Nearing The DAT Peak | Weekly Roundup

Transcript

the fact that we're trying to think about how crazy it's going to get means it's not that crazy yet. And then only in the moment when it's like actually crazy, people are going to say like, "I can't believe this. I just like I can't believe what's happening right now." And we nobody's saying that yet. You know, like we're still in the moment of like, "Hey, this feels pretty crazy. I think it's going to get crazier." Or like, "I wonder how crazy this gets." So to me, that suggests that it's actually not that crazy yet. It's only the moment where people are like, "What the f is going on?" That's when it's actually gotten crazy. And I don't think we're quite there yet. 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 Blockworks. Our hosts, guests, and the Block Works team may hold positions in the companies, funds, or projects discussed. All right, everyone. Welcome back to Empire. We have a mly crew today. We've got a Vichrol, who's back in the pod from Electric. We've got Rob. Rob is officially joining Empire as co-host number one. He will be leading the show

forward. Sant co-host number one. Number one. Wait, is Santi number two then? What? What is this? You you I mean, you've over I mean, I read the YouTube comments. I look at the tweets, you've overtaken both of us. People People like you more than both of us. So, and we've got Santi back. Santi, new background, my friend. Looking good. I know, right? Listen, man. I I'm I feel like I'm out of, you know, closer to leaving Empire now. Now that Rob is uh you and me both, man. Rob's coming for us. We're gonna be on the job soon here. Maybe it's a Rob.

Yeah. Yeah. Well, to to be fair, we did a lot of episodes with Hib, like Avito Hase. You remember those episodes? Some of the best performing Empire apps of all time are Avichel and Hib. Little did we know that the other partner of Dragonfly was actually a better a better one to to replace. He first had to take down Hib. Yeah. For the for this position and then he comes for us. That's how it goes. Then I'm coming for you guys. So, one at a time. Yeah. So um well look guys I wanted to talk uh the about the the topic dour which is digital asset treasury companies. Um I mean I feel like we've just been talking about them non-stop on empire but it we keep getting new ones and it keeps getting bigger and we keep

getting what's what what I think Santi and I said was going to happen is now happening which is we're pushing farther out on the risk curve. You know, you had the Bitcoin ones with micro you had Micro Strategy, right? And then you got more Bitcoin ones and then you started getting Ethereum ones and then Salana ones and now you're getting Hyperlid and Suie and um Athena and there's a a a whole host of other ones launching. Every every coin's getting a getting a digital ass a DAT now. So um I'd love to just maybe Rob and Avichel get your guys' take on like the good and the bad and how you guys are viewing this. Is this like, you know, you talk to some people and they say, "Okay, this is obviously going to blow up, but like you got to be doing it." You look at other people like I

think Nick Carter was saying like VC shouldn't be touching this with the 10-ft pole. A vichel, you guys just did one. Um, so e Ezilla obviously which which was successful. Um, so maybe a vichel if you could if you could start by just giving your framework for how you're thinking about these things. Yeah. Well, I think that the TLDDR I think is what Sailor showed is that there's this giant pool of capital in the debt markets and you can go tap the debt markets and borrow it 0 5 10% with some duration and then turn around and buy an asset that goes up a lot more than 5% a year. Um, and if you believe if you can if you can make that debt long duration enough and with the right terms, there's there's a huge arbitrage basically in the capital markets and you

can then turn that that flywheel. Uh, and then the market started saying, "Well, if you're going to turn this flywheel and you're just going to keep stacking two, three, four, fivex more Bitcoin per share. I'll just frontr run you. I'll make even though you have a dollar bitcoin on the balance sheet, I'll make you worth $2." And so everybody looks at that and says, "Wait a second. This is just a capital markets arbitrage." And I think these type setting aside any value judgments, I think these these things, they are what they are. Like the capital markets exist the way that they do and people arbitrage them and and like if this is going to exist, you know, between debt and and equity markets and people can turn that crank, people are going to turn the crank. It's just sort of, you know, it is what it is. I think the the

most interesting question here is like how long does does it last? And is any of it actually durable and I think the the analogies to the ICO markets are very apt. I think this is kind of like the ICO um you know cycle. Um there's a bunch of capital that comes in. Most of it doesn't get anywhere but but actually I mean we got Ethereum out of the ICO cycle, right? You got a $500 billion asset that that has had a transformative impact, right? So, I don't think it's also I don't think it's fair to say this is all bad. Like I think there there are like there are going to be implementations of this that I think are really interesting. Um and so my take is actually I think probably for Bitcoin, probably for ETH, maybe for Salana, um I think there's an argument that the that

these things will persist actually on the other side in a very very meaningful way. Some of the longer tale assets I think is going to be very hit or miss. um you know some of them are clearly going to not be around and some of them I think actually have a shot at being around um because the exposure into a new capital market it sort of like front runs an ETF and so if you can't get an ETF this is actually a way for other parts of the capital markets to get exposure to your thing and if your thing is actually like fundamentally useful then I think it has a shot but I think if we restrict it just to the BTC ETH soul I think what happens is I mean our our base case is that likely there's there's a run right these things

basically behave like levered exposure for a Um, and then it pulls back hard. And when the when the when the inevitable crypto pullback comes, these things probably end up, you know, it's like it's like GBTC. It'll it'll sort of pull back and it very likely pulls back below NAV rather than being a 2x. And uh and when it pulls back, that's when there's there's like interesting opportunities actually. And if you're long-term minded, I think some of these guys who are long-term minded and smart um you know, like I think Joe, we we did um we participated in ESPET with Joe Luben, for example. And you know, I think it's entirely possible that Joe goes out and says, "I'll just roll up a bunch of other ones or the or the ETHzilla team could go out and roll up a bunch of other ones in this in this sort

of the cycle." And then you get to the other side of that cycle, that's where I think it gets really interesting. So, I think if you're able to pull off a Bitcoin treasury or an ETH treasury or a soul treasury and you have some fundamental yield and you think these assets are actually worth 10x what they're worth today, you play that out. And I think the long game, if you're long-term minded, is do you end up with an asset with, let's say, $30 billion of notional, right? Like if you get if you get three four five billion dollars of ETH today does a 10x you end up with 30 $40 50 billion of notional that thing's generating staking yield and other yield on in uh DeFi could you make a billion dollars a year in free cash flow with basically like 10 people that's a pretty monster business that

starts to look like a Birkshshire style business right it's a really small team that just spins cash so I don't know I think there's an argument that in the long term these things are actually very interesting if done right and it's just going to be it's going to be messy in the middle for a while yeah Rob what would you Yeah, I wouldn't add a lot. I mean, I think all that makes sense. I think reality is is like these things are going to exist once you put a, you know, a pot of capital into a public vehicle. Like, it'll continue to trade, right? It's not going to need to be delisted. It's going to have some sort of nav, right? There's going to be somebody around the table who like cares about this thing existing. And so, they will exist. This idea that like they won't

exist, I think, is is a bit odd. I think where you run into trouble, obviously, is how you think about like, you know, what the capital structure looks like. And you know if there's a lot of debt on a vehicle that is much more highly volatile than maybe Bitcoin or ETH is right and you know how does that you know play in like a you know a really you know bare market or a down market. I think the the M&A point is a really good one. Uh and you know a lot of people are thinking about M&A in terms of like okay well you know Sailor can go buy a bunch of other Bitcoin asset uh DATs and and I think that is true but I also expect that Sailor is going to go buy like the 15th BNB one and he's going to sell a

bunch of BNB into the market and he's going to go and buy like more Bitcoin, right? Like I think there's going to be a lot of like activism around these things. I think there's going to be a lot of M&A that's across assets as well. You clearly don't need 30 of these, right? Like at the end of the day, the amount of copycats that are popping up right now is just astronomical honestly. And like you know, we're I I think there's clearly exhaustion in the market uh from the investors about like how many of these are coming out. And a lot of them just frankly look like like um money grabs. Yeah. I talked to a team yesterday that uh was actually already raising for a fund to go do a rollup strategy of these treasury companies. So they they were raising for a like an

activist fund for this, right? Which is very obviously is a sign of a lot of froth in this. The thought there Rob is expect uh six months from now these things will turn over, market goes down, these things trade below NAV and someone's going to roll these things up. Yeah. Exactly right. And they want to be prepared for for that. It's unclear to me like why they would have a better ability to buy these vehicles than like Sailor will. He'll have, you know, some sort of premium probably still. he'll have a better asset base, he'll be able to pay more. So, I don't know why they would win, but it it shows you that there's like a lot of um people thinking about like what happens in this market in six months and how it's going to change.

The um the other data point that is important to appreciate is um hedge funds can't buy ETFs most of the time. Um they can't buy in a managed strategy. So that is where a lot of the demand is coming from like other than retail hedge funds that want to express a view on and I think you know will buy these DATs and I think that's where you could see this prolong for an extended period of time where you have a lot of demand coming in that way right what I keep hearing is for the competent sponsors uh a lot of hedge funds are lining up to get exposure to other assets that uh they can't or or not willing to touch the token and so for that reason I I've sort of changed my tune a little bit like I understand the

distribution. Uh I understand um the potential to earn other staking fees or other types of revenues. I can't justify the premium for most of these uh which it would suck again to be in a position where you were right about the underlying thesis but you didn't end up making any money and the sponsor did. And I just would remind people to be cautious. Um because most of the folks that I've talked to are saying something to the effect of, "Yeah, we know it's going to blow up at some point or the premium's going to compress. This is a trade, not an investment." And you're like, "Okay, just make sure the size of the door is really big on the way out."

Yeah, I agree with that. I I I I do I do think it is a relatively small number of people that should be trying to play this game. Like I think the average retail person could could get burned and and they should be really careful and I think people should tell their friends to be really careful. Um um what are your uh in terms of the going back to your point of each hole like I think Micro Strategy has been able to get really good terms. How uh if you were to canvas like the the how sophisticated and how what are the terms looking like for a lot of these DATs? Um because because that's really the the biggest risk, right? Where you basically are a forced seller and you have to liquidate. Yeah, I I I think you're exactly right. And I'm Rob, I'm kind of

curious what you're saying because you guys probably get pitched. We get pitched like three of these a day now across all sorts of crazy assets and and a lot of them you you look at the decks and you're like this is clearly opportunistic. It's like some it's like you look at the profiles of the people and you're like these people like came into came into crypto in like January 2025, you know? It's like there's there's like nothing here. Um and they want to raise $200 million and it very much looks like a trade, you know. uh and so the the people who are credible I think can can get more size the the debt markets have sort of it's interesting I we've seen kind of two things one is the duration is generally short like sailor does I think have an advantage here in terms of

being able to get longer duration debt and in part because of sort of the the assets that he has and kind of how he's stacked his capital base and he's he's done a lot of stuff I mean to he's been doing this for years right so it's not like he started this six months ago he's been doing this for years so he has such a head start on everybody um and so he's getting like multi multi-year debt which like doesn't convert or you know he's he's been very sophisticated. Most of what we're seeing is like two years maybe three years uh convertible and it has like forced conversion provisions on the upside. Um you know you're often talking you know 8 10 12%. Um you know sailor is able to get better rates often. Um, so almost almost universally these DATs have worse terms than Sailor.

Uh, and I think you're exactly right, Santi. I think if this blows up, this blows up because we go into a bare cycle. All of this debt comes due at exactly the point that the assets are depressed 50 or 60%. And that's that's like a force liquidation event. Like you could end up in, you know, massive. It's it's like a it's like a terrorist situation, right? you just have to print a bunch of shares at like the worst possible time or you got to like sell a bunch of assets to to like try to pay back the debt or you know, who knows where the debt markets are in terms of refinancing. Like it could get pretty gnarly for for a lot of these smaller ones. Yeah. But I also think that that brings about the point we just talked about which is like it's possible that like

Sailor is just, you know, the buyer of last resort here and nobody wants to actually sell the underlying potentially and they can get, you know, they'll do an all share deal with Sailor and Sailor will refinance with his banks and like all of a sudden like Sailor is a hundred billion dollar, you know, plus uh company and and pretty quickly, right? Like I I think that's like very possible and I think we might see Go ahead. Well, how does that how does that work for anything not bit not Bitcoin though? So on Bitcoin, I think that's right. But on everything else, it feels like it's it it really could spiral. Like maybe in ETH, it's like a handful of people get to scale and are able to buy up everybody else. But all the other assets, it feels like it just it I I completely agree with you that the

assets are have to going to have to get sold. And I think that's definitely right. But I also it's not clear to me that if sailor's trading at one and a half times NAV and you know uh you know whatever a SU vehicle is trading at you know 0.9 times NAV and the shareholders like just want some sort of you know some sort of value to come out of it and the management team wants to get paid right that you know sailor can't look at that and say hey listen this is you know I'm getting 90 cents for or a dollar for 90s and I don't care about the underlying so I'll immediately sell it into the market and I'll use that as actually essentially additional leverage right to increase my Bitcoin per share.

I actually expect you'll see a lot of that type of of play happen and you'll see like activism around that and and it's there'll probably be a okay well do I take that bid from Sailor do I sell the underlying of which a lot of these longer tale ones have like agreements with the foundations where the foundations don't want them to sell which complicates things or do I do something where call it a financial sponsor wants to come in and you know maybe help me close that gap and and save the vehicle but the financial sponsor will never be able to pay as as Sailor will and with that asset base that he has with the refinancing capability and with the premium to NAV he'll be trading at. So I actually think like and Sailor should be the highest bidder in all of these cases and

theoretically he can buy a dollar for 90s over and over and over again and just roll a bunch of these up. But for instance, let's double click on like Salana for instance, like uh where you're most of the folks and some of the larger vehicles are trading in lock and they're putting that in and they're getting at some sort of discount. Um what happens there, Rob, because obviously this is not a liquid instrument that's vesting over a multi-year period. Like it's it's a it could be really messy. Like so how do you think about about that scenario? I hear you on the Bitcoin side, but I I'm I'm struggling to see how that actually why Sailor would want to get or or someone else would actually step in for

uh some of these vehicles that have a very big duration mismatch. I think so what we're seeing and I'm interested what vital seeing as well but so for one of my biggest pet peeves when we get these pitches is that you'll often see people say hey you're you're entering at you know whatever 1.1 times nav or whatever but h 50% or 30% of that nav is actually like a locked token and if 30% of that nav is a locked token then you know there's actually the market price of that is a bigger discount so it's not 1.1 times that you're actually getting in it's 1.3 or 1.4 for or something, right? And so people don't aren't doing the math appropriately when when they talk about that. On the locked side, like listen, those locked soul vehicles, they I don't believe the lock is actually that much

longer. We have um another call it two to three years, but you know, they're coming, they're actually it gets less and less over time. And so you have kind of the steady stream of, you know, Salana that is unlocking. So if that trades at a a really big discount the way like a a close-end fund would that isn't you know fully liquid and we expect it it probably would there is some equilibrium price there where then all of a sudden like you are taking you're taking some price risk but you can orbit out and or hedge sorry hedge it out in the market and then you have like basically you know a cash flowing vehicle that you're using in the future to buy more Bitcoin.

Yeah that's fair. Yeah, that that's an important nuance here, which is uh what you should be looking at to appropriately value NAV, not the headline now that you see in the deck, is go look at the secondary market if you wanted to fully punch out of your locked soul and then use that to appropriately value NAV. Uh and I don't think many people are actually doing that math. what we see and and I mentioned what a vital say is people are trying their best to um really kind of hide exactly what some of these like numbers are because I think a lot of people are just trying to to make money and I believe there's a real flight to quality now and so we'll start to see the you know the best vehicles that are the most straightforward that you know

have the best terms and that are you know more investor friendly and not just around the sponsors making money those will be the ones who will be to raise capital going forward and are more straightforward about it and not not the others. Well, and and what I would add to that is I think there's still I mean Robbie, your idea of Sailor buying the other assets and liquidating them is really clever. Um and they and he's totally going to do that and and anybody who is a Bitcoin only Bitcoin maxi is going to love that. Um and so it makes me think that there's actually like a surface area in these things to use the assets strategically and be creative about them that is underexplored as well. And so the really smart people will figure out what to do with these assets in unique and interesting ways. Like it's a it's a

really interest if you just look at it as like an intellectual exercise. It's a really interesting combination of an operating business tradey tooling like how do I cut options against this? How do I you know like this the strike stuff that Sailor is doing? Um you know super interesting. He's like recreated the entire yield curve using different assets right it's like super clever all the stuff he's done. And then you have the DeFi stuff too right? And so can you take these assets and use them productively on chain? Um which which some of these treasuries talk about. Um uh and and with like the ESL one in particular like that that was that was like a key thing that that the team leaned into. We're just for clarification we're the asset managers on the back end on that one. So we have a we have a a non-exclusive deal with

the company to manage those assets. Um, and so I think actually the surface area to generate yield and be creative about these things is still quite underexplored. And I suspect there's going to be like a bifurcation. Like the good guys will figure out how to do all this stuff and then the people who are in it for just the trade won't be able to keep up. And that actually I think will suppress the premiums even more. Like I think those guys start trading at a discount pretty fast. 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

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Trust me on this one. The Bitwise weekly CIO memo is really worth the 5 minutes of your time. Check it out at bitwiseinvestments.com/ciome/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. Visual, can you say more about that? Actually, because I was I was reading your guys' press release and and obviously we've we've talked about it.

So, you guys raised four so I'll just read it for anyone who missed it. 180 life sciences announces an upsized $425 million private placement to establish an ether treasury reserve led by a consortion of digital asset leaders to launch ETHZilla. Uh, and this is the one that you guys you guys are behind or working on or I don't know the right the right language there, but there was a line here. It was um, see if I can find it. Yield uh, yield generation. Uh, you guys plan to uh, at closing electric will serve as the external asset manager for the company and plans to implement an onchain yield generation program. I thought this was pretty interesting and uh in the investment highlight high highlight section uh it was it was all about generating outsiz yield and being able to generate yield using the

company's ETH treasury. So this kind of seems like a I don't know you're talking about it now I read it in the press release like go deeper into what this actually means. Yeah, I think I think for any of these um I think specifically for like ETH soul, maybe but especially I think for ETH there's a pretty robust DeFi ecosystem and we think actually being able to participate in the ecosystem um is a kind of win all around. I think it's it's a win for the company because you can generate outside yield if you do it right. Uh and we've been doing this uh for some time in our funds. It's a it's a win obviously for the ETH ecosystem because you can actually start to create flywheels in in places that are strategic for the ecosystem. Um, and I think it's a win for the shareholders, not just because

they might get outsized yield, but for a lot of people, they don't want to touch the DeFi stuff. They don't have the expertise to do it. There's, you know, this is just a new vehicle for them to be able to get sort of outsized yield exposure without having to touch any of it. Um, and so I think you could actually create a positive flywheel where everybody benefits. Um, and so, you know, whether I think you don't want to do um, uh, super super risky risky out there things because I think the loss of funds risk is like a real risk here. Um, but what we've seen is that there are a lot of opportunities where the contracts are are formally verified, there's bug bounties, there's audits, um, and if you size your positions appropriately with with small chunks, you can move the needle on protocols and

actually help them or help bootstrap new things in the ecosystem. And so if you create that sort of relationship here, it's it's actually really really positive in our opinion. And and I think that can make it so that the there's an entirely new pool of capital that can come off chain because I think one one of the things we think about here too just macro with these digital asset treasuries or sort of the broader evolution that's happening with crypto is I think it would be really sad and unfortunate if what ended up happening was we created all of this amazing decentralized DeFi infrastructure and then we just piped it through the brokerages. Like what a what like a waste of 10 years at the end of the day, right? like why do why did we work so hard uh to like just allow people to

like click a button in their Schwab account? That seems like a waste to me. Um and so I personally think that like the right way to if to to Rob's point, if this is going to happen no matter what, it would be better from a decentralized crypto, DeFi, you know, Cippher Punk, whatevers you have from that perspective, it's better for us to go figure out how to co-opt that liquidity and bring it on chain. Um, and so I think that's that's like the experiment to run here is like can you do that in a in a good secure safe way and just suck all that liquidity in. Do lenders allow you to do that by the way? Are there some sort of restrictive covenants in there that might prevent you from doing that?

Uh, thus far no. Um, and I don't think they they will particularly care actually. I mean even if they under a I don't think most of those guys understand DeFi in the first place. So they don't even understand kind of what's what you know how that would even work. But but but we haven't seen such provisions yet. and and you know really um in this vehicle in particular they I think they're going to be a little bit more conservative on the debt and so it's going to be you know if you're sitting on a bunch of vanilla ETH you could stake it or you could do this other stuff and it's actually from an ecosystem perspective I think really good to to do it this way like I think I think what this kind of gets at a slightly different take on this I think

is I think one of the things that Sailor got really right which a lot of these treasury companies don't get right is that Sailor is a Bitcoiner like he's of the community right and so what that means is the community wants Sailor to win and so all of the Bitcoiners are pulling for him. And so what's really happening is it's not it's not just that like Sailor is the interface to to Trafi, but he's sort of like the vehicle through which Bitcoiners are expressing their worldview into Trafi to co-op Trafi. Um and that's like a big part of why that works. And I think that's like that's actually how you succeed here. I think what you got to do is take all of the crypto people who truly believe in something and say, "Wait a second."

Like, "This is the community vehicle. Like, we're of the community and we want this community to win. Let's go co-opt Trafy rather than Tradfi co-opting us." And I think if you get that right, I think you'll actually get you won't you won't just have one person on CNBC talking about the thing. You'll actually have like 10,000 people saying, "Okay, well, if you're going to do this thing, go to these guys because what they're going to do is co-op Traffy." Like, they're going to suck all the liquidity over and help DeFi win. And so the the the the sort of like scene I have in my head is like we're going to hit we're going to hit the fall. You're going to have Thanksgiving and like every family has like one cousin that's like the crypto bro, right? And like for the last two years the crypto bro has been an

idiot. And this year the crypto bro is a genius. And so if everybody's asking the crypto bro like, "Oh, have you heard about Sailor and have you heard about like these stats and have you like you want that person to say oh well if you're going to do it go to this one, right?" Like the way the Bitcoiners are always like don't go to the other ones. Go to Sailor. Like Sailor's just never going to sell the Bitcoin. He's going to do the right thing. He's like he's he's he's one of us. You kind of want to create that I think effect. Is that is that how you guys are doing it? Because you guys got Lesner and Terrun and all these guys. And um is that how you are thinking about it when as compared to probably Andrew Keys? What's Andrew Keys is Bit Bit

Miner. I think it's Bit. Uh no. So Tom Tom Le is Tom Lee's bit mine. Yeah. Yeah. So there's so basically there's right now it's Espet is Luben, Tom Lee and is Bit Mine. And then Andrew Keys has his and then Ethzilla. Those those feel like the four big players to me. Yes. Ether machine. Um yeah, that's right. That was that was very much the intention. So we have like Constantine from Lido. We have Shriram from Lair, Robert Tun, uh Danny Ryan, VC from Etherealize. like you you look through the list and it's like oh it's these are people the the intention was and I think it'll take a while for the for for the separation to happen and for people to start realizing what's going on but the the intention was these are people who have been in Ethereum for 10 years from the very beginning and and

the if you're going to take this strategy and you think that on the other side you might end up with some 3050 $50 billion vehicle that holds all these assets what you need to do is bet on the people who who will be around in 10 years like you need to suffer through the next five years to get to that end state and so if you're going bet on somebody to do it. Bet on the people who have been here for the last 10 years. Bet on bet on the people who haven't left and aren't going to leave. That was sort of the the sort of vibe that you're going for. And I think the people who are able to let off a will have a shot. I think everybody else will kind of it'll be obvious. It's just like every crypto cycle, right? It's like there's

people who have been here. There's people who have been here for two or three cycles now. And there's the tourists. And the tourists come in, they see the the the the bubble, they see the ICO bubble, or they see the DeFi summer bubble, or they see the NFT bubble, and they milk it, and then they leave. And I think there's a small percentage of these that they're actually true believers. And if you get the true believer ones, I think you'll suffer for a couple years and then out on the other side will come something actually really interesting. How far out can we go here? So this so this past week we had BNB did a big one. Suie did a big one. Um I'm trying to remember what's public and what's not.

Obviously there's Athena I think. Anyways I I'll stop there. But I think Ton Ton is doing one is I didn't know if that one was public yet. So like August will be August will be the month where like we really get farther out on the spectrum like a lot of the L1's are now doing them. A lot of the L2s are doing them. How far out can we and should we be going here? One observation here is with any of these cycles is um if you're asking how crazy it's going to get, it's not gotten crazy yet. You know, like it's only crazy when you're like I can't believe it's this crazy. Um and so my take is like the fact that we're trying to think about how crazy it's going to get means it's not that crazy yet. And then only in the moment when it's like actually

crazy, people are going to say like, "I can't believe this. I just like I can't believe what's happening right now." And we nobody's saying that yet. You know, like we're still in the moment of like, "Hey, this feels pretty crazy. I think it's going to get crazier." Or like, "I wonder how crazy this gets." So to me, that suggests that it's actually not that crazy yet. It's only the moment where people are like, "What the f is going on?" That's when it's actually gotten crazy. And I don't think we're quite there yet. So I think it's got it's got it's got some legs to run. I think this this momentum will probably carry it for a while. Like I'm trying to think of like what what I don't know if you got like an ohm treasury or something something like totally bananas where you're like I can't believe this

is happening you know like a loot treasury remember loot the NFT project if you got like a loot treasury or something and people like this is the future yeah yeah people are like oh this is the future of gaming then I would sit back and be like what the is going on right now aren't dads the future of uh financial engineering and or curing cancer along with AI yeah yeah exactly so once once we start having that kind of a language And then I think we're like out on the risk curve. We're I don't think we're anywhere close yet. It's like so many of these it's just like I always am like I can't how far are memecoins going to run? Like how how crazy can people possibly get? And then it just like keeps getting crazier and crazier. And so it's just like I don't think we're

anywhere close to the end of this. What is the what is the main KPI? like if you have a dashboard up and I appreciate some of you guys are not like near-term traders but you know you think about downside like what is what are the KPIs that you're measuring to assess like is it the premium uh you know like some of these are not holding up fairly well um and and so does that indicate that like at least on the dad side like is is the music uh you know coming to a halt um is it more nuance than that it I mean obviously these vehicles are not all equal but I'm curious how you guys think about um how long does this um phenomenon persist?

Well, I on our side, I guess, my side, go for it. No, Rob, go for it. Sorry. Sorry about that. Um no, listen, I think on my side and a vitual is is more involved with these than than we are. I I think that to your point, Santi, the premium is not subsisting. I mean, the premiums are still pretty high. It just is that the premiums were crazy high before right these things shouldn't trade at you know four five six seven 8x premium they should trade at maybe some premium that is you know call it somewhere between you know one and two right and so they are getting to a more reasonable level I think what a vitro said earlier around well if you're asking if it's too crazy it's not crazy enough yet or we're not at the top I think that that's probably true in the

public markets but I think if you if you're in the no or you're you know those of us who are seeing these deals every day. Like it does feel like there's a lot of exhaustion on this side and the public markets are, you know, four to six weeks behind where the rest of us are in terms of seeing all of these deals. And so I I do expect, you know, pretty pretty soon you're going to start to see, you know, call it like an asset with a billion dollars or $2 billion or $3 billion of market cap that's going to come to market and you're going to be like, how how does this make sense, right? like people are going to raise and they're going to buy 20% 25% of the float to go and offer this to the public market and nobody will know what this asset is or or you

know why it even is supposed to exist. We we see a couple of these right now. There's a um that are are starting to come to market. There's a large VC behind one where like there hasn't even been a cliff yet uh in the investing and and that one's just feels very very frothy to me. And you're starting to to see people talk about even like pre-launch projects have digital asset treasuries and they're talking about that seriously, right? And so that tells you at least on the side of the people who are putting these things together that I think we're starting to get towards, you know, near the top, but of course like the public announcements are four to six weeks behind that.

There's a pre-launch project that said uh they uh actually I'm not sure if I there's any there's a pre-launch project that is that's doing one of these and they said we want to diversify out of our once the token launches we want to diversify out and acquire Blockworks. So that it would be this token which is like it's literally like I don't know it'll be like 100 on Coin Market Cap. It's like yeah and uh and Block Works. I was like I think I think we'll have to pass on this one. But um yeah it's got Now we're talking like when that when that's actually like a real thing like if one of signs of the froth. Yeah. Yeah. Yeah.

Yeah. Yeah. Are we going to are we going to skip uh actual like has has all the speculative energy and flows just now sitting on traditional markets and there's we're going to totally skip onchain activity and craziness as we saw in DeFi summer NFT summer. I mean, the floor of punks has gone up pretty dramatically, which is I I generally think NFTTS when they catch a bid, it's it's a it's a sign of the times that we're closer to the end than we are to the beginning. Um, and so certainly like there's been interesting activity on punks. Uh, but I'm curious if you guys think that uh we'll see some flows uh as we have historically in prior cycles where Bitcoin rally, stabilizes, then you have demand uh in

other assets on chain. Well, there there's two there's two aspects to that, right? Like one is the the price movement across assets and I think it's entirely possible that it it does behave like it has in prior cycles which is like Bitcoin moves first and then other stuff moves um later. Um actually three aspects. Two, I think this idea of like tradable that that the real speculation of this cycle happens on the traditional markets rather than the crypto markets. I mean, obviously there's hyperlquid and perks and and memecoins and stuff, but I mean, that's like that's baby money compared to what happens on Wall Street, right?

Just the dollar flows that you're talking about, the ability for deep pools of capital to access any kind of instrument is just so much deeper on on the Wall Street side. I mean, I've we've we've talked about this for years and we maybe even talked about this on a prior pod, but like my operating theory has always been that we've never actually seen a proper crypto bubble. Like people talk about crypto bubbles, quote unquote, but like I don't think you can have a a proper bubble without Wall Street being involved. Like bubbles require proper institutional rails and real capital flows from the traditional markets that are that are truly deep. And this is actually the first cycle that we have those rails established.

And so this to me sniffs like what what we've been thinking about for years, which is like it's only when Wall Street really gets its hooks in and you get real institutional dollar flow from Wall Street that you can have a proper crypto bubble. Um, and so to me, this is starting to sniff like the beginnings of that. This is starting to sniff like, you know, it's it's it's a little bit before my time, but it's like I have to imagine this is like 1996 or 97 or something felt like where it's like the Wall Street guys finally kind of figured out, oh, there's an internet and we should like do something about this. and then it got crazy, right? And so I think my read is like this is the first signal that that might actually be happening.

Um, and so if that's true, then then yeah, like the real speculative cycle happens on the traditional markets in that in that situation. It's just cuz the dollar flows are so much bigger in that universe than there are on chain right now. 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

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Trust me on this one. The Bitwise weekly CIO memo is really worth the five minutes of your time. Check it out at bitwiseinvestments.com/ciome/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. What do you what do you guys think of uh Nick Carter's tweet? He said uh peak debt euphoria is over. Um, in a year or two, most funds will pretend they never did a DAT. Castle Island has never done a DAT. We back operating businesses. Um, so I mean I I I think I know how you

guys would say peak DAT Euphoria is over. I think you guys would say it's it's probably not over yet. Um, but what do you think of the other idea that like VCs shouldn't be doing these like it's not the role of electric to do this or it's not the role of Dragonfly to do this? Um, I think the term VC is like as a as an overloaded term and so I think it really depends on your mandate. like some like we have multiple kinds of funds. We have this like yield generation stuff that we do that we'll we'll do with the treasuries. We have like an open-ended vehicle that we have um from uh from 2018. So, you know, kind of depends on on what the strategy is that your LPs have asked you to, you know, be tasked with. Yeah.

Um, but I also think that, you know, part of part of being successful in crypto and I think part of being successful in like the modern investing environment is is being thoughtful and understanding what's happening. Like I think one of the big criticisms you could have of VCs let's say from 2010 to 2022 like in that window is they were extremely uncreative. They were unimaginative. So they like bought some stuff. They had like macrotail wins. they sat on it and the lesson that most traditional VCs learned was like buy and sit and hold and don't do anything. Um, and really in retrospect what you realize is what they should have been doing is harvesting in 21 when things were going crazy. Um, and doing secondaries or trying to help companies go IPO. And so I think actually being

thoughtful about where the capital markets are and where liquidity is and how to how to get liquidity for your LPs is is well within the mandate of an of a VC. And if it turns out that this is the best way to get liquidity for investments that you're sitting on, um, and there's a pricing arbitrage, like your job is to help your LPs make money and be thoughtful about that. And so why why ignore an entire section of the capital markets that allow you to get liquidity for your investors when your job is to make money for the investors. Um and so I think actually like a lot of VCs would be better served by being thoughtful about understanding these other things like you know go like take something like um you know we we Jason we were talking about boom supersonic

right and so it's it's a it's a different domain it's it's a it's a different industry but actually has a lot of parallels to crypto which is it takes a long time to build a supersonic jet and get it to work and there's a ton of regulatory risk right you got to deal with like the the government to actually like build this thing so it actually turns out a lot of parallels and one thing I think is really interesting about that um that business is I don't think the public markets I think the private markets don't understand that business as well as the public markets. So it's this like bizarre thing where the VCs really struggle to understand a supersonic airplane company. But I bet you if that company was public, it would be like a $5 billion publicly traded company. Um and and it's because like

the retail market actually understands that better. They want to have a slice of that thing in a way that the privates don't. So, if you're an investor and you you have you're an investor in such a business, I think it is actually well within your mandate as an investor to say, you know what, Boom Supersonic, maybe you should be a publicly traded company and let me help you get there. Um, because that's actually the right way to capitalize that business and that's the right way for you to like as an early investor in that business, make money for your investment. So, anyway, I think I think this idea of like what is the mandate for a VC is actually the crux of what he's saying and I actually disagree with his premise. I think actually VCs need to be much more active and much more thoughtful about how to

use the capital markets to generate returns. Yeah, I might I might push back on one part of what a Vichrol said and then and then agree with another part which is I do agree that this is all about what your mandate is. What type of fund do you have? What is your fund supposed to be doing? What type of returns are you underwriting to? Like what is the return timeline and threshold? Uh I think you know in NIX funds specifically you know these are close-end funds like eight-year life cycles I believe. you know, they he's really solving for a different type of investment than these digital asset treasury companies. These these companies are are are are trades in a lot of ways if you are doing the pipe investments, right? And that's obviously specifically what he's referring to is is okay, somebody's

doing the pipe or they're doing the convert, they're playing that they're long some underlying token, they're hoping for a little bit of a premium to NAV and and then they're getting out of it, right? And these are it's a traders mentality, right? And and that's what he's trying to say. I think I also believe that his expectation or his belief is that these are bad for retail. That isn't necessarily true, right? And you have to you have to assign that sort of like ideological point to I think get to where he's getting to. It is possible that's true. It's possible for a lot of these vehicles that's true. But it's also possible that there are ways to put these things together that aren't necessarily bad for the follow-on investors, the retail investors, the people who are there in the public markets. And so, um, I I do think it all

comes back to the type of fund that you're you're investing out of and and what people, you know, um, are expecting to get out of this. The thing I would push back on a vital on a little bit is this idea that, you know, just because like the private markets and public markets, uh, are, you know, sort of understand different types of assets better. Like I I don't there are very sophisticated investors on both the public and the private. And the fact that like retail might buy Boom Supersonic and and you know make that a five billion dollar company and the private markets won't that doesn't that doesn't imply to me that the private markets uh don't understand the asset.

What it implies to me is that there's a lot of you know kind of retail mania that is looking for potential growth. And we saw this, by the way, in this backboom of 2021 when you had a bunch of EV companies, space companies, you know, other kind of like longtail technology companies that went public immediately traded really really uh well and they they had, you know, kind of immediate pops and then most of them are basically like close to dead companies today, right? And in that case, you know, it's kind of the same thing. I think you would imply that the public markets actually didn't understand that asset.

the point that he's making around we back operating businesses. I would I would sort of like it's a bit of hyperbole like can these dads become operating businesses? Absolutely. Like again not all of them are but but what I would say is um there's also a part of this which is I would sort of agree with Vichel's point which is you saw for lowest cost of capital and distribution. So, y if it's going to help your project get more attention uh and that's going to and you're in the business of of generating attention because you built a good product and so Fossil Island invests in a project that at some point has a uh you almost are wondering are you

there to support it and and maybe facilitate introductions to debt capital providers and lower cost of capital and solve for distribution possibly right I mean at the end of the day like it really just turtles all the way down. Like do you fundamentally believe we're building products in crypto that are valuable or pure pure speculation vaporware? And that's more of an existential question that you got to just answer for yourself. Um I do think that we a lot of times in crypto and just in traditional markets we jump to conclusions because price action does one thing and then we throw everything out of the water. It's like, oh, this is a scam. And and unfortunately, like there will come a time where a lot of

most of these DATs probably trade below NAV and we're all going to call them a scam. And I don't think it's a it's it's we've seen this time and time again in cycles. Like price action, unfortunately, is the main parameter by which people form an opinion. And it's really challenging. like we as much as the private markets have become very liquid like secondary markets on on boom and stripe and some of these companies are pretty robust um uh and they have very healthy tender offers like Kraken's raising a huge round like there's there's a healthy amount of secondary activity which is the more liquidity the better the price discovery to your point of each as soon as you go public it's it's on steroids right you just have tapped into

a river of flows that you're never going to yet. Um, but it is really hard to do price discovery on on everything really. I mean, crypto is trying to it's a challenging industry. So um I I I it's challenging because even even if it's not an operating business, can you make the argument that by like Athena's vehicle we have more distribution for for ENI and people want to have long stable coins and for Athena that is kind of their business, right? They're just you need to solve for distribution and the that kind of does that. So I mean I think Guy had a nuance take which I appreciate. Um, so like I would put it

back on Nick and if he wants to come in the show, I'd say, "Okay, if you have a portfolio company, they want to do a dad, would you support then and there?" And I almost I I think that's how you force him to probably say, "Yeah, you would back it if it's going to if it's going to improve the business way, shape, or form." As Athena, the amount of flows that have flowed into Athena because they're tapping into traditional markets are important and that's their core business is generating more fees as a result. Yeah. Let me I one one thought on this. I want to I want to push back on Rob on this um this uh sort of observation a little bit. So what I'm what I'm asserting is not that something like Boom just because it could be worth 5 billion on the market should go public.

Um because I think I I do think you run into like this the spack issues but like speaking of specs I think like Joby is an interesting example right Joby is now worth 14 billion uh after having spacked and having gotten crushed for a little bit. Um, what I'm asserting is I think there's a all of this, you know, whether you're talking about the DATs, whether you're talking about the debt markets with Sailor and bridging debt markets into buying Bitcoin or you're talking about VC markets, if you sort of step back for a second, these are all capital markets and certain parts of the capital markets understand certain things and they have mandates to to to generate returns in certain ways. And um and what I'm asserting is that the type of return that a VC is looking for and how they think about risk does not map to all

ideas. And so if there's a different part of the capital markets that actually is willing to under that underwrite that risk, then that's actually where you should be. And then your job as a VC is to recognize that. So like with with the boom case or the Joby case, I think what you have is a forward financing risk which is like you can't like if if you're like hey look you need $2 billion to make a VTOL thing and I don't know if I if I give you 100 I don't know where your next 300 comes from. If you can't get that next 300 you can't get the next billion and that's how VC works then you have a real risk and so the person that wants to give you 100 can't give you 100 because they're not sure if the next billion shows up.

Whereas if you do a spec, you get all billion at once. The the forward financing risk is now gone. And so the capital markets have like fixed that problem for you. And so all of a sudden, you don't actually have that risk anymore. And so I look at that more as like there are inefficiencies in the capital markets of what people's mandates are, what their constraints are, and where they can put money. And if you find a pocket of the capital markets that is aligned with what you need to do, then you as a as an investor should help your port co do it. And I think this is exactly right Santi in your point which is like well what if you have a business whose job it is to accept as much capital as possible and move that capital around and you can access the public markets which are 100x

deeper and bigger than the than the private markets on chain. Like don't you have an obligation as an investor to tell your port like yeah you should try to figure out how to get 100 more 100x more capital into your protocol because that's the purpose of your protocol is to have as much capital flowing through it as possible. Um and so I think I think saying like it's not the VC's job is a little too narrow. I I sort of agree with his statement which is like there's a segment of things where this makes a lot of sense and I think it's specifically when you have these like capital markets holes where a certain segment of the capital market just doesn't understand what you're doing but a different segment does then your job as the VC is to get your your port code over to that segment of the capital

markets that actually understands it. Yeah. Let me let me ask one more question on Dly like I I do agree like I think with basically most of what you said and I don't want to seem that I'm like you know disagreeing with like the broad strokes. No, no, dude. Channel channel your inner Steve. Let's go. But the idea that like listen, we have Porcos, too, right? Athena is one of our ports and you know, obviously they're out there in the market right now. We have others that are are trying to get out in the market right now. And so I broadly agree with that point, but I think it is a little bit simplistic to be say, okay, well, there just like one part of the capital market that, you know, is able to understand this asset better than the other one because there is a lot of call it misaligned

incentives, right? and the incentives of a lot of these sponsors is different than the the incentives of the people who are buying the equity and they're different than than the portfolio companies themselves and and the VCs themselves. And so I think at least being straightforward about what those misaligned incentives are is important. But from a year you're in my perspective and from what Nick Carter is saying's perspective, I totally agree that like our job is to be fidiciaries to our our investors, our LPs, right? And so we're going to go and do the best things possible to make sure that we are fidiciaries to those investors and that we're helping our portfolio companies of which you know every day I wake up to go to war with them right and this is also helping them as well. So I agree with all of that, but I think it is also a

little simplistic to say, well, just because, you know, some sponsor is willing to give you 100 million bucks and speculate on some warrant and then also take a 20% fee is willing to give you some money that it's a, you know, necessarily a part of the the market that understands this better is probably also like an incorrect statement. Mantle is pioneering the blockchain for banking, a bold new category combining traditional finance with the power of web 3. With UR, the world's first onchain money app, users can manage fiat and crypto side by side using a Swiss IBON account in euro, US dollar, Swiss Frank, and RMBB, all posted to the blockchain. Backed by the Mantle network, UR is the access layer that

unlocks a purpose-built vertical platform for onchain payments, trading, and asset protocols, including ME, TH, MI4, and functions FBTC. All economic activity within UR will be captured by Mantle Network to further drive value to MNT token holders. Follow Mantle on X at Mantle_official for more. I wanted to take a moment to tell you about Citria, the ZK rollup, expanding Bitcoin's utility without sacrificing its security. Using ZK technology, Citria enables Bitcoin to function as a fully programmable financial platform. Citria is optimistically verified by Bitcoin, offering the most secure and native way

to extend Bitcoin's utility to DeFi. With Citria, developers can build scalable payment systems, tap into Bitcoin's liquidity with financial applications, and build privacy systems. Citria is currently on testnet and approaching mainet. To follow their progress, click the link in the show notes or follow them on X at Citria_XYZ. As always, investments in blockchain technology involve risk, terms, and conditions apply. Let me ask one more question on dats and then we can move past. Um, we said this was not gonna be a dad only episode.

It is. It is. All right. I just recorded a prior episode with Ryan from Cryptobanter on the exact same thing with Aby and Tired of Two hours of dats. Maybe last question is like uh Avich, let's say you're right and uh you know we hit this like mega super cycle whatever and like Wall Street's got its teeth into crypto. Um there was there was a Vance tweet um or Vance said something along the lines of like uh a Vance I'll just read it. He said it should be obvious that no one will benefit more than from lower interest rates than the corporate entities who issue Pref debt converts to buy coins.

Wait actually that's wrong. The coins being bought will actually benefit more incredible technology. Basically what he's saying is uh do you buy the do you buy the hyperlquid vehicle or do you buy hype? And that hype will do way better than buying the hyperlquid vehicle. Um, what do you guys think about this? What I mean, what what does better? If you're an Empire listener and you are long Athena, are you like Athena? Do you buy do you buy ENA or do you buy the Athena treasury vehicle? That's an interesting question. I mean, I think it goes with what Rob was saying before. It's like what how do you think about it? If you think about it as a trade, then there are likely capital markets inefficiencies in the public markets where these things get mispriced and you can probably exploit

those. I think if you think about it as a like longhold, uh I think in most cases, you know, there are a lot of advantages to owning the underlying if you can, right? You can use it productively. I mean, that's that's the point of all this DeFi stuff, right? The the point of the DeFi stuff is you can own the thing and use it productively. Uh and you can get rewarded for being a participator in that network. So yeah, it sort of I think it depends on on are you talking about trading in and out of it or are you talking about I want to long hold the thing because I want that that thing to exist. I want that product to exist and I'm a user of that product. So I think it it could go either way actually.

It's it's really a time horizon point and like part of the cycling point, right? Because like if you're putting debt on these vehicles and you're taking on, you know, some sort of like convert that is like debt-like, right? like it's going to perform better at times when you're getting leverage and the premium's trading up and the token's trading well and it's going to perform worse on the downside on on the other side of the market, right? Sorry. Go ahead, Sante. You're going to get soft liquidated like you're going to get either massively diluted again. It is it is incredible amount of edge that you have if you have a two, three, four, five year horizon.

So like if you're bullish Bitcoin, okay, maybe go m go buy micro strategy. If you're bullish ETH or soul or Ripple or whatever flavor of asset, it is going to you're going to feel terrible if you find yourself in a position where that asset actually performed well and you did not because you bought a company. It just introduces a vector that if you don't need it, Yeah. why they cute because again, zoom out. You're investing because you think that you're trading in a lot of risk units for what you think is going to be a venture- like return. Why introduce complexity? You don't know the manager.

You don't know how that he's behaved through the cycle. You don't know the likely don't have the sophistication to go through and read the capital structure and all the different terms that they have. And so like there's like you can just go buy it at Coinbase. You likely are going to be able to buy the ETF. You're likely going to be able to buy it through JP Morgan. So like it just to me feels like there was a big disconnect here where I I go back to when I was at Parafi we were pitching to large you know funds and and they don't necessarily care if you stake and get the incremental 8% yield. They're like listen guys we think this is going to be a 10x like just don't blow it up. Just like hold it come back to me in 10

years. I don't want to hear about you just do your thing and like have a venture-like return. So if if you're approaching it like that, I would I would steer clear from these vehicles because it it just introduces a whole layer of complexity that I I don't think there's I think complexity is the right words. Auntie, I think if you're if you are relatively unsophisticated and you don't want to manage the complexity, probably don't deal don't touch this stuff. And if you're a much more sophisticated investor and you and you understand and you can actually do a look through, then maybe you should consider it. But I think most people are not sufficiently sophisticated to price these things properly and understand understand it.

And so you got to be really careful. I think as as a typical investor, I think it's probably something to steer clear of. I agree. Look what happens with with Sonnet, right? So Sonnet was the um the hype vehicle that came out, right? When that vehicle came out, it traded up to 18 bucks on day one, right? It is now today like 380 or something, right? And so it has come down a, you know, significant significant amount, right? you know, something like 80%. And it's come down at a time when hype has basically been flat, right? And the reason for that was because it was unsophisticated investors who wanted to play, you know, they thought there maybe be more of a premium. They didn't understand the warrant structure. They didn't

understand the dilution. They didn't understand how the uh how the capital structure was evolving over time. And they also didn't understand that they weren't actually buying hype right away. And that because they didn't know when it was getting funded. And so there to all of these points that we're making, there is a lot of sophistication in these vehicles that it seems like most people who are buying them once it's publicly traded do not understand. The pipe investors understand, the convert investors understand, but the people who are buying the common equity through their brokerage account, they haven't really understood. And that's the tough part about these vehicles to to everything that we're saying. Whereas in like yeah if you go on Coinbase and you buy some Bitcoin, you buy some ETH um you know you just you can sit and wait

and you know 10 years from now like you will probably be a lot richer than you were when you bought it right and so it is just a very very different type of vehicle. Yeah, you got to drop. I do have to drop. Uh I wish I could be here for the rest of this. Uh there's other good stuff to talk about. I appreciate you running along on this stuff. Thanks for joining. Good to see you Rob. Good to see you Santi. Thanks for coming. See you guys. [Music] All right, pivot. Pivot from the dat. I'm I'm datted out. Is this live stream, by the way? Is this our first live stream?

We're live, Santi. No, we're not live. Actually, I thought there was a live stream. God damn. No, you did your makeup. Not even live. Man that we can edit you in post. Don't worry. The only time we've done the live stream, you guys did not tell me it was live stream and we couldn't edit. I was like, dude, that was a spicy one, too. What was that about? I don't know. I don't remember but it was it was at the beginning that we Yeah. Yeah. Um what to discuss now? What to discuss now? Let's talk about um actually while we're recording J uh SEC just announced that they're rolling out something. So actually this is an interesting week because SEC so the SEC just announced that they're rolling out

uh a crypto team a crypto project crypto to help make America the crypto capital of the world. and specifically to do whatever is necessary to modernize the rules and technology to bring financial markets on chain. And yesterday the White House launched the crypto report. Um so I don't know Rob Rob if you had a did you have a chance to dig into the crypto report. So I haven't dug into it. I did read um Rebecca Reddig had a really good post about this where she kind of ran through like some of the main points. I think just super high level. It's just awesome that we're seeing I think it's 164 pages that has been written uh about crypto coming out of the administration and

there's stuff in here that like makes it very clear that they actually understand what's happening right it's not I think in the past we've seen some of these things come out and they've been you know very high level they haven't necessarily you know really dug into the issues of of what the administr the the um all of us seem to care about and what you know those in the industry care about this did that right? You know, one of the biggest, you know, pieces of discussion in here or is around like what does actually control mean and control of an an asset and when you write a smart contract and it's sitting in a liquidity pool or it's sitting in, you know, a protocol, does that make or does that mean that those protocol developers are actually

exercising some sort of control over that token? And then what does that mean for regulation? what does that mean for, you know, how these things should be treated in terms of, you know, whether they're, you know, um, commodities or or securities. And so that was really interesting to me and I think it's um, really topical. What I really also liked is that it actually went out of its way to say, hey, listen, the the regulator should start forming rules right now and doing, you know, some sort of governance right now, even as we wait for the legislature to come out with, you know, some sort of like market structure acts. And so that was actually probably the most interesting thing uh to me in in that report, but I don't know um Zante or Yaniano if you guys had anything else that that stood out to you.

Well, extending on the last point you said Rob, uh it was a buy from Helium that actually retweeted this, but it's this section of the report that that um calls out he tweeted because it calls out specifically deepen, but I'll read um you know the SEC should consider using its rulemaking and incentive uh authority under the Securities Act to advance the following initiatives. Um you know it talks about uh establish a fitforpurpose exemption uh from registration under section 5 for securities um involving digital assets establishing the safe harbor you talk about. The other one interesting is consider also an exemption for distributions of digital assets by decentralized physical infrastructure deepend providers and securities

transactions for the purposes of rewarding participation in deepend networks as well as distributions of certain NFT holdings. Um so that's pretty I mean you could have just never imagined this coming from the SEC um prior to November of last year. I would say this report had it launched in the prior administration. What kind of price action do you think we would have had if this came out last year? This time around last year. Yeah seriously. I mean like everything would be massive green candle. But the market sort of like now absorbed that and priced that in, I guess.

Yeah. I I thought this section was really good. The uh taxonomy on crypto tokens was was good. I mean, it's something that people have been asking for for for a while. So there's uh it's page 45 through 61 if anyone wants to take a read. But um yeah just yeah I mean they basically establish a taxonomy for for crypto tokens. So you have security tokens uh tokeniz yeah tokenized securities commodity tokens uh network tokens and I mean if if you have a token or you're investing in tokens it's it's worthwhile to read this. So um there's a fun little Easter egg here at the I think it's page 164 or something where they put uh like a hash uh into a a a message 165 there. Um the next page after this just shows you I think you

know this is kind of just a fun thing that they did but it shows you that they're paying attention and like they care about what is happening in the industry and you we just couldn't have imagined that level of attention to detail and you know focus on this industry you know even probably nine months ago to be honest and so um Uh I I get asked all the time like why is this different now like in the context of starting my own company and I said we started in version specifically October of last year November when Trump got elected I was in New York in the Trump hotel and I was putting like a great like play and start to my company and and it's just sort of one of those things where it it is a total 180 and it does matter inc like when we go talk to

a board about running a playbook it is no longer like this is a scam of an industry Indry, it is okay, we can actually we can actually do this and and that is like there's just so much pent up interest and people that have been sidelined that when they see this report you can actually send them this report and it's like you know even for fundraising uh you know a lot of these pension funds are like listen we there's this risk that you know the SEC is looking at this and and now you can this report does wonders for for everything and so it's it's it's almost one of those things where like this report is going to be circled around and it takes when's the next board meeting for all the large companies? Well, it's going to

be staggered over the next three six months. This report is going to be circulated and then maybe it shows up in the mark in in the tape, you know, in six months when when all this happens, right? So, it's one of these things where I think this is incredibly historic. Um, and in any other market, you know, this would have had a massive response from the market, but I guess we're getting used to the the US government being really pro crypto. So, I haven't read the the SEC thing, but because it just dropped like 10 minutes ago, but I'm gonna read David Hoffman. David said, "The speech from Paul Atkins is the most bullish thing I've ever read out of the SEC. Explicitly states we're going to move America's financial markets onchain."

So, we we'll have to read this. I can tell you for a fact that every single to to Sony's point, every single large company right now is doing something in around crypto or talking about it at the board level. At the very least, there are, this is a more of a stable coin point than just a crypto point, but there are RFPs out in the market right now by I know of at least 12 Fortune 100s who are actively looking for service providers to come in and help them uh implement some sort of crypto or stablecoin strategy. If you go and talk to a lot of the asset managers, you talk to the, you know, kind of companies that enable a lot of the market structure, every single one of

them today has had a working group or a team that was working on tokenization for the last few years that is now actively telling you they are expecting to roll out a product or some subset of products over the next six to 18 months. And this this acceleration of onchain finance is picking up pace at at a a speed that I could not have possibly imagined nine months ago. Should we talk about there? There's a couple really good announcements like uh JP Morgan now is going to allow you to buy crypto with a credit card. I was doing this back in the day. Uh I don't think they ever knew that. They didn't shut mine down my accounts. I did hear Oh, you were allowed to. I was doing this in 2017. Well, you were allowed to, but then like again, like not too long

ago, they had objections if you were sending money to and from Coinbase. Now, you see this, which is huge. So, I actually pulled this up. I pulled up the Google Trends. Look at this. I I thought this was interesting. Buy Bitcoin with credit card. So, you weren't allowed to do this in the 2021 market. No one got back into this game, but in 2017, there's probably like 20% of people I knew were buying Bitcoin on credit cards. Um, and look at the Google search volume for buy Bitcoin on credit card. So, it's clearly an in demand thing. I mean, it just skyrocketed. You got it for me. You were getting credit card points and you were buying Bitcoin.

It was great. It was great. Yeah. Great. Um, I mean, it's interesting. So, Coinbase and JP Morgan Chase join forces to make it even easier to access crypto. So, A, you get to use your you get you can transfer your Chase Ultimate Rewards to USDC. B, you can use credit cards to fund the Coinbase account. and C. Um, they have this new like direct bank uh banking integration. Um, so this also comes right before uh Jamie Diamond here. Let me see if I can pull this up because I I actually haven't listened to the full speech, but I saw Pete Rizzo or the Bitcoin historian said uh uh you never know what's real or what's not on this, but um I haven't watched the

full video, but it sounds like Jamie Diamond in this video today said, "We will accommodate Bitcoin. It's what the customer wants." Um well what I can tell you is uh they are now before they couldn't solicit they they couldn't uh proactively pitch um IBIT products to their clients. Uh now you're likely going to it's a change of tune. Um and and so now that's been also a blocker right if a client calls in and say hey I want to buy IBID or I want to get they would facilitate now now they can solicit. So they're so they're calling you saying would you like to buy some private?

They're reaching out like hey do you want to like hedge like further diversify your portfolio? I'm like I'm okay guys but like thank you very much. Thank you guys for the sound investment advice. I'd be hungry. Uh but uh that's huge, right? That that has been I don't know, Rob, do you know of other financial institutions like where that's the policy still like that they don't because a lot of the demand for the ETFs has come from like RAAS, right? Yeah. So, a lot of uh a lot of RAS, a lot of wealth managers, um a lot of pensions, endowments, um you know, I can tell you one of the biggest shopping wealth funds in the world who is uh usually quite conservative. Uh I learned today that they bought um billions of dollars of of actual like spot bitcoin,

not even iB um over the last three months and that was the first time they've ever bought an alternative asset like that. Um I from the financial institution perspective I we've started to see pretty much everybody can solicit but not some of the call it like more conservative guys still they're still working through that but what I can tell you is that like all of those conversations are happening at the board level now so they're you know you might think they're late but they think they're early because we finally got okay we got genius and we'll maybe get clarity or some version of clarity in the next couple of months and every a lot of these people saw clarity as the goalpost to then turn on the jets and start, you know, pushing these types of products, right? And so that is when

I think you really get, you know, kind of the jet fuel going and you'll see just an acceleration at a pace that is even quicker than what we're seeing right now. Yeah. Yeah. Anything else from this week that you guys found interesting? Um, there were the Robin Hood earnings if we want to touch that or we just referenced a tweet that was pretty good. Oh, hey, what do you guys think of Zora? Have you guys been following Zor at all? Are you going to pump us your bag? Are you going to show us your bag here? Yo, I have I have I I have Yanocoin. I I have $99 of Yancoin. We're doing So, we do our disclosures every uh every month.

And uh I'm here to keep you honest on on this. Well, we only have to disclose it if you own $5,000 of it. So, I don't actually have to disclose my my Yanocoin, of which I own $99 of. I I saw you and and Mike uh poking around there. What's Zora? Mike is Mike is like super bold up. I'd say it's the mo the the crypto thesis he is most interested in is by the way it's not Zora. It's not that it is Zora. It is that uh the create I would let me try to summarize Mike's thesis. It is that the creator economy is going to grow 100x let's call it over the next 10 years. And right now, the way that these people make money is just sponsorships and ads, which is probably the most

broken of all the ways to monetize. As someone who makes runs a business that does make money with sponsorships and ads, it's the it's the most broken of all the the revenue models. And um I think Mike's thesis is you have to enable uh capital markets around these creators. like these creators are becoming bigger and bigger and bigger and more important to society and uh you have to enable different forms of credit, different forms of like alignment like you saw Messi when he came to the US took an equity stake in the soccer team. Uh you saw an artist like a DJ I think take or musician take out a line of credit against their records. Like these are all kind of like early hints at what capital markets around creators should look like. So I

think I think I I don't think it's that Mike is like gigalong the Zora token or Zora product. I think it's that he's gigalong like really bullish on capital markets forming around creators I would say. So maybe listen I this is also true of tokenization. So not to be like you know a huge bear here but uh I've been hearing that thesis for like probably like you know eight years now. Um, and to be fair, I heard about, you know, tokenization of of, you know, traditional markets back in 2015 and and I was at Goldman when we invested in a thing called Axoni, which was a kind of a a high yield tokenization platform uh back then. And so it it did just take some time for call it the market

structure and the infrastructure of blockchains to get to a place and for people to get comfortable with the technology and for people to have clarity from from the government. It's not clear to me those same issues exist in like creator tokens and it's just my concern there is that there is a need for capital markets to your point Yano but it might just be that like this isn't the best way to provide capital markets for these creators right and you don't necessarily need crypto for for everything and so I would just put that out there a little bit because I I see these things and we've had so many of them before and they kind of pump and then they come back down and everybody tries to do this like retro like, oh, what went wrong? And like, we know what went wrong, right? It's it's not that

complicated. Yeah, that's a good uh astute observation, Rob. Look, we've had go listen to the podcast with Meltim around the creator economy, tokenization of everything. Like, it's again like that, it's going to happen. What I will tell you is conversations with large artists that have made it will not do it. To Taylor Swift not going to do it. She has bargaining power with Spotify and the platforms. uh the even even medium to reasonably successful artist like do you it forces the question you're opening up a whole can of worms when you introduce price into everything that you do and it works well when things pump it works terribly when the the market goes down

because then all of a sudden you have to respond to that and I think the financialization of everything likely will happen but I don't think it is appropriate for certain pockets. While I fundamentally agree with the thesis on paper that creator economy, the the value that these platforms are generating is mostly from user generated content. There is a lopsided unfair distribution of earnings that creators make, right? But that doesn't necessarily mean that financialization is the answer to that.

Now does do these experiments put pressure on these normal platforms with distribution to rejigger the economics maybe on the margin like maybe medium or maybe Substack uh change their model because they feel the pressure. I could see that happening. Um but yeah, I just don't um I don't know. If I were an artist with reasonable success, I I I wouldn't necessarily launch an NFT collection, maybe I would uh collectively as an artist industry, like go back to Spotify or go back to some of these, you know, event or event ticketing platforms and try to drive a hard bargain. But it's

it's hard. I I I don't know. I I price is financialization works both ways and it can be really detrimental to your reputation and your hard-earned work as an artist. Yeah. Yeah, I mean these things are clearly better and they're products for the people who haven't made it, right? Like they are not good for the big artists. They're good for the smaller and mid-size artists who are struggling with ways to monetize and to reach their customers, right? And to broaden that customer base, but also like those people have this core set of customers who will find them anywhere. And the you know if they end up doing a lot better like people will find them but then when things go badly right the people who are kind of on the edge and that price comes down like it is it's negative only right and there's like downside only once

you've already made it. So the incentive for all of these guys is actually to push for something like this when they're like a midsize you know artist then to get big and then to try to cut it off and get rid of it. That is the incentive for everybody. And so there it's kind of misaligned with, you know, the incentives of the actual token holder themselves or the their their, you know, fans. Yeah. Well, look at like Bele for instance, uh, you know, made his name on chain, so to speak, within a small community, and then he ended up selling in Sabes, and he's paying way higher fees, the Sabes. Um, but again, distribution wins. And if you have the user relationship just you command power and whether you want to accept that or not you know that's as an artist but uh you know

distribution you'll pay for distribution and and you pay for also the uh the stamp of approval from the institutions in in west broad or west uh you know like west Broadway or the best galleries like goian and s all but even in capital market. So, I went to I I uh like rang the closing bell with Luben and um uh Dankrad and the ESBET team on Wednesday and um it's so it's so funny because like New York Stock Exchange, I'm sure you guys have been, it's got the whole floor and stuff like that. Granted, not as many people show up, but NASDAQ NASDAQ has like not nothing. Like there's no it's just an it's just a it's just a room that's like set up as a prop. You would imagine like the Wall Street like chaos.

No, nothing. It's just it's all marketing and PR and it but it's such a good feeling for a company, right? To feel like you're ringing the bell and it's um I don't know. I actually think that there's something that crypto companies can learn from that like Coinbase or Kraken like they should like there's something about the physical experience. There's something about a Sabe's auction. There's something about ringing the bell at NASDAQ. Like you know when someone I don't know someone lists on Coinbase or probably I don't know there's too many listings but someone hits like 10 billion market cap. I don't know. Coinbase should like you should celebrate that in person or you drape the logo on the New York Stock Exchange.

There's something very special about that. So, I think that's a we can create better products, but it's hard to take away the value of the institutional stamp of approval. So, Rob, what content are we consuming? Um, I would say the I watched Happy Gilmore 2 over the over the weekend. So, as someone who was I I see Santi get very very upset about that. I can't watch it and I just I punched I can't watch a movie anymore. I don't know. My attention sp I I I will say I just it was you know very nostalgic for me. You know I think all of us are in that age group where we grew up with Abby Gilmore and uh the there was something like 70 cameos. There was a lot of you know professional golfers.

There was a lot of you know the Eminem was in it. He ends up getting like eaten by some alligators. Uh, and so I just I I it was nostalgic for me. Okay, it's I'm not going to say it's the best movie, but like you want to feel like a kid again, like every once in a while, like you know, it was it was fun. I've been I got to go watch and finish it. I I was the first 20 minutes and I was like, I'm over this. What do you uh I I mean, boring as it sounds, I'm rereading Charlie's Almanac. Um, really good. I've been tweeting about it. It It's just so good. It's one of those books that every time you can read it five times or every year and you'll piece and you'll take away a new

learning because you're in a different point in life or you're doing a different project. Uh it's called Poor Charlie's Almanac. A classic obviously classic. Honestly, it's such a good book and and there's just a lot of gems in there. So, I find myself reading that. Um so, yeah, that's really it for me. Nice. you um I listen to Sam Alman on Theo Von. You guys listen to Theo Von ever or you know Theo Von? He's like Yeah, I I don't listen to him either. Um I'd never I'd never like listen to a podcast Theo Von podcast, but he's blown up. I mean, he's like one of the biggest creators right now in at least in the US. And um and I saw Sam Alman on Theo Von, which is very like misaligned I

feel like. And uh I don't know, I thought it was an interesting episode. Um, what else? I'm re-watching 30 Rock. More importantly, I'm re-watching 30 Rock. By the way, are are you um are you following the whole Cluey thing? The the the how Yeah. Yeah. I've followed Cluey since like day one. But what's new? What's new with Cluey? No, just a founder and like like real time building it like how Oh, yeah. I think that's the future of building. I I actually like I we can hate on it. I don't I don't know how you feel about it, but okay, here here's here's an episode. So, My First Million did an episode called um the rise of the cinematic creator, and it talks about how like Gen Z or whatever the generation after Gen Z is, I forget what

that's called. Like, let's say like 18 to 22 year olds right now, they're so good with like short form video, like so so so good. And Santi, if you look at Cluey, what they're doing is they're ba it's a basically a reality TV show built around a startup. So they've got their SAS product that they're selling, but their marketing and distribution is building a reality TV show using short form video and in-house influencers, aka their own employees to market. They don't do any of the traditional marketing things. They're not spending ads. They're not paying Koss. It's just they've got employees are influencers.

And then they're all so good with short form video. So, uh, there was a line in my first million in this podcast where Sean, this guy Sean Pur said, um, you know, if you go to different countries, they speak different languages. You know, you go to America, they speak English. That you go to China, they're speaking Mandarin. The language of the internet is video. It is video, it is video, it is video. And you've got streaming and short form video. And so, I think companies are going to start need to start figuring how how they lean into that. So, that's my take away from Cle. They're so good at video. No. Yeah.

Yeah. I agree with that. Yeah. But but I will say like there's from a news perspective and you know what we talk about what people talk about in the podcast there's such a focus on you know just what is going viral what is you know making what is funny like why are people interested what type of content has existed there these companies still need to build great products right and what I think often ends up happening is for something like clearly who's selling a product both a retail product but I think they're also trying to sell an enterprise product B2B too. Yeah.

Yeah. B2B as well, right? Like if they don't build a good product just because they had a great form of distribution, they'll still die. Maybe they'll get somebody to Andreason to give them 15 million bucks and then they'll just die in the next round, but like they will they will still die. And so when you ask me what I think about this, I think it's it's fun and it's great if they're specifically reaching the audience that they want to sell the product to. It is not clear to me that the Clearly guys are actually reaching the audience that they want to sell the product to. instead they're reaching the audience that will make them the most famous, but uh it's not I'm not I'm not sure that there's actually correlation there between the people that they're actually selling to. And so what what I feel is

that this is great if you're if you're in the news and you know I think there's the old saying that like you know uh there's no such thing as bad attention. I don't know if I necessarily agree with that, but you know let's see what happens as they actually go and like build a product to see what their sales look like. Yeah, I agree with that. you know, uh, here I I actually have a really good episode I listened to which I forgot about is um, invest like the best did one with um, Ramin Naimi who is the bu he's building Abstract which is I I actually didn't know him or Abstract before this. They're a seed they're a seed fund. Um, yeah.

And they've got actually they almost have two billion under management actually already as a seed fund. and just really impressive human being. Like he's got some actually the first like 30 minutes are all about the art markets and uh he's like a collects art as well. Young guy is like 34 35 but that was a really good episode. So go listen to the you know I'm going to pull out a founders podcast go I know you hate now this guy don't you? No I I like it. I I just listened to a founders episode on um the guy who created the glasses company. Yeah. Yeah. Yeah. The Lord guy. He actually lives in Monaco. But yeah, um um no, go listen to the one of David Gagosian. Uh if you want to understand everything in crypto, everything we've

talked about in this podcast about attention and memeing things into existence and the signaling, he is masterful in how he basically took and and like uh dominated the art market and and created like he would single-handedly make artists famous. And if you think the NFT market um craze was go study that and then you'll understand who did it best and who's the absolute goat. It's a great episode. So yeah. Yeah. Rob, welcome to the official. Is this are we going to d this the official one because vual kind of got in the way and like should how do we feel about this being like the number one like July 31st 2025?

I like it. Right. That's I think it's perfect one. We if we just hit all-time high and then we go down only from here. Yeah, Rob marks the blame me. Definitely blame me if that happens. Market activity. Yeah. All right, everyone. Thanks for listening. Um I was gonna say we have a good episode on Monday. I don't know what's coming. What's on Oh, we have a great actually we're um a really interesting episode on Galaxy. Um sitting down with uh Duncan who is I forget his Twitter handle. Flood I think it is. um really good episode on Galaxy stock um and like the bull case, the bare case for Galaxy. So listening on Monday. Thanks for listening. Enjoy the weekend. See you folks.

All right, take care guys. [Music]