a traditional equity. And so you ask like what what problem are they solving? And the problem they are solving for that product is essentially just that they don't have the license to go offer equities, right? Like like that is the problem they are solving. like they're competing in Europe with uh Revolute and with a bunch of these other

um you know fintexs who have the right licensing in Europe and have are offering us equities through like Drive and Alpaca and like these other you know providers and Robin Hood just doesn't and so they're they're made a big deal about the the tokenized you know equity piece and and but it's it's essentially just you know a kind of I think a little bit of a regard for them right now. Now, they do say that they're like setting themselves up for, you know, a future of being much more on chain and they want to have their own chain that's on arbitrum, etc. So, I'm excited about where they're going, but I just want to be like very clear about like what that product is today.

Yeah, it's it's a Robin Hood chain. It's deployed on arbitrum and it gives European customers the ability to buy tokenized um US stocks, I think over 200 and ETFs, right? Yeah. But, but it's it's there there's no interaction with any permissionless chain for you, the user, right? like they they're going to settle. They're going to batch settle. Um today it's actually going to be entirely on arbitum. The in the future it sounds like it's probably going to be it's going to use like the orbit tech stack, but it's probably going to be directly settling into ETH instead of settling into arbitum. It's not going to be like a an L3 or side chain. So I think we'll it's like kind of unclear. Um the private company stuff is a little bit different. And so like you that's the public company. For the private company

stuff, there was obviously some some hoopla about this on uh on Twitter yesterday because they said that they, you know, uh they were giving you uh private company stock and then OpenAI came out and said like we're definitely not allowing transfers and it turns out that it's the the structure of it is pretty similar to what you've seen in other um types of structures where they are buying, you know, or they've been able to buy or source some equity from, you know, OpenAI employees, early investors, you know, same thing with um uh I believe it was SpaceX and they're putting it into an SPV and they're allowing you to buy um some fraction of that SPV in a derivative contract again and um in a kind of again like a uh completely permission like you know in

their um app uh program and so again it's it's it's tokenized but there's not necessarily like anti- interaction with crypto at least today. So again, I think it's important to say like it's exciting that we're having these types of conversations, but the the product as it exists today um isn't solving a lot of problems for much of anyone other than frankly like a little bit of regulatory arbitrage for Robin Hood specifically. Yeah. Yeah. You know, I I've looked at the video and look, I'm sure they thought extensively about how they were going to position it, but I I think it's important if you're a founder of your company, like I don't know if it was a feature or a bug, but I I would have done it differently is all I'm saying because you should have like what

happens like retail like Robin Hood is a retail focused platform. The worst case is imagine if all users are flocking and buying this thing because you know these are companies that people want to have exposure to in a in a worst case scenario you have a ton of interest a ton of people unsuspectingly buy this thinking that they're going to get on the cap table and that's not the case and if you're not on the cap table then then this might fall apart. I mean it has a whole set of nuances and considerations where you know obviously there's backlash with open AI like it is some companies like stripe for instance doesn't allow like there's all these transfer restrictions on stocks I mean as far as I'm aware stripe you know I think it's like 100 billion in the secondary market the

company tenders back shares like if you're an employee you want liquidity the the company pretty much like every quarter or so is buying back these shares and they're very very guarded as to who you can sell them and most companies are are are are like is. And so, yeah, I I I think it's um I would have done it differently. I wonder why they they didn't do it this way. Maybe they were intentionally opaque about it or just, you know, but it's just a word of caution because if you're in crypto, what you don't want is this is what we have wrong as an industry, you know, is just be transparent. Maybe hold off on the announcement or maybe go talk to these companies. If you take the long path, like now you have backlash from OpenAI and now there could be a more scrutiny

and so I wonder if this actually jeopardizes their capacity to maybe do something interesting where you go and structure these things and get employees liquidity. I don't know. Yeah. My my maybe my I'm my perspective here is that the biggest problem they made to your point was just how they talked about it. It wasn't actually the product itself, right? Like it's actually really exciting that people can get you know more access to like you know private equity you know um Tesla and and or sorry um open AI and SpaceX. It's you know exciting that people in Europe can get access to these public equities through you know the Robinet platform when they couldn't before. I my expectation or my my concern is that they talked about it in these big kind

of like crypto promise ways and to get everybody like super hyped up about it and and even the event. I mean, I I don't know if you went, but but I was there for part of it. And, you know, they kind of there's this air of like, oh, it's like really exclusive. Like, everybody is staying at the best hotel. They're getting on a um a shuttle that only the shuttles could go up to this essentially this like chateau that like then was like they were he he was presenting. And it was really all about this like air of exclusivity that they were trying to to go out and foster. And then they talked about a product in a really opaque way that really is like not is pretty simple. And it was a really about this like future looking version of like what they want their

onchain or maybe what they want their like onchain future to look like and how they want to interact with permissionless blockchains. But it got people expecting something different than what the details actually were. And that is the worst thing you can do. Like you need to be have clarity in language. You need to have clarity in the way you communicate. And that is why there's been so much confusion and backlash. um at times at least you know on on Twitter and elsewhere. Yeah. Yeah. I mean look if if it were up to me I'm sure there's some regulatory stuff but it's like hey this is a derivative contract is going to track the price of the secondary market of these things and look if you've observed we're going to give you like this is maybe how the oracle works and we're going to take a weighted average and and

this is the calculation. And I mean maybe as I understood it that it's sort of like that you're you're going to and then I have questions around well how are you calculating this and who's shorting it like who's who's taking the other side of the position how are you managing that and like so they did come out eventually and I I don't think this was a publicly released at the time. So they came out eventually and now what they've said is they're using like Carta and Forge secondary markets as sort of like a pricing agent to um try to kind of pin or or track the uh the price that you're seeing on Carta or Forge. I think there's like very a lot of confusion still around like you know do you own common do you own like a pref like how much what should a common

or pref trade at? Um you know I think it's very unclear around or it's not unclear you actually you know that you have no actual rights. So like what is your legal right you know relative to Robin Hood and then Robin Hood is actually you know has this SPV and are there other owners in this SPV like some of that like legal structure is like is unclear um but they did at least say they're going to try to use you know secondary markets at at Carta and Forge um and have some sort of like pricing agent to to help you like bring some sort of transparency into that pricing. Yeah, look I don't disagree with you. I mean in the best case we get more liquidity more transparency into the secondary market like crypto is a good engine to bring price discovery with liquidity and so you know it does play

into access like most people don't have the opportunity to like like invest in US stocks which is a huge win I think and then there's obviously a lot of people that don't have access like most of the value generation over the last you know two decades or so has been in the private markets companies are staying private longer and you know not everyone can get access to that so you Hopefully you see the promise of where it can go. Uh but I do think we have to go a long way and and as an industry just be a little bit more measured in how we like make these announcements because I think there's especially in moments like these there's a lot of hype. There's a lot of expectation uh especially as a public company. And so I I think um yeah.

Yeah. Well, and by the way, Robin Hood stock was up like what 12% after the announcement just like completely ripped. And I would say this like I would contrast this a little bit with um like Republic had an announcement about also distributing uh private shares I think specifically of SpaceX uh like last week and they did it in the way that you see these things are typ typically done which is that they did I think uh a reg CF and so like everybody could um they could only distribute up to five million over a 12-month basis. Everybody had to be you know KYC AML on the Republic platform. the um the public was telling people that we don't actually have the shares yet. They were very clear about that. But if we get up

to, you know, 5 million of interest, we will go and acquire the shares. This is what we think the target price will be, which I think on their platform was they were targeting between a 400 and 500 billion valuation for SpaceX, which is like absolutely incredible. But that was the way that these things are typically done. They're done in a regulated manner. and in and and and Republic deciding to do it in kind of like this unregulated manner is a little bit odd and then on the public equity side to your point like in Europe people have access to cheap US stocks and so the the the distribution point for the users doesn't really make a ton of sense. It makes sense in India and Southeast Asia and places where people actually don't have access to uh public

equities, but in Europe they already people already have that access. And so it really felt to me like, hey, we want to tell a really good story for the public market and then we want to do a little bit of regulatory arbitrage. Yeah, totally. To your point on Republic, I like the way they called it, which is uh mirror tokens. Yeah. And that I think name is is is more reflective of what this instrument actually is doing. So, so as they called it, mirror tokens, a new type of token tied to the tied to the performance of the world's most valuable private companies. I think that's that's very elegant way of saying it, right? Yeah.

And and so that's probably, you know, a big contrast there. And you know, Republic's been quietly doing this uh for for such a long time. I mean, they've been I was a seed investor, an adviser at some point, Ken. It's good to see them come out of like uh you know, it pays to play the long game. And, you know, they've taken the high like the harder path, which is, you know, trying to do this in a very regulated manner and and and never compromising, I guess, their ability to operate, which I think is so essential in the space. Like, we're just getting started. like don't do anything that puts you out of the game, you know. Uh so it's good to see this.

Yeah. And I think the the one thing I would I would maybe end us with or or maybe we move on to like XTOX and some of the other solutions. But the the other thing I would say is like there is going to be more regulatory scrutiny on a tokenized equity that is, you know, trading on chain if and when Robin Hood allows these things to be transferred on chain than there is on like name your token today that trades on Jupiter, right? And so like we do need to be I think a little bit more thoughtful around how we think and talk about these things because if we get to our head of ourselves like you're going to have a bit of a snapback against even you know this regulatory regime which is obviously you know much more friendly to the administr or to us than than prior

administrations have been. And so I think that's an important point. And then I think the other thing here is I expect we'll continue to see more and more transfer restrictions and language on transfer restrictions in shareholders agreements be um uh be tweaked to include things like affiliates and subsidiaries and SPVS so that uh because the the companies especially the private ones they don't want this to happen. They don't want their stock out there trading, you know, especially not permissionlessly and even within Robin Hood unless they facilitated themselves.

They control the environment. So, I think we're going to see more tension directly with people like OpenAI, which you've already seen here. Yeah. This episode is brought to you by Geonet, the world's largest decentralized RTK network delivering real time centimeter accurate positioning around the globe. Powering technologies that enable precise navigation for drones, autonomous vehicles, first responders, farmers, and robotics, Geodet shows that blockchain can be a truly transformative force. By delivering realtime centimeter level accuracy, Geodet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out

more, click the link in the show notes or follow them on X. Hey everyone, Jason here. Earlier in today's episode, you heard me mention the weekly CIO memo from Bitwise. In an industry as hectic, fast, and complex as ours, it's incredibly hard to get an easy nononsense stream of what's actually moving crypto. The memo comes from Matt Hogan, Bitwise's chief investment officer. He's been on the show before and he has this amazing ability to take the most complex topics and break them down with clarity. Trust me on this one.

The Bitwise weekly CIO memo is really worth the 5 minutes of your time. Check it out at bitweisinvestments.com/cio memo/mpire or just hit the link in the description of today's episode to get started. Carefully consider the extreme risks associated with crypto before investing. As always, investments in blockchain technology involve risk terms and conditions apply. Have you seen the movie uh the big short? Yeah, of course. You know, you know those scenes where like Richard Thaylor or Selena Gomez or you know Margot Robbie goes in there and explains like this weird like complicated financial name. So let's just do the same here. Mirror token. So So nothing stops you and I Rob from

entering into an agreement where we bet on the outcome of particular company. So like let's pick um you know open AI. I say hey open AI is gonna be a trillion dollar business and you say you are absolutely out of your mind. I take the other bet side of the bet. I say it's going to be X and then we I would never do that more than a trillion. Well you know I mean like so say that you were um not agreeing with me but but you would find a counterparty that would take the other side of the bed and that's how you would structure as a normal bet would. Right. Patriots versus Chiefs no different than OpenAI. You just select the price and then the you assign some sort of payout structure and you enter in a handshake agreement. No problem, right? Derivative markets are

vastly larger than spot like notional markets like they're just huge huge huge um and that's as I like this is I think nothing stops you from doing that. I mean there's some like regulatory considerations and stuff but that's effectively what this mirror token is in some ways. uh you need a like synthetics try to do this back like back in the day where they had the synths and I think if Kane were listening you know a lot of people were not as sophisticated because when you were minting SUSD you were basically shorting and so you had to like make sure that you didn't acrew bad debt um so these are the hard problems like you got to manage the book in a very good way and so you're somehow trusting this platforms to like if

you're not doing it directly as you and I have like done it right now someone is going to have to do that for you and you're hoping that there's no counterparty risk because oh there's always counterparty risk. There's always there's always counterparty risk. You rob run away and don't honor it when we try to settle. There's a whole myriad of counterparty risks that could you're trusting Robin Hood or you're trusting Republic and how they're doing it and then maybe the company's you know there's backlash you actually maybe not be settled and so you never get the shares and there's a whole set of things that if you don't do it the right way it can really backfire right in Robin I think there like there's like three or four layers cuz like you're trusting like Robin Hood Europe then you're trusting like the US broker

dealer that is you know acquiring these shares or has acquired these shares for the SPV then you're you're also trusting like the SPV administrators Right. And so like there's like three people there and then you have open AI on the other end. And so like I mean you know this and you know it's maybe something that's a little foreign to to some of the listeners but counterparty risk is probably the number one thing I used to talk about when I worked on traditional hedge funds like more than anything else. It was always about counterparty risk. Yeah. No totally. I mean uh le like these organizations blow up abocates. Uh these things can get really out of hand. Um, speaking of counterparty risk, I was just in a panel of ECC, I guess, and we're talking about DeFi and uh, we ended up talking about

this cuz uh, the whole point was there was like a couple of folks there from like traditional like I guess not traditional but like DeFi protocols and it's so common these people just like talk a very big game. It's like we're going to blow up JP Morgan as we know it. it's going to cease to exist. And I find it all a lot. It's odd, but these people like haven't worked in Trafi. So, it's like, well, not really. But, um, I've been now that enjoying like, uh, ever since my Pari days like, can you walk into and talk to your friends in Trafi and not mention crypto, but mention like the underlying mechanism and system and get them excited, right?

Can you talk about stable coins without calling them stable coins? You talk about DeFi rails without and one of the things as you were saying counterparty risk. This is one of the like core primitives that it's not to say that DeFi is going to blow up Trafi but like the way I would describe it to folks at JP Morgan like hey imagine if you had the ability to assess collateral 24/7 365 and you can inspect that in real time. you not like like entity level, systemwide protocol-wide. And so you never get yourself in a position where you can actually monitor counterparty risk in in a more precise way in real time. And if you just say that, they'll be like, "Oh, that's really cool."

And you're like, "Oh yeah, well that's DeFi." And they're like, "Oh, no, no, no. We can't we can't touch DeFi. This is this is terrible. This is uh you know, snake oil kind of thing." But uh these are some of the properties that I think as an industry we're better off and and your point around stable coins just to go back there for a minute really does that well which is don't necessarily think about what you're going to disrupt but more of what is sort of like a new primitive or a new benefit that was just not possible before flash loans composability atomic transactions you know 24/7 365 reducing counterparty risk your ability to measure risk in more real time like these are some of the things that if you're just taking the very narrow view of like what are we displacing you sort of miss perhaps even the bigger picture

of what is possible with this technology that I think is worth I've seen sort of the best founders think like that that uh uh whereas by the way this is like the way you are supposed to get people you're this is how you sell you don't go and sell to somebody by saying like hey like this we're going to disrupt your business or somebody else's business and like nobody is like oh yeah you know sign me up for that you go and tell them like I'm going to make you money I'm going to make your life better and I'm going to reduce your risk and this is how I'm going to do it. And then they're like, "Yeah, sign me up." Like, absolutely. Right. They never You never go You never say you're going to cut costs. You always say you're going to add revenue every time.

Yep. That that's very true. Um what else should we talk about? Um is there anything else on the tokenization stuff that we should cover? Did did you want to quickly touch on X stocks because um those are actually being traded on uh on on Salana right now and Camino or on Jupiter and Radium and um you know you can use it as you can do securities lending essentially on commino. Yeah, let's do that. Yeah. So so just quickly maybe I'll I'll um talk about how they're a little bit different. So these are uh in somewhat of a similar manner. You you go uh and you can buy them through right now Kraken or Bybit. I think Gate is going to sign up as well. I expect we'll see other um other exchanges sign up. And

you, you know, KYC IML, you go and you put in an order to um to to to order to to buy one of these. You know, they mint a token and what's happening on the back end is a a company called Back.fi is acquiring that equity into a SPV that um that they control and and they're regulated in the EU, I think, through Likenstein. And then they're minting that token. And so you now have that token like on in your Kraken um wallet. But now actually those tokens can be transferred to you know your Phantom wallet or any self-custodial wallet on Salana immediately supported to do securities lending on Camino immediately supported to go and swap on Jupiter. And so we saw a lot of people I think tweeting about this and getting really

excited about this because now it's like oh equities are in DeFi. You know, I think I I had a tweet about this that I think there's a lot of again like structural issues here that created a market that or probably going to create a market that is kind of the worst of both worlds that aren't really uh allowing us to completely take advantage of being onchain. Uh and also we have a lot of this, you know, call it counterparty risk and um and risk and off-chain and regulatory risk that exists. And so, um, you know, that's that was XOXOX and I think that was kind of caught up in the Robin Hood announcement, but that even is a step further because it's in many ways sort of like the Robin Hood announcement, but now you can actually use these things in DeFi.

Yeah, that was a decent amount of liquidity, but what what's a I saw some comments around like the price was just being totally off. There's not enough liquidity in there. I'm curious like what um and what you've observed. Obviously, it's early days, but like what could go terribly wrong and then what is Let's just focus on the downside of of how this could break and then we could talk like the upside everyone kind of knows, but like how does this actually break and and what's the worst case for for this type of stuff? Yeah. So, there's been about uh I think there was like 8 million bucks of volume yesterday and so there's a little bit of volume on chain. Um but actually, if you look at Amazon, there's like 700 bucks of liquidity right now and so there's zero uh essentially. I think um Tesla

maybe had uh uh was it Tesla? No, it was Apple who had maybe like 70K. Then I think Tesla actually had like a million bucks of liquidity. And so these are, you know, in radium pools. You can swap it through Jupiter. And so you're seeing kind of like a wide disparity of like where where people are willing to to uh provide liquidity and where they where they want to um put money into the AMM pools. There's I think the concern I have and I talked about this a little bit on Twitter was there there's actually like no real way to market make these economically on the weekends. Uh after hours is also really tough. And so what I'm concerned about is there was essentially like this immediate oh hey we're going to you know do a securities

lending against this on Camino. We're going to immediately allow for swapping on Radium and through Jupiter. And there's this likelihood that there's no sophisticated market makers on the weekend. And if there will be market makers on the weekend to they have to go and hedge offchain. Well, you can't actually hedge if you're a um if you're somebody that is if it's during I guess off market hours if it's not on um you know during those market hours. And so they actually have to hold that market to hold that risk for that entire weekend or those after hours time frame.

And to be able to hold risk for an entire weekend when the world is changing as quickly as it is, they're going to have to like blow out the spread and pricing is going to get like all wacky and it's going to be uneconomical for professional traders and you're just going to see kind of like, you know, unsophisticated retail trading these during those periods of time. And I and I'm worried that now that they're going to be used in Camino and potentially derivatives on top of that, you're going to see a lot of like cascad cascading liquidation risk on chain. And so that's one of the things that I think is um we need to be thoughtful about very early on. Yeah. No, absolutely. I'm going to I'm trying to share my screen here because uh maybe you can see it or not, but Coin

Gecko has actually a good dashboard here that tracks uh I I believe this correct like Xtocks ecosystem and you have uh just to to your point earlier now like you have the most amount of volume on a 24-hour basis is the S&P 500 X like X stock and that has 1.6 6 million volume. Uh, and then it drops off pretty dramatically. I guess Nvidia had a lot, you know, sorry, Robin Hood, Xbox, Circle, and Nvidia, but it's it's very thin liquidity, right? Um, and and so just going back to on the problem that you observe on the weekend, let me know if this terribly wrong, is because you someone needs to take that risk over the weekend. uh there's a counterparty in

there that you know you're going to have to settle on Monday and and if there's a lot of movement over the weekend or and or it's especially when it's thinly traded it lends itself for like these very big fluctuations someone can be caught off guards really really badly there. I mean all of us I think who have been in crypto long enough understand or have seen how these like thinly like low liquidity weekends might just like cause like cascading issues and these are even for like much more liquid uh liquid markets and to your point like there is a market maker out there who will make this market but they might you know blow out the spread by 5%. Right. which means that like you might just be taking a a 5% haircut the second you buy this this

token on the weekend and you don't have the upside of like a memecoin. Like I had a bunch of people tweet at me like oh you know haven't you seen that people are willing to take you know 10% slippage or 15% slippage to go and buy like fartcoin. I was like yeah that's because everybody thinks fartcoin is going to like 4x or 5x 100x or bust you know. Yeah. Exactly right. like you you're are you really going to take a 5% haircut on day one to in a hopes of making 7% or 5% or 2% on an Apple move you know pre-market hours on Monday morning like in the vast majority of cases no right and but the sophisticated actors like that's what they're going to do because if they realize that like retail doesn't care and there is that demand otherwise yeah I mean excellent point like imagine

if you're using these shares as collateral and there's a huge fluctuation over the weekend because there's a whale that wants to liquidate you like we we've seen this like pretty adversarial environment in crypto where people can you because people are seeing your position in real time. I mean I don't know if these are like accepted as collateral but let's just say that in Camino you can borrow against you can borrow against circle shares right you want to go short circle you know there you go ladies and gentlemen none of this financial advice I'm not but you know it it um right now it's tracking fairly closely I guess like 187 but but over the weekend it' be really interesting to see how this plays out. I mean, some of the low liquidity ones were trading at a like a I think it was Apple I was looking at today. It

traded at a solid like 7% discount at some point. And like I said, there's only like 70k of of liquidity. I mean, it's early, right? And so, we'll see what happens, but there's I I think there's a lot of DeFi risk here that especially because like you can't orbit easily, right? So somebody if you want to arb the the transaction or the price differential like you have to go back to Kraken or you know buy or one of these places you have to be KYC AML then you have to go and redeem the token for whatever the offchain price is not the onchain price you pay 25 bips and it's getting those um transactions that that redemption is getting batched and so there's no way to go and do like

automated you know high frequency uh arbitrage trading here. And so it's like really hard for any sort of like sophisticated actor to go and figure out how they want to actually, you know, play this in times where the equity markets aren't open, right? Equity markets when they're open, it can be okay. Equity markets when they're not open, especially on the weekends, like it just strikes me that I don't know how these are going to work on chain until more of the flow is natively onchain, until we have primary issuance natively on chain. What do you mean by that? Because people might not appreciate that. So these are essentially like secondary transactions, right? Somebody else is buying them and they're selling you a like a wrapped version. Wrapped versions of things exist all through traditional finance, right? Like ETFs are rappers, right?

That doesn't mean it's a a problem, but you need to have like a native market on chain that is separate because that way people can actually hedge more easily on chain, right? And it doesn't also matter if there is a structural reason that a thing trades at, you know, a discount or a premium because there is the native version of that that can be used to, you know, to short, to hedge, etc. And so, um, that market I think actually will be really interesting. I think there's people like superstate trying to figure that out where it's like okay well you know put 95% of your float with compuserve like you know and put it on the NASDAQ and then put 5% of your float with superstate and put it on to you know an AMM pool and and and into into

DeFi and if that's the case those markets are completely separate they're not dependent on oracle they're not dependent on each other and so you will just actually see like really sophisticated actors play them separately and they don't have to hedge offchain in that case cuz it's it's not a rapper It's like natively issued on chain. And so that that even though the float might be low, there's it's still a native. So you don't have to go through this like multiple step process to actually do the ARV and and and and close the gap. Right. Right. Because if liquidity gets pulled on this thing on chain, it can actually go to zero. Right. And you know, and you it could actually go to zero unless you go and and you and you redeem it and you redeem it for that off-chain price, right? So like that's the that's the the

you have that um right to that off-chain like you know um price that is coming through the oracle if it's native it can also go to zero right but it's entirely dependent on the liquidity and the supply demand dimensions of like what is happening onchain you don't ever have this like p gravitational pull back to whatever that um uh what whatever that offchain price is yeah definitely earlier in today's episode I mentioned Ledger's latest products the stacks and flex. And I wanted to take a few seconds to tell you more about them. These wallets feature the world's first secure touchcreens, which don't just simplify your digital transactions, but also keep them extremely safe. These wallets are virtually impenetrable to online attacks

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no. It's it's surreal, man. I I'll have to be honest like I expected a lot of things to happen this year. I expected there to be um just a lot more you know regulatory clarity. We haven't quite gotten that yet. It looks like Genius Act is going to get uh passed pretty soon and the reconciliation but it's taking longer than people expected. I think there's a lot of ex concerns around when clarity gets um whether that gets passed or not but I expected that to happen. I expected people and institutions and traditional trading firms to continue to dip their toe in, but I didn't expect there to be a few people on the stable coin side and Robin Hood to accelerate as quickly as they are. Even if it is a lot more like

window dressing, it is at least the right direction and it's something that we should all excited be excited about. And and I tell you actually the most surprising thing to me is just how [ __ ] the alt token market has been relative to everything else we're talking about. Like there's so much excitement about some of these equity stuff. There's excitement about actual like, you know, equity public company treasuries that are buying crypto tokens and yet there is no excitement about like all of the tokens that people were investing in and talking about a year ago. Absolutely not. Yeah. I mean there there all the liquidity has been pulled and is going u you know um you know to public markets. What does that tell you about the state of crypto? Um, you know, is there is this anything more

than a casino? like are people like what happens like you know in a world where you have now these tokenized public vehicles and people are like playing the NAV premium and you know you know how you you kind of know how that ends but um what's your like prognosis maybe like for the next year or particularly like the next 12 months like do we continue to just see more and more interest more and more um you know ability to you know people investing more in the public markets and just all just don't catch a bid or I know you guys are mostly focused on venture but like as a as a personal opinion or view like how do you see that unfolding?

It it does feel like at least in the near term like there's it's going to be really tough for liquidity on you know all of these alts. I was at this so I was in con as you mentioned and I was at this other event over the weekend that was kind of like high status high value um you know kind of u GPS LPs some some founders that were just talking about the state of the market and they did a VC panel and and I wasn't on it um I I was in the the audience but the VCs that were up there spent like literally like 60 or 70% of the time that they had to talk about what they're excited about in crypto to talk about these treasury companies. That's all they talked about.

And these are like venture capitalists, right? And you know, I mean, this is what we I am too. And I'm really focused on, you know, early stage companies. And everybody's looking around and they're like, how do I figure out a way as an asset manager to make money and they're all pulled into this shiny new thing of public companies because there is no bid by the trading firms for alts. I think that's been the concern and and I was telling somebody else this this morning like there are clearly two different markets. There is the like onchain cryptonative like DGEN market who mostly just cares about like a few you know revenue generating type liquid and a few others.

Yeah. hyper liquid Athena, a like those types of guys, right? And then and and that's not a lot of liquidity because then the other thing those people care about is Farttcoin and you know pump when it launches and this stuff they don't care about any of the other stuff that like you know people are talking about and then there's like the institutional bid right and to go back to what we talked about earlier like you know when I was at the Goldman event the Goldman event talked about a couple things talked about Bitcoin it talked about ETH it talked about Ripple and it talked about Canton those were the things they talked about they didn't talk about there was a little bit of conversation about Hyperlid in there as But there wasn't conversation even really about Salana that much a little bit and and I actually there's another

conversation to be had here about how I think like Salana is the Silicon Valley token and Ethereum is like the Wall Street token. I actually think there's like this mental model for this that's happening right now. But those are the things that they wanted to talk about at Goldman. They didn't want to talk about any of the other things happening in crypto. They wanted to talk about that and stable coins. Well, you know, go study the history of innovation and in crypto markets. And I think if you're a builder out there, um, you know, do you really want to be doing the next public company tokenization strategy? No. I mean, I I think you now the meta is revenue generating tokens. I mean, like, okay, like you should have been building that like you always you always should be building revenue generating things, ladies and gentlemen. But yeah, I I

think um you know, price is obviously very distracting. Uh, and it's funny how Wall Street just gets obsessed with these things. Uh but but look I mean if if you objectively like going back like over the last nine months you had a total 180 on the regulatory uh stance. We have four years of really getting policy right. There's been a lot of work. Um the stablecoin stuff is not new, but it's getting a lot of attention and that bodess that has like ripple effects into other the other stuff that's happening in crypto and you know you might be in a position where the design space for tokens actually improves and so um who knows like one of the things that would be really interesting is um so so the circle effect for stable coins is it was

important in a world where you have anchorage or fire blocks or chain analysis. is or what's I guess the the exercise is what are the next five companies that are going to go public in crypto putting aside these like treasury vehicles and what is the second third order effect in the crypto ecosystem. I'm kind of curious if you have a view. Yeah, I mean I I um I guess I didn't like fully answer your last question. So I do I do want to take a quick step back which is to say I actually am long-term bullish the same thing you said about markets. Like markets are cyclical. You know the second that everyone calls for the death of Ethereum it trades back up.

the second everybody calls for the death of all alts like they will trade back up and there's a reason for tokens to exist there a reason for builders to use tokens as part of the way that they you know align incentives and trust and you know potentially even as a you know uh a form of ownership in the future and so I I think you know your alts will catch a bid maybe maybe not you know your specific shitcoin whoever's listening but like I thought you were talking to me Rob I feel I'm let he's like it's behind me now no for you tell me my book is going to catch touch a bid. Thank you. I'm licking my wounds here.

No, no, no. Your your your specific coin, I'm sure if you ever have one, would would catch a humongous bid. But, um, no. I I I think, you know, coins will catch a bid again. But I think, you know, to to the point you said, I I I'm I'm long-term bullish. Go and build. Like, it is a good time to be here. And don't be so distracted by price. it it's easy to do it but also like by the time that everybody's doing a public company that means the trade is over right by the time that like everybody is talking about stable coins that means the trade is over when it becomes consensus is not when you make outside returns.

Yeah. uh last chapter. Uh I know none of this financial advice. I mean we could talk about other new stuff, but I actually on that point like um you guys have been through and through investing through cycles. Um you're one of the larger funds. Um I'd say you don't necessarily invest where the you know fair wind investors if that's a term. What are some of the what are some of like the key buckets that you are excited about to deploy capital behind?

Yeah, I remain excited about the things that I've always been excited about like what do blockchains do, right? Like they they send data and value, right? Like that is what they do really well, right? And what is a permissionless, decentralized, trustless system that sends data and value? What does that do? Well, it does finance. And so I continue to be really excited about the things we're talking about, right? I continue to be excited about payments and I continue to be excited about uh stable coins and DeFi and real world interesting use cases of bringing people on chain to give them those things in a better system with a better user experience than they have before. And so that's what I'm really constructive on. like it's not, you

know, we continue to look at AI, we continue to look at some of these other verticals, but at the core of what this industry is, and I say this as someone who spent my whole career in fintech, so I'm obviously biased, but the core of what this industry is, it is bringing global internet native financial markets that are better than what we have today to the world and to the masses. And that is what I want to continue to invest in. Yeah. Yeah. It's almost like a you know I I've I feel that as an industry we always like come at it from a defensive position because look like people outside in crypto is still not a relatable piece of technology. It's starting to kind of become more relatable but objectively speaking most of the world still understands how the

hell this techn is going to fit into their daily lives. It's said differently that AI is so relatable. Why? because you go to chat GPT and it's a prompt that it like search is so native to people that it doesn't require like new mental processes and habits to form. Crypto is not relatable. The exciting part is to your point like I think as an industry we we constantly every cycle need to justify our existence by saying we're going to like do crypto AI and then and then and then some sort of like new 0ero to1 primitive. That's like honestly go back to the very very early reasons why you got excited and why this industry exists. It started post global financial crisis to bring more transparency to a system that is really

opaque and and um I mean you know this as well as I do like it's not to say the banks don't want to adopt this technology. The only department that keeps growing in these places is back office and compliance. like they are very motivated to adopt this and and the best part of this is like there's a lot of infra that's been built and the exciting part of this cycle is you can actually start seeing it be integrated into the financial system integrated by large players like a new bank a revolute um you know some JP Morgans of the world and um it's not to say that you know all of a sudden they woke up and said oh okay great it's like no like there are very clear catalysts that allow them to do this uh you know as a public company, yeah, you're not going to do something

that can jeopardize your business. So, if if the commissioner of the SEC is telling you not to do it, well, you're not going to do it, right? And and you know, it's it's it's it's I think just a reminder to go back to those core primitives like like I feel that we're in this state of the market where anyone that really understands payments like people outside of crypto that are now looking in maybe that alttimeter person out there uh have are now more excited about what crypto can do and the type of transformations that it can deliver to particular businesses in the public markets than crypton natives because Yeah, they're all coins are not pumping and so they're all now bearish looking for the next meta and it's like you don't necessarily need to

look for the next meta. It's like stable coins financial system that's going to transform a lot of companies and if all that settlement and flow comes on chain yeah protocols are going to crank revenue and it's it's more users come on chain that's going to have you know a lot of impact to protocols that are built really good technology. Yeah, we are at the precipice of like getting what we wanted. Using like blockchains for like real economic activity that is not just speculation. It is happening. You know, like we we talked a little bit about like a little bearishly about these products earlier, but it's undeniable that the trend is, you know, there are going to be a lot more users and mass adoption of doing economic value and and

bringing economies on chain. Like this is what we wanted. And yet we've like kit ourselves over time that like we should be buying like random shitcoin for like some sort of protocol that's going to like reinvent the way we think about like some sort of social media that nobody actually wants, right? And then the token doesn't pump and then we're all upset about it, right? Like let's just get back to the core of what we wanted, the core principles of, you know, what Satoshi wrote about. And honestly, you and I cut our teeth in this industry really in DeFi. And that was what got us really excited about how that DeFi could change the way financial markets worked. And that continues to be the best use case.

That is what I continue to be excited about alongside everything that goes in with that transfer of value. 100%. I mean, I remember in the early days, this is Bitcoin in 2012 and it was trading like subund bucks and I was comping it to what's that right? It's a 100 bucks. I think it was like 60 bucks. 21 million. I'm doing the math here. It was like 1.2 billion. And I was looking at that and I was like the remittance use case. I was like, "Wow, I can move money across border. I can hedge this out." The price volatility. And then I was comping it to like Western Union and and you know like Western Union is uh hold on wait ladies and gentlemen.

Three billion three. I was trading like pretty distressed but back then it was like I think trading at much higher but like you know it was like a multiple of where Bitcoin was. Yeah. Um, and so like as we sit here today, you know, crypto including Bitcoin is a $3.4 trillion. I guess that includes stable coins. But, um, anyways, Bitcoin's like two trillion and then everything else drops off after like Ethereum's like 300 billion. But um you know if you just stop here, if you don't innovate like zero like homo fully homorphic encryption and all this other stuff, if you just say okay stable coins and then some very specific use cases around that you could argue and you could still underwrite that this is a venture-like return

if if it starts Yeah. You know and and so a lot of that's the point like don't don't overthink it, you know. No, I mean if you just use metap's law and you just think about the value of networks and you think about the amount of users that are going to start to come on chain, the amount of economic activity that is coming on chain, like it is so easy to see how the right smart contract platforms just go massive from here, right? And so I don't know. It's it feels like we're overthinking it. It feels like people just want that quick win. there's just a lot of I think uh fatigue due to you know some of the 24/7 market dynamics etc. But I'm so bullish right now about the future of this

space. I'm just bullish in the pockets that make sense and I'm not bullish on like all of this other crap that people talk about on Twitter. Yeah. You know, uh as we wrap up the segment, I know how much you like Hyperlid. Uh, I can't wait for our fellow Kenneth Worthington at JP Morgan who who put out this report on Circle. The next report is going to be him comparing Coinbase who is now launching per to Hyperlquid or Uniswap. I can't wait for these comparisons because to your point around network and how networks are vastly more profitable like you have uh you know an organization on the left like the table is something to

the effect of Coinbase massive overhead employees and and footprint and has to you know this this cost structure thousands of employees and then you have or even Binance and you have Hyperlid which has you know this better than anyone 12 15 engineers. Yeah, I mean they they've uh I think they're like in the 20s now, but um I mean the amount of that codebase that like Jeffon wrote himself is honestly the most insane thing that I've ever heard. It's just absolutely crazy. And I I mean I think I think you might have seen we we talked about this a little bit, but like Dextoex volumes as a percentage, the amount that are in Dexes like continues to just go straight through the roof. Like we're going to be

at all-time highs in terms of like Dex volumes relative to sex volumes. People want to trade in really good product that isn't necessarily Coinbase or isn't necessarily Binance or Private. They love Hyperlid and but you're starting to see it not just Hyper, you're starting to see it in spot as well. And so there's it's not just that Hyperlid is a is a better product. It's that people are getting more comfortable with being on chain and it is a better user experience. Totally. Yeah. And candidly, I mean, people might start interacting on chain without even realizing it, right? right at the user aggregation layer companies that might abstract away like make crypto invisible. Um, absolutely. I mean, I remember uh when I was at Parfy, like we we were very actively trading on chain and and one of our strategies was

uh stable coin arbitrage and and there came a time we're trading stable coins like if you wanted to go a pair of like USCT, USDC, it was actually more efficient. It wouldn't curve than than Coinbase. And so you know that that's like a for us like a that that moment where I remember we were sitting there and saying oh like you start seeing a window where the common criticism that people are not active on chain might totally miss which is no there's actually a lot of efficiency even often times more liquidity on chain and then liquidity be gets more prices better price discovery and that that flywheel just gets going and and I think in a best case scenario we're going to see that for tokenized stocks and private company stocks and bring more price discovery to these markets and if we do it the right Okay, whether it's

Republic or Xbox or Robin Hood, collectively these experiments are thing net positive for the industry. I think we just got to be measured and you know doing it the right way and you know managing expectations so to speak. But there is nothing that crypto Twitter is worse at than managing expectations. And so you're speaking to the choir, but I don't know if you're gonna get anybody to listen to you. No, definitely not. Um anyways, Rob, this has been great. Anything else that uh you want to talk about? gotten over got a little bit overboard, but I'm curious if there's anything that caught your attention this week.

No, I'm uh the only thing that caught my attention was just like how excited people were. And but and by the way, I am I will say this, I took a little bit of Mia because I went out and I kind of tweeted about how con was a weird place to hold ETC, but I will tell you it's beautiful and you everyone showed up. Yeah. Now, I don't know if they showed up to the actual events. They actually did, but you know, they showed up to the beach and so at least people were in proximity of each other. That's great. And so I take it back. Con is a great place. Put the HCC there again and I think it's going to be for like three, four years.

Yeah. I mean, it's a fantastic place. It was a bit hot, but I definitely agree with you. It seems like people were having a good time and a lot of side events. We were there at the Seleni conference. We over overlapped and there was the RWA conference that you were speaking at as well and that was very well organized and then obviously ECC and so I'm sure there's a bunch of side events that I wasn't graciously invited, but that's okay. Um any I'm a dinosaur. Uh how um any content you've been on the road planes, any books or movies or series that you're uh we always like to wrap segments with with that.

I I got to tell you, I have been so consumed with work that I have not watched a new thing other I've been watching like The Office like replays and I have not read a new book in like a month and so I've got I've got nothing. The office is the kind of shows you put on and like if you want to have like a a 20 minute or 30 minute like meditation of like not thinking about anything like that that that'll do it for you. Yep. It's great. That's good. All right. Uh that's that's good for for the week. I'm actually headed to New York next week. So we might do an inerson podcast there. Rob, if you're around I don't know where else in the world you're going to be talking about stable coins and uh with big banks.

Be talking about stable coins with you in New York. I think there we go. Maybe we recorded inerson pods just hit differently. So maybe we'll just get the keys to Block Trick's office. We'll we'll let Yano not be there and we can record in person. Sorry, Yano. You've been replaced. Yeah. Well, that's that's what happens. Anyways, guys, Rob, thanks so much for joining us. It was great to have you on and uh thanks everyone for listening and and we'll see you next uh we'll see you here next week. Have a great weekend. Thanks lovely. [Music]