Macro Uncertainty, Circle’s Surge, and Prediction Market Utility | Roundup

Transcript

the kind of the most real alt season was actually right after maybe like early 2023 after the FTX crash where it was just like everything reflated because it was all similar pools of capital with the same thesis. But now everyone's thesis is so different and there's much less capital I would say for the alts that there's just going to be a ton of dispersion. So like a classically oriented alt season not happening. This episode is brought to you by Arkham. Arkham allows crypto traders and investors to look inside the wallets of the best traders, largest funds, and most influential players in the crypto markets. Today, we'll hear more about Arkham later in today's episode. Quick shout out to Permissionless 4 coming this summer to New York June 24th through June 26th. We'll have speakers from all across the industry, including

Hayden Adams, Kyle Sani, Guy Young, and more. Get your tickets today by following the link in today's show notes, and make sure to use code Bell 10 to save 10% on your purchase. See you there. Hey everyone, quick disclaimer before we get into today's episode. Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and the views expressed by anyone on the show are solely our opinions, not financial advice. Our guests and I may hold positions in the companies, funds, or projects discussed. All right, everyone. Welcome back to another Bell Curve roundup edition. You got Michael's one and two. Vance, how we doing? Good. Yeah, just hanging out. It's uh feels like summer today at

least. It's nice and warm in SF. It does. Guys, do we want to make this a macro or a true crime podcast? You got options. Karen Reed or Iran? Those are the only two things that can hold the public's interest. Either murders or other crimes or macro. Yeah. Um, Michael, can you just give us a little bit of a So, Karen, give us give us I'm the one representing this because I brought it up. Oh, okay. Fine. Uh, well, Karen Reed, uh, John O'Keeffe um was was killed um I think two years ago. Uh, his girlfriend at the time, Karen Reed, was um charged with his murder um alleging that she ran

him over with her car. Um there's a good HBO documentary on this that I would suggest anyone curious go check out. But um we're reporting this on the 18th and earlier today she was found not guilty which is why it was top of mind. Um it's just a really interesting kind of like police conspiracy, you know, planting of evidence allegations. Um who who actually did it? Um it's it's like true crime true crime in real life. Um or it live. I mean, um, so interesting storyline that came to an end today.

Yeah. I, uh, I did not realize that that was actually still happening, but I'm glad it sounds like I don't know if there are actually cops out there or people framing I think that's one of the worst crimes you can commit. I don't know what the right I mean, there's some there's some crazy stuff like I hate it. Her the the tail light of her car was bashed in at some point. Um, but they don't think it was from when she actually allegedly hit him. There was like blood and hair that was on the car that somehow traveled in 20 miles in a in a blizzard without falling off. Um, and it was the the people who, you know, whose home it was that were the ones who were uh intaking all the evidence. Um,

so there's there's some sketchy stuff, but you know, tin foil hats are on. Yeah, it does. Um, all right. Should we I mean I'm curious to get your guys uh just sentiment on markets here at the current moment and uh yeah obviously it's been the entire world has been looking at um Israel and Iran the last couple days and you know not to get too armchair expert here obviously it's a little bit outside of domain of expertise but um a couple thing I mean actually I don't know if you guys saw but poly market uh actually moved before um like futures indices which I thought was super and it was a pretty wide gap in terms of this type of it moved like 20 minutes before other markets, which I thought was pretty significant, very

cool. Um, but obviously people are pretty spooked um on the idea that maybe the US could get directly involved here. So, I don't know. Um, maybe not, you know, we don't need to comment from like a which political side are we all on perspective here, but just from a market side perspective, uh, I'm just curious if you guys think this is like a blip, something bigger to pay attention to, how are you guys categorizing this internally? I'm I'm surprised that markets are hanging in there to the extent that they are. Um it seems such that this has been built as the possible worst case scenario for maybe over a decade for markets. And I'm actually reading an interesting book at the moment called

choke points which is the history of sanctions from the US. And um in the Bush and then the Obama years uh there was one Treasury official who was the lead for sanctioning Iran. And you know they did all these things. They tried to cut their uh you know domestic exports. They tried to cut you know all their access to these financial services. They tried to cut access to the actual central bank of Iran via sanctions on the Swift network. And then there was these other kind of sanctions that would have cut off oil exports entirely. Um and at that point, you know, in the early 2010s, uh the administration didn't want to do any more sanctions because their their case for oil was that it would be anywhere from $140 to

$160 per as at that point Iran was actually a meaningful portion of the uh oil that was consumed in the US. Since then, the fracking boom and and the knack boom have kind of considerably filled that gap. But um they decided not to do sanctions to the extent that they have done them today as a result. But um all of that oil now flows to China for the most part and China pays and receives uh invoices in remmbb and that forces Iran to actually spend the the Chinese currency in China and so it's kind of this like colonial power relationship between those two and the Iranians are not super happy about it.

Um and so I think China is going to bear the brunt of really any rise in the oil price today. But overall, it is this this sort of macro calamity that has been, you know, 30 40 years in in the making since the uh Islamic regime kind of took power in Iran. And it kind of seems to be over. And, you know, I'm I'm I'm more of a no no war guy, but I do think if you have the shot, it is probably worth taking uh in terms of being plus EV and and just kind of, you know, neutering them entirely. And that seems to be where Trump thinks they're at. He's kind of like making jokes about taking the guy out, the Ayatollah Kamanni, I think is his name. Um, and so it seems that he has the situation under

control, but then you listen to the Steve Bannon and Tucker Carlson pod and Steve Bannon's blackpilling and Tucker Carlson's like, you know, it's over and and it took all of like five months to really get to this point. So, I don't know. I don't know what the future holds for the MAGA coalition, but I I probably don't think it's as detrimental to the movement as people are making it seem, especially if it's just a clean strike and and then it's over. What did you think of the Ted Cruz interview by Tucker Carlson? I didn't I didn't watch it yet. Ted Cruz Cruz just got put on his ass. Uh it did. It was pretty bad.

Yeah. One and a half minute clip that I saw. I don't know if the full thing came out yet, but it did. I watched some of it and it's it's you know Ted Cruz quoting scripture about you know how you know if you defend the Israel state you know you will be one of the chosen people and just Tucker just destroys him. Um I I don't know. I I I think you know what some of the data points that I have uh read and and heard on some of these interviews is number one um as as per the strikes that did occur so far, they were directed um principally away from uh oil refineries and and oil distribution centers. Um and so that I think is is one element that you know

maybe there's some impact that the US is having on where these strikes are occurring at least so far. So it doesn't seem like there's been a massive disruption in the in the oil distribution coming out of Iran yet. Um the other uh data points that I think are interesting, number one, uh we already have air superiority uh over Iran. Um and so like there's nothing that's flying in or out. Um and the other one is that um an estimate is that they have somewhere between 2,00 and 2500 missiles. Um and in the strikes that occurred so far um most of which were picked up by the Iron Dome. Um they they were firing anywhere from 400 to 500 per night. Um and so it's not like

they have this massive war chest of ammunition and and kind of capabilities that are that are still remaining to be fired or you utilized. Um I don't think that there is if there is any sort of conflict officially um or any continuation of what's been going on, it will last for very much longer. Um I I think that we will get to some resolution from a conflict perspective soon. I agree. I mean any sort of conflict with Iran is is net detrimental. Um I don't think that it's as net detrimental to markets um as I would have expected frankly. But um I also just as we assume um or as we have seen so far there just hasn't been that

much effect um you know in in terms of mass destruction or mass um uh interruption with economic flows. Um it seems like it was pretty targeted against specific people in Iran. Um and now I think the big question is do they go after the nuclear enrichment sites? Um the bunker buster bomb uh is what's being talked about. Um that would be obviously an extremely targeted u attack. Um unclear as to what will happen, but hopefully it'll be resolved by the time we're having this pod next week. Bill action fired up.

Of course, the blood lust tweet about the straight of horm. The amount of times I've seen straight of horm uh on my timeline. Here's a reliable indicator that this is almost over is once people start naming obscure geographic features of a region that they also do not understand. We're almost done. So, I agree. Hopefully, you know, we're one and done tonight. So, Trump did just approve or told somebody approved a strike. Um, but great. Who knows? Yeah. There there was also a pretty funny uh photo. Someone caught a photo of an oil tanker on fire in the street of Hormoots and they said they're setting fire to the oil tankers. Turns

out that an oil tanker just trashed. Immediately people were tweeting, "Are you ready for $150 oil?" This is why you can't take this stuff serious. Fog of war still exists in the era of Twitter and everyone the fog happens on Twitter. Totally. It's very confusing and overwhelming, you know. It's not. So maybe everyone take it with a grain of salt. I agree with you though. I think that when you have crypto Twitter talking about macro, that's almost always uh that's a very reliable bottom indicator. So I don't know. I'm not a markets guy at all, so ignore my thoughts here. But part of the deal, Arkham was created to make blockchains human readable and simplify blockchain data so that it is meaningful and useful to the average crypto user. With their

new exchange, users can see what the top traders are buying and selling with Arkham Intel and then trade on that information with Arkham Exchange. To get started, follow the link in the show notes below. As always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research. Okay, I want to get your guys thoughts on let's talk about stable coins. It's been kind of the topic to over the last month, but I feel like we've got some a little something to celebrate this week at least because we've got the Genius Act which passed the Senate. Um, and importantly, this was a an overwhelming bipartisan vote.

Um, so historically, the Democrats have been very against this. Um, Senator Liz Warren was kind of drumming up um drumming up a bunch of fears saying that there were personal interests that the Trump family or Donald Trump might have here when it cames come to a stable coin. But um yeah, I think there were something like 18 Democrats that voted for this. So really positive show of bipartisan support here. And you're starting to see, you know, Circle closed. We're recording this today on Thursday the 8, sorry. Yeah. Nope. Wednesday the 18th. Um and we actually saw almost I think Circle $200 uh on the open markets, which is pretty nuts. And we also which is bananas just because it was such a good disclosure

regime, right? That's right. That's how good the disclosures were. That's exactly right. Um so it's a 2000 XP, but those disclosures are so good. They're phenomenal. Um well, what do you think? What's the uh Well, it's kind of like there's an analog here to token markets, right? where when everyone wants to bet on a meta or a theme and there's no liquid token to do it, you see people pile in, right? That's been the story for any number of tokens in the past. I feel like this is the Tradfi equivalent of that. Yeah, it's the Tradfi equivalent of a phenomenon we like to call low float, high FTV.

And that is the secret sauce that's happening here. And I mean you you you look at any of the recent IPOs, E Toro, this one called Sailpoint that was a PE backed cyber security firm that went public. Um Circle obviously I think there was one going out this week or or maybe went out today that's up 20 or 30%. But you know it kind of is um the cure for this behavior in traditional markets is more IPOs because the pop will get less and less and people get more and more wise to the game. But you have to remember, you know, the IPOs that came out and did really well were Corewave and and Circle and the amount of negative articles written about those prior to their going out was was unbelievable. Um, so I think that some

of this is just a reversion to the mean and and a little bit of a lack of access. Um, I do think, you know, and everybody should watch the token disclosures uh podcast on Empire and look at the token disclosure uh system on Blockworks as well. Um, a lot of this is a result of just like such scarce amount of ability to get into crypto companies and a lack of desire to get into alts and and some of that is because the disclosure regime, some of it is frankly just because there's not a ton of good alts. Um, but you know, as Circle hit $200 today, Coinbase was up I think 15 or 20%. So, it's kind of this correlated bid and maybe it's event driven because the stable coin pill bill bill passed yesterday, but I think what

you know we're hearing and seeing is people reaching out to us to do the Kraken IPO or do the Kraken secondary sales or things like that. Um, and I think that's just going to continue as long as these companies are high quality. But for something like Gemini, you know, I don't really know how real that business is and I wouldn't expect this type of pop to happen with something like that. I got a question for you guys or something to I saw someone tweeted out I'm sorry for not giving you the proper credit here but uh sorry but alt season is happening in public markets and I think there's some truth to that where maybe one mental framework to try on for you guys is that some of the alt season speculation is actually happening in public markets now between like coin and C like circle but

also these treasury vehicles as well and we're almost in a little bit of a bare market in more tradition traditional crypto alts here. We kind of have ran out of people that want to buy these things in good projects for the most part outside of relatively small handful. Um, and maybe one uh anecdote here and it's kind of a silly stupid thing, but basically every bare market that I've ever seen has actually been characterized by a perp dex that does buybacks. Uh, which is literally what you have in the form of hyperlquid here. And that's a little bit of a joke, but that is actually like a classic hallmark of like an alt bare market. Like I can just remember GMX a little bit. That's a little bit, you know, point A to point like Z. It's like it's like a half a joke, right? Hyperliquid's a phenomenal

project, right? Like you wouldn't that. I will say though that like, you know, if Alt Season is dead, how is Hyperlid at 40 billion, right? So I I think the rule is um kind of like everything seems to do do well in terms of IPOs. Um, and I would say treasury companies to an extent, but this is all such recent history that I think you need to see it probably do well for like a year or two or at least pass unlocks for it to be a real trend. Um, and what you see in crypto markets is just hyper dispersion and and like to the extent that it's usually we track so we track coins um on Trading View like everyone else does list of names and then you pull up you

know is it a day is it a week is it year to day and you can see you know most of the alts are like really correlated in this tight band and then there's like four usually who are you know above that by a standard deviation or and it's hype, it's syrup, it's Sky, you know, formerly known as Maker and then, funnily enough, it's it's Farcoin. So, it's like, you know, only the really real stuff and then like the best meme and Farcoin is pretty funny. Um, and Dip Wheeler is hilarious. So, I think there is a method behind the madness, but it's too soon to tell if it's a real alt season on the NASDAQ. Um the the other things that I would add are number one I think what we're seeing

with the public liquidity and public activity is uh frankly just like we're tapping into new sources of capital that we haven't been able to historically whether it's you know convertibles whether it's you know retail orientation whether I mean the people that are buying the circle IPO right now or the circle you know shares right now are either one not very understanding of how crypto works because if you were you'd probably do a spread trade on coin and Circle as opposed to just buying Circle. Um, and number two, you're probably just looking at it a group of people who are looking at it as a trade. This thing is blasting off through 200. Uh, maybe it goes to 250, but I'm going to sell it before then. Like, this is not long-term oriented buyers um, for the most part.

And and so that that I think is new new pools of capital that just frankly haven't been in crypto historically. But also historically when we've seen an alt season, you know, quote unquote alt season, it's because we've gone through the same process, you know, twice now, um, where Bitcoin moves and then alt layer ones or Ethereum moves and then that trickles down into some other type of, you know, excitement, you know, DeFi summer, um, whatever the the kind of like norm may be at that time. That's where you start start to see an alt season. We haven't seen I mean we if we haven't seen a Bitcoin move and an Ethereum move and a Salana move that would be enough in terms of wealth creation to justify an alt season yet.

And so that's why I think we're actually closer to the start of this process than we are the end of this process. And while we may have also I I don't think we're even close to the end of the process of these publicly uh traded crypto vehicles. No, we are just getting started in terms of where these things go and what they're able to do. Now, I don't think there's going to be 25 of them that launch every single week, but there will be a lot of them that try to get, you know, breakthrough success. And we'll probably see a bunch of different assets that are represented that currently are not represented, you know, as these PCBs. And so, I think broadly, like, yes, we haven't seen an alt season yet. And and yes, maybe there is an alt season going on on the NASDAQ, but I

think that that's irrelevant because we just haven't had the the wealth creation to create an alt season within crypto yet. Like like like the memecoin season was like an alt season scaled down to to bathtub scale. Um was that an alt season? I I I think the only real alt season that I would classify as as as likely in the near term is something that's fundamentally driven. And I think that's why the disclosures regime is so important. But we've done process of elimination on NFTTS, meme coins, you know, games, uh, different kind of, you know, new infrastructure. Um, and I think we're getting to a point by just process of elimination, people only feel comfortable holding a handful of coins.

Either it's the majors or or it's something that has a really optimistic, future-looking investor base with the fundamentals to justify that. So, you know, it's um I I will say as well, not to argue against myself too much, but Bitcoin has not even broken 100K on the World War II scenario. And that is very very indicative of how much capital is ready to bid that. And we heard from people that it was kind of sovereign wealth funds that bid up the price of BTC over 100 after the election. And I think the market's psychology is effectively under 100. it's the sovereigns and over 100 it's the treasury companies, it's the ETFs, it's the retail investor base and um I still,

you know, think that we're going to see 250 300k BTC this year. Um after this war is done and after, you know, and that that may be as simple as Trump pressing a button. Uh and then after the bill is done, you know, I don't really know how much there is to price in in terms of a wall of worry. And somebody told me yesterday it's like 60 it's like maybe 61% of the uh NASDAQ earnings is actually Nvidia. So, you know, if you want to know where the stock market is going, you should just develop a opinion on Nvidia. And our opinion on Nvidia and AI is that it's very real or at least it's it's very real over the next five years and after that we can kind of sort out, you know, who acrews value or or what's going to

happen. Yeah. I think also, you know, I'm curious if you guys think so that cycle of wealth creation, um, whether or not that's enough to fuel alt manas like it has been in the past, like because historically, you know, Bitcoin has gone up anywhere from, you know, 20, you know, 10 to 20 or 30x and same thing with ETH and soul. I just I mean, I don't really see that on the happening anytime soon. I don't think it's enough wealth creation anymore. And you know, we're probably on the the eve of uh you know, pump fun. You know, my pattern matching here is that this probably is going to suck the last of the speculation out of memecoin markets. I would guess like this is sort of what happened when Blur launched. And it's

not like Blur didn't kill NFTs, but it provided an index to bet on NFTs and gave the last vestage of liquidity for people who were bag holding. So, it kind of I I could see the same thing happening with this pump fund launch. Like, people are going to have to fund that trade somehow. So, I don't know. I I also Oh yeah, sorry. I don't know if it goes that was a lot. I'm speaking stream of conscious here. I I think it's so like I think maybe first thing to define is like what is an alt season? I think classically it's it's a time where there is zero cost of capital and there is no desire to underwrite fundamentals at all and everything goes up in a uniform fashion. I was gonna say the bigger thing is you can you know throw a dart against the list of tickers and and

make money. Like right that's what an all season is in my mind. I I just don't see that. I don't see that happening. Yeah. Yeah. I think that's like the main thing to kind of fully get back into people's head. And it's been four years of people hoping for this, you know, everything goes up. And I think the the kind of the most real alt season was actually right after maybe like early 2023 after the FTX crash where it was just like everything reflated because it was all similar pools of capital with the same thesis. But now everyone's thesis is so different and there's much less capital I would say for the alts that um there's just going to be a ton of dispersion. So like a classically oriented alt season not happening. What I will say is going to happen is you just see things like like Sky has

uh tripled this year from the lows. Um, syrup I think probably has also tripled. And those are stories that are led by real fundamentals. And people are probably sick of us talking about the same three or four projects, but guess what? There's only like three or four assets even in Tradfi that are like ripping the cover off the ball. And that is where people need to orient themselves towards and it's a different mindset. Over the years, we have seen a multitude of hacks, rugs, and bundled launches. The number one way that crypto traders can protect themselves and the wider community is through onchain analysis. Knowing who is moving funds and where those funds are going. Paired with their new exchange, users can see what the top traders are buying and selling with Arkham Intel and then trade

on that information with Arkham Exchange. Arkham's exchange provides traders with the tooling and liquidity to take action in crypto markets based upon their onchain observations, bringing them the world's first exchange powered by crypto intelligence. To get started, follow the link in the show notes below. As always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research. On the I'm curious what you guys think um on the infrastructure front here. And you know, one thing I have a a thesis I'd love to see what you guys think of, but if you think about the companies, the private companies that did really well during the 2020 and 2021 run, it was these sort of CFI infrastructure companies. It was the custodians and the prime brokers, right?

the BlockFi of the world and the Anchorages and the Bitos and they got funded at massive valuations and a lot of them have you know some of them obviously failed but some of them have kind of slowly are working their way back towards growing into those valuations and a lot of them failed along the way and I think a lot of the projects that were very sexy in 2022 and 23 were also kind of onchain infrastructure projects that got bit up very high but and they're also working their way through but I think there's a little bit of a difference in between projects that have a liquid token versus projects that are private because you get punished much more I think for overraising if you have a liquid token

because like consider the uh you know consider being like a private company you raise at a really high valuation in 2021 if you don't run out of money you don't have to go back to the private markets and do a down round and you can just kind of you can just take forever right it can be kind shitty. You can grow your way out, but you don't have to do this horrible thing where you revalue the equity. If you do the same thing like let's say you raise too much money, you sell too much of your um you know, sell too much of your tokens to investors even they will dump that token when the unlocks come, right? So, you could do the same thing. You could be like, I have enough money in my treasury. I don't need to go back to markets to fund yourself. But month over

month, those unlocks are going to keep hitting and your token's going to get smashed into the ground. And I so even as bad for people who are out there sitting like it couldn't be that much worse. Look, it's already down 60%. It can keep going down. Like the unlocks on a lot of these tokens are still horrible. Like it takes a long time to go through unlocks. I think generally the the lesson of investing that we've had to learn and learn many times over is just it takes so long for things to play out far far longer than you think. even unlocks, you know, it's two years of unlocks, but then, you know, some people hold to the end and then they sell the year after. Um, and I think that is iron. Like, it's not ironic, but that is why you really need good VCs is

because, you know, if you want me to tell you how painful the unlocks are going to be, just tell me who your cap table is. It's very simple. Um, and so I think that stuff will take a long, long time to play out. And the same thing on the fundamental side that takes a long time to play out. Like I think there's certain projects right now, hype, sky, syrup where all they really need to do is execute. But the execution takes a long time and it's not just you can do everything today and then it manifests the day after. Um it is a multipleyear road map where the prognosis is not an alt season. It is your token grinds up slowly and then if there's some inventory that steps off the sideline that's going to send it down 10% for a week and then it will resume the up only

once there's buybacks. So, it's just a different mental model, but it just takes forever for things to play out. And the whole, you know, uh private market returns, public market liquidity, uh shtick that was pitched, it it by VCs in in our industry to LPs, it's just not true. Um it is a venture mindset. You need to have that mentality when you're investing here. Yeah. The only thing that helps you in terms of unlocks is a successful business model. Yeah. Right. If you don't have that, then it's going to be really painful, especially if your cap table is what Vance is alluding to.

But if you do have that or you have path to progress of getting there, it's going to be great because it's going to be this slow trudge upwards and you're going to have aligned partners along the way who are helping you get there. What do you guys tell how are you what's your most upto-date in terms of how you counsel founders who are thinking about launching a token? because you know one one responsibility of having a liquid token versus just being private or being pre-token or whatever um one I do think I mean a little plug here but eventually investors are going to demand uh disclosures in some way shape or form so we just launched a very lightweight very check the box you know uh disclosure regime like hopefully over time we build that out into something a little bit

more sophisticated but there's like that kind of overhead on having a public token but the other thing is you need to be a spokesperson not just for your product anymore, but for your token. You have two products now. You've got your product and then you've got your token product. And you know, if you if you're a CEO or a CFO of a public company, you spend a [ __ ] ton of time thinking about investor relations. You got to talk to the investors. You got to message things publicly. You got to do it in the right way. And there's the crypto equivalent of that, which, you know, you're not doing this really formal boardroom. here's I'm going to walk down my financials, but you got to do the equivalent of that, which is probably being loud on Twitter. Um, and creating things to do with your token, but I'm

curious. Yes and no. I mean, it it really like I I think you you definitely have to talk about both in conjunction with each other, but you don't need to be shilling. And I think actually, you know, the the ones that are the most successful are the ones who shill the least. And the let let the business take care of itself. But the the the big thing is like you can just track these things on chain and you can understand how they're doing and what they're working on. Like that's what matters way more than you know you have to go out there and pound the pavement and and you know get everybody aligned with this token concept. I I think there's also a difference between like what's an L1 strategy versus what's like an

application strategy and or infrastructure versus application business model versus knob is the in most cases I think the ones that frankly didn't shill are the are the founders and the protocols and the tokens that are doing the best. You know there are no Jedi mind tricks that you can use to magically manifest buyers of your token. I think the market's basically shutting that down, right? But um for the things that are fundamentally driven, like there there is no ceiling and like the stable coin bill passing, the market structure bill getting its its kind of head start now when it should pass at the end of the year, there is going to be a path for all the disclosures and all the marketing and all the kind of uh you know IR functions of a traditional

company but done in crypto. And I think that's actually going to limit the creative space that you have to just go on Twitter and say crazy [ __ ] um you know as a token founder and I think that's kind of how it should be where you have disclosures you have you know fundamentals that are on chain and then you have a standardized platform for communications um so I think that's a good thing but I I I I would say you know people probably spend less time on CT and more time in these forums and that would benefit them pretty pretty you know substantially look the other stuff that we have been advising more so I'd say in the last six months less so uh prior to that is, you know, this whole construct of like I'm doing this for the community. The community needs a massive airdrop. Um,

that whole that whole concept is completely outdated. So, like if you're a founder who's like thinking about distributing a ton of tokens through your airdrop, like don't uh definitely don't talk to us about it because we're not going to be supportive of that. um the whole like we need to go off and and like build the best community because community is what takes us there like that that versus like a BD strategy or or like a true partnership strategy um is just a weak perspective um going forward I I think like the norms that we used to have on um a lot of things that if we think back to like why did we have

an airdrop it's because unis swap air dropped 14% and that was thought to be like this amazing mechanism and everybody just drafted off of that concept and just said, "Oh, well, we're going to do the same thing. So, like we need to distribute 14%." Why did we have 50% going to the community? Um, well, because at one point there was someone in, you know, probably w with a law degree that said, "Well, 50.1% goes to the community, you have an argument for decentralization." Like, yeah, we get closer to market structure bill and understanding what's sufficiently decentralized, like we won't need that construct anymore. And like do you really want to be giving 50% of your tokens to people who are going to sell in 72 hours? On average 90% of airdrops are sold completely within 72 hours. So

like that that is a real, you know, problem if you're trying to, you know, bootstrap this network and get it off the ground and you're you're trying to do handhand combat with a bunch of people who are anonymous on Discord who are selling your tokens into the ground. Like it's just the reality. And and so I I think that there's a lot of like dogma and perspective that we should re-evaluate um and just frankly institutionalize more and I know we've talked about it before but like disclosures are a great way of getting there and um you know eventually hopefully we have standardized financials and like that's that's another huge element that everybody should be looking for. Um so anyways just some perspectives of of stuff we talked about with founders.

I agree. Um there's in if you were to look at the crypto industry through fresh eyes around practices that don't necessarily make sense and trace them to their root origin. A huge percentage of that would be because of some weird regulatory rule that people were trying to skirt or avoid back in a day where the regime was far more unfriendly and not even a regulatory rule like literally some lawyer's perspective of what the current at the time standard was which probably has changed 10 times since then. lawyer lawyers make [ __ ] up too which by the way all the time. So yeah, I think it's a really good time to question some of these practices. And the other thing too is that crypto Twitter last thing I

think I think we need to shrink the industry so that the industry can grow like every single time we push something like apech chain or board ape you know yach club or crypto is the future of consumer or uh you know like any number of implausible things like that is a valuable bullet of social capital especially if the largest firms in the space get behind it and really push for it. I think you know as an industry and especially for the largest fund in the space uh that is not us um they need to like get fully behind DeFi. I know it's not like the Facebook on blockchain thing that they would probably like, but um really need to support the serious builders that have serious use cases.

And the real tragedy on a lot of these things is in the case of Hyperlid, a lot of funds are just saying that's illegal, we can't have it, we can't do it, whatever. In the case of Skymaker, they've already sold these coins. like they've they've already given it up for good and and so they really have like no exposure to the actual real [ __ ] that's happening in the industry because it's like conceptually below them. Um and so I think on on a you know a serious basis like these funds are really net negatives for crypto outside of the regulatory and compliance stuff that they do which is helpful but that's not going to turn the industry into you know a 10 trillion plus outcome. So that that's my kind of soap box about just like where the current like fund leadership of the space is and and where

they probably need to go. I think that the industry is moving in this direction though and I think already actually the industry has changed an enormous amount in terms of how people think and talk about this space since at least the time that I got into it. And there's some amount of churn here and I think it's healthy churn like the beginning of this industry was extremely ideological and I'm really glad that they were right. They gave us these really strong values. They gave us really decentralized protocols like Ethereum and Bitcoin. But I think that these people are going to be continuously frustrated. And okay, there are people who are just straight up pushing bad [ __ ] But there are also people who, you know, that Japanese soldier who's still fighting in 1975 in World War II. I see a lot of that on the

timeline. And like guys, you can't you can't just preach this is so cool and like it has to make money and it has to work. And I think the collective zeitgeists of this industry is we're tired of [ __ ] not working. And that's it's like rubber. Getting getting to that point is a point where people are just I'm not putting up with the [ __ ] And and by the way, this is not unique though. This happens in every industry. There's still people there's Japanese soldiers in the 3D printing area. There's Japanese soldiers in the AI area, in the self-driving area. Like this is something that is recurring.

But, you know, you do get to a point where the rubber has to meet the road and usually that produces great outcomes. Well, what what I was going to say is that the worst thing you can do as a venture investor is try to push a perspective that you want to see in the world. Yeah. As opposed to what is actually happening and is actually working. And this is like I I think you it's pretty you anybody who's followed the clean tech industry like it basically blew up a couple of the traditional venture funds. uh in Planner Perkins in particular in in the 2000s.

Um and look like they wanted that to be the case. They wanted that investment strategy to work. They wanted, you know, the world to be better because of their investments in clean techch. But the financials and the unit economics just didn't make sense. And you may want, you know, crypto to be consumer. You may want, you know, social media on chain to be a reality. Um the ownership economy to take off using blockchain technology. It's just there's no evidence to suggest that it has so far. And and so I think you you really have to take a realistic perspective of do you want this and ask yourself honestly, do you want this to be the case or is this something that you're starting to see the kernel of truth around? Um and and yeah, I mean go

to the stuff that's working and change your change your mind. Yeah. I well so th that same outside of the fund comment as well. It it happens on a founder and like a product level as well, right? Like you can tell when the market is pulling demand out of you, but there like the graveyard of crypto is littered with people that built for a market that they think should exist or they think will exist in five years. And you just can't do that. You have to meet the market where it's at. I think David Saxs actually described this idea of being a taker versus a maker um of markets. And when it comes to things like what are the pro like what is the market? You have to meet the you are a taker of markets. You your job is to kind of

define where the market's at today and serve it not where you think it's going in the future. And it's a subtle but it's a really important difference I think. Yes. and and I I think people get caught up in being thesis driven um or catering to different types of founders that look more like, you know, folks that they would want to back. But um that's kind of why so many people are on the sidelines of something like Hyperlid. Jeff's very backable though as a f as a founder. I think 90% of people don't know he's like from Palo Alto. Like he's like also no private rounds. So like there there's some constraints on like are you able to buy this token you know on the market uh like is this the right

price not having the confidence to be able to like back up the brain struck and and put on a T-W um versus like oh I need like documentation and like a preset price and a round and all that. I mean it it doesn't look and feel like your traditional venture investment um because it's not and and that's what people have to get behind. It's also extremely huge like it's $40 billion. Um but you know what are the chances that that 3xes versus you know your random seed startup is going to get to liquidity and 3x from there. Um I I I agree. I think it it is it is unfortunate that it it changes you have to have the mental flexibility to be able to like change your mind. Um, and

we also have had, you know, mistakes where we found founders in certain verticals and we're like, oh, let's build a thesis around this. And it just still to this day hasn't worked out. And, you know, gaming is one of those things that we just haven't seen massive scale success yet. And it's like, okay, well, that that's fine. But you have to be willing to change your mind. And being a founder, being a being a taker of markets is the best way of putting it. Um, can I ask you guys how much of this is dri driven by LP demands what they want to see? I could imagine this being the type of thing that LPs are like, I want to see a thesis here. I, you know, I want to see that these people have thought about it. When the closer you get to the ground, you're

like, there are we, we have thesis and we have themes and we could, we could talk to you about forever like here, but but the point is it's like they change rapidly. you know, every six months it's like we need to go back and re-evaluate this. And I I think the way look the uh pulling behind the curtain a little bit, the way that we build thesis is we start to develop a consistency of finding really world-class founders who are going after similar ideas. And when you start to see three or four or five of them uh who are coming in with different but similar pitches, you're like, "Oh, there's actually maybe something here."

And you know when you see them coming over from you know some of the top AI labs on the AI sector or you know being an energy trader and coming over and looking at energy concepts um like those types of people have a differentiated perspective because they have the world the real world experience and and when they're coming to us and they're like hey I think this needs to be a protocol help me build the web 3 side of this and we can partner on that like that's where it really starts to to connect but you really can only develop a thesis in an area like AI or energy or frankly even like stable coins once you've seen like four or five or six of these founding teams who are world class in in their understanding of the market. And it's

and that's the difference between like I want to go off and see this vertical. So I'm going to go find founders in that sector versus I have these people knocking on my door and I'm talking to them every day and like there's consistency across their themes and their thesis. They're going after different problems, but altogether they could be a singular category. And so that that's the nuance perspective, but I frankly think like that's the that's the definition of being a taker versus a maker. So what would you say what do you think about stable coins as a potential category here and I do think that across a bunch of different levels here, there are people who are doing very interesting things in this world at the current moment. And uh obviously there's

going to be a bunch of new stables that come online presumably with the passing of the Genius Act. We didn't talk about this, but uh JP JP Morgan uh I guess filed something along the lines of JPMD, which is a USD deposit token on base. Uh so it's a permissioned USD token deposit, think like bank deposit or sorry, uh that enables JP Morgan institutional uh clients to move money 247 onchain. Um and I also see like kind of in the weeds here, right? like shout out uh you know to the steakouses of the world uh that are kind of finding very interesting ways of um you know spinning up new businesses in this area. So yeah, I I don't know if that's a thesis in and of itself, but there's um I'm sure there's going to be interesting

businesses built around the space. Yep. I mean I I think uh in my mind the creation of a new stable coin from JP Morgan represents a capital infusion into the crypto ecosystem. it doesn't represent, you know, crypto capital that's going into JP Morgan and never coming back. And so, you know, how that might work would be um, you know, they want to go on chain, they need to be paired with something, another stable coin. That stable coin provider earns revenue. You know, they want to be used as lending collateral. Okay, they, you know, inject a bunch of JPMD into a or spark lending markets and lower borrow rates artificially with their stable coin to get adoption. And so I think these things do grow the onchain ecosystem. And you know, a lot of the monetization of these these stable coin

projects is going to be through breakage. Just people who forget that they have things on chain and they leave those profits there to kind of um just metastasize over time. And so I think this is generally a positive. Um it's it's so interesting to work with big banks and you know if you want to get something done you need to like talk to five different advisory committees. And so I would assume this is the first step of many and I would peg the start date of any of these, you know, iterations as is 2026 maybe. Um, you as of right now it seems like this is just a a filing for a patent or a trademark.

Um, by the way, I ended up poking around a little bit about what we were talking about last week about stable coins eroding NIM. Um, that actually isn't the case. Uh, so stable coins, my assumption is that they would move onto a bank's balance sheet like in the assets and liabilities. They're just treated like a product, like a money market fund. I I this is a little bit facitious to say, but checking accounts are kind of a scam actually. You are just getting they're they're a scam. This is breakage. This is what I'm talking about. Yeah, that's like the equivalent of that dead capital in Sky, right? That's literally what that is. You just don't have to pay any interest to people that are holding in checking. And some of the it seems not even that innovative because it's so

basic, but I think some Coinbase product allows you to hold your USDC in a morpho vault so you're earning yield right up until the point that you want to spend it. And that just feels really obvious, right? Like like they should banks should do the same thing. They should default hold your your money in a money market fund and as soon as you want to spend it, they should just move it out. Way back in the day, I remember in uh I think it was 1998, I went to Wells Fargo and started my first uh bank account. Um and it had a checking account and a savings account. And the savings account was limited to how many withdrawals you could make per month. And like that's literally the dating item as to what you

know, like the difference between the two accounts was like this. This is 1998. There's barely online banking. I don't even know if there was online banking at the time. Um but um I that is the difference. It's like oh well if you're going to be like writing checks out of your checking account or using your debit card to pay for things like that has to be money that's in your checking account whereas your savings account earns the yield that they pay and I don't even know what it was in 98. the the there is no there should be no difference between the two and you should be able to hold it in something that's earning yield up until the point when you want to sell it and it gets withdrawn in a liquid format from that pool of of capital but Mike to your point I mean we didn't get into it on

the last pod but but yeah the assumption here is that these aren't actually held on the balance sheet and that this is basically a product or a business that's wholly owned or as a subsidiary beneath and so therefore it doesn't actually change the net interest margin um is the assumption of what like a purchase by JP Morgan of Circle would look like and it also potentially includes um you know a deeper integration where you'd be able to move your let's say US dollars in your Chase account into USDC like that that integration is I think one of the advantages that they were exploring um you know with a purchase of a stablecoin provider like circle obviously not not going to happen now but yes I I think creating a stable coin will be something

that isn't um it it's not on the balance sheet. It'll be actually probably something that just sucks up cash um from customers who want to use JPMD or whatever it ends up being called um in a positive way for the bank. So I I bet the bank's business will will do very very well with these stable coins. It's just funny. I think Ben Berneni wrote something back in the late as or maybe early 2010s or something like that about uh what banks do calling it duration transformation or something like that and it's this fancy word for gets artificially cheap funding from you know US consumer deposits to invest in risky securities and juice their nim but for them it's like hey this is good for the

economy we get to uh invest it out to businesses provide cheaper cost of capital for Amazon and and Key point key point get 10x leverage in the process. I think that crypto might blow a hole in that social contract. It crypto is a funny thing of uh you know it is there's not contracts. No, it doesn't. And it's a funny like grounds up reimagining and it's making people question pretty basic assumptions of how the financial system has worked for a long time. Like should users be getting yields on their deposits which I think they should be.

I mean, look, there there's also like um I think it was last week it it was at the Coinbase Summit, they announced the 4% MX card partnership that earns you 4% back in Bitcoin. like there there's a lot of I think um if you want to call it financial innovations that are going to be pro crypto proconsumer that are going to come like in partnership with financial institutions and crypto companies that are just better products and and I think that um this is an example of that. Now is the average person who's a JP Morgan customer going to move over into JPMD because they can earn 3.8%. Absolutely

not. Um, this will be a slow this will be slow moving at best. Um, but it will erode around the eight fringes, but if they own the stable coin, then they'll benefit from it. Yeah, I agree. Um, I mean, I think it's kind of an exciting time for exactly that reason. Um, you know what else? One thing we might have talked about it on the show or privately I can't really remember but I do think that prediction markets are in their early innings and I think that is yeah very interesting and I can see I've talked to a little I've actually talked to some of the folks at Colchi not quite so much poly market but there is I do think that the people that connected Poly Market to news are not wrong actually they do something similar

right they there is now a global in it's almost like you know the whistle the SEC whistleblower program where everyone's got a financial incentive now to if you see something and you call it out and it leads to a fine, you get some percentage of that fine. Think about that for any piece of information on global scale. It's and it's actually it's really really strong as an incentive mechanism. Um, so I think that people that have large audiences and are credible and can kind of sniff around for this stuff will actually do it'll be a really interesting business model for journalism, but also just people that have an audience. Um I I I view them as very positive like really really positive in general. I think there will be some connection with with prediction markets and you know real-time events

whether that's reporting on them or or news or or even just like a new format of kind of like newsworthy information. Um you know we're talking about how polyarket moved before the markets moved like that's real. Um I I don't we have seen a couple of ideas where it's like integrating the news into prediction markets in a way that I think is difficult to to necessarily see right now. Um but I think the the markets in and of themselves are potentially newsworthy. people will there are lots of there going to be lots of different iterations of this and there'll be different shades like there are actually like surfacing critical information about the world and blending it with news there's more of a

visual hey do I want to you know imagine like an Aiden Ross who hosts some stupid internet question and gets people to bet on it live there will be many many different types of flavors of this and actually poly market you already they have a they have an integration or a partnership with XAI where AI is giving if you want monitor the situation, you know, and get live updates on how markets are moving. There's an opportunity to do that. But I think that people are scratching at something relatively real here. Um, and I think it's interesting. It's one of these things people have looked at from a bunch of different angles and I I think there are relatively um there are good benefits for from a bunch of different angles. I thought you were going to watch a prediction market instead of

this token trans and everyone was going to lose their minds, but glad you didn't. Maybe we'll see. Um, you know what else? Okay, one last thought on the prediction market thing. I I wonder if people would use this to so people generally use financial instruments to hedge in funny ways or or make bets. Um, and this has actually been a problem for commodity markets especially where policy makers don't like it when speculators bid up the price of oil because they think Iran's going to close the straight of Hormuz or you know or or whatever, right? But there's a lot of speculative premium in commodity markets which this is why policy makers have uh, you know, imposed price caps in the past because they don't like it that these speculators are profiting off things

that people actually want to use. I wonder if you could instead of betting on okay like let's say I want to express the view I'm nervous about CO or it's going to shut down the economy instead of buying lumber if you could just bet directly in a prediction market maybe it would suck at least some of that speculative premium out of you know the unrelated commodities. I think that would actually be a societal benefit also. Um I don't know. Yeah, I I uh speaking of derivatives and hedging, the next podcast I'm listening to is the the Empire one with uh Josh Lim and Shalang.

So, it's a good one. That's uh if something is happening in the derivatives worlds, someone once told me that like all the people who trade derivatives seriously in crypto can be generally sat at a conference room table. It's it's you know, it's like those two and then, you know, maybe 10 or 20 others. So, um I'm gonna take my cues from them before I comment. Yeah, the uh we have seen actually a concept that is doing kind of prediction markets specifically for financial um questions. You know, even to the point of like will the Fed raise rates uh yes or no or how much. I mean, that type of stuff I think is um you can build a position or you can build a perspective

through financial instruments um outside of a direct prediction market, but it's just a lot cleaner and a lot simpler to ask the exact question and then say yes or no in a binary option context. And the the tough part is do you have enough liquidity and basically like enough um integrations to be able to get to the size that people actually utilize this in a real financial manner. Um, the reason why you had, you know, the Trump poly market effect is is because it was such a a crazy timeline and and kind of a unique meeting of cryptonative audience wanting to understand more about politics um, and track it that way. Um, and then it built a base of liquidity that I think within Poly Market has generally stayed around um,

more so than I I frankly would have expected. Um, now with financial markets and getting to the to the root of whether or not, you know, these are efficient markets and liquid enough markets for them to can be used as financial instruments. Um, that that's like a 10x or 100x difference in liquidity. And so I think that's the hard part. It's like where what venue is going to provide that much liquidity for something as big as like our interest rates going to stay the same? I think whoever cracks that will have a very valuable business on their hands because if you sort of a bizarre concept for you here but imagine you know imagine prediction markets become a powerful tool for journalists like

here's another here's another just mental model way of thinking about it let's say you know how you tweet you create a Twitter poll and you kind of tweet it out and it tells you a little something little little something about sentiment or where to poke around. Imagine someone that has a large audience like a Zack XPTt. Imagine if Zach was like, "Hey, I'm going to create a prediction market. Will Rooie Manch still be the CEO of Movement in 2 months?" And imagine he tweets that out and it spikes to like no gets to 60%. That would be a really interesting data point for you. And the other the second derivative or the you know what that implies is the more liquidity that you have the better you are at surfacing information and telling truths about the

world and being accurate is a so if you have liquidity around something that is is as generalizable as uh prediction markets you have a really really really powerful advantage actually and I think exchanges and oracles both or the oracle part of this is actually another really interesting component that could be a good play. Yeah, but bespoke or maybe cryptonative questions like that example with with movement are are kind of cryptoindogenous where I think that that is less what I'm saying. I'm I'm saying more of like the financial markets questions and I think my my general take is um you know there are there are hundreds or thousands of uh multiples more people who are trading around

something like the FOMC that just happened today um stayed the same. No surprise. Um but the uh and there are ways to express that view in traditional financial instruments that have you know or many orders of magnitude way more depth than we even see in crypto. And I think that there is a little bit of like muscle memory when it comes to people who are trading those markets that they want to be able to trade swaps. They want to be able to trade, you know, uh derivatives that are hooked up to their Bloomberg and their brokerage accounts.

And there's like yeah element of like convincing them to use a new product is way harder than even if it is, you know, way way less complex. They're just like used to the way that they do it. It's kind of like why everybody trades options in in traditional markets whereas like there are more efficient ways of of doing it. Um so I I I think breaking through in the financial market specific questions um is going to be a hard one. obviously a much much bigger TAM um but much harder to do. These are sort of being played out with two different approaches here. Poly market is a DTC approach like they want you to go onto their site and they got something like 50 and then Khi is more

like you know they're okay with white labeling and they tap into the distribution of Robin Hood. So you're kind of playing both of those different strategies out in real time and there might be room for both or maybe one of them just ends up being dominant. All right, fellas. I think that's it. Um, shout out to Karen, uh, Karen Reed for her victory. I know you're thrilled, Michael. Um, and hope to see, uh, those of you who are traveling to New York or New York at Permissionless. Um, there was Jason and I promised to do if ZeroX Research got enough uh, tickets, we would do the dunk tank. Um, but I'm not sure if they crossed that. I remember when Celus did the did the dunk tank. I was gonna say drunk.

Throw it in. Yeah. Uh, we'll we'll have a live recording next week. Yeah. Yeah. Yeah. It's going to be a blast, guys. What do you guys Well, we can talk offline, but yeah, would be great to grab a beer or something outside of this, too. So, um, all right, guys. Look forward to seeing in person. And, uh, cheers. All right. Later, guys.