Retail Vs Institutions | Who's Right About This Market?

Transcript

[Music] welcome bankless nation to the AI rollup where we stay up to speed with the emerging trends and developments in the AI crypto space i'm David Hoffman here with my co-host Ajaz how's your week week's been good David um I I'm kind of living a paradox of my life at the moment like on on one side I'm like taken aback by the rate of innovation in AI like literally it's becoming a weekly thing where a new model drops or a new app that I use just kind of blows my mind um it's incredible how consistent it's been yeah yeah it it's it's crazy consistent but then on the other hand uh markets are crushed that includes cryp like macro markets so

stock markets as well as crypto markets and within crypto especially the AI coins right so it seems like for now we're at like the whim of wider macro markets or in other words whatever Trump says or whatever the Federal Reserve says it's funny whilst we're recording this there is currently the FMC meeting happening so we'll see where the market turns by the end of this episode um and the other paradox I'm living is uh all the suits and government people that kind of like crypto was birthed on kind of opposing or doing the opposite of is more bullish on crypto now than the actual crypto people so it's a super weird state of affairs that I'm living yeah yeah yeah i think this has been the big cloud that has overhung everyone in

crypto and even not just in crypto but in markets broadly i actually heard a really good take that I'm starting to really integrate into my knowledge about like why this is the case like why does retail feel bad and institutions feel good about crypto when it's usually the complete opposite and even not just not just that but in addition to that if you ask general consumers or general the general population about their opinion of crypto it's terrible it's like yeah like that's a terrible industry it's our our brand publicly is terrible but then nonetheless institutions are like "Oh yeah we're totally like we're going all in we're going all in right now." And then also our own retail our own crypto consumers are like "Oh yeah I'm actually

just bearish crypto right now." I think what's going on is that like money is hard right now donald Trump is like doing whatever he's doing to like literally cause a recession and we've we're having a high interest rate environment sustained for two and a half years now crypto has never existed in a high interest rate environment and what I'm starting to understand is like that has fueled like this native DGEN casino speculation retail dopamine side of crypto for almost all of its existence and the longer this high interest rate environment goes on the more we are like actually purging the casino out of our system and that is like a detox it actually feels bad we're in like we are

in rehab for like all the all the DJs are in rehab they're all trying to go they're all going to like gambling rehab and that's also why institutions are like I feel good about crypto right now is because that they are also learning that this is now safe foundation to build on yeah yeah i mean u the example I said to a friend the other day was the lights are now on at the nightclub you can you can look around you can see everyone it's like oh my god you know what what what the hell are we doing here it's 3:00 a.m it's time to go home and like you know sort our lives out um but yeah man it is crazy i do think that this is however temporary pain uh for a long-term gain and that sounds you know whatever maybe like contrarian or or

whatever but because a lot of people are like calling for like a Yeah well yeah or cope it could also be cope but I I I think that I I just don't see a way that the that Trump's just going to let his presidency just like run into shambles for like his his remaining term i feel like he's going to have some kind of upswing right he's a business guy right so uh and the reason why I mentioned that now on like this AI podcast is a lot of these markets are just attuned to whatever the wider macro markets do whatever the stock markets do uh and we're going to get into like you know how this is affecting our AI coins and and where you know some of the uh potential for investing might lie yeah no I think that's right while while markets are doing like shortterm acute

dislocations because of this chaotic leadership that we have who's for some reason interested in a recession and like we've done episode on big bank list as to like what the strategy is with that go listen to our most recent Jim Biano uh conversation to kind of get a glimpse as to what's going on over there nonetheless like AI innovation is just full steam ahead so everything is just so crazy so nuts and the bet the bet that we are making is like the way that AI the innovation of AI gets expressed in value as an investor gets expressed and gets monetized is going to be disproportionately on crypto tokens as in like if you are interested in investing and growing wealth and gaining access to wealth opportunities to AI you

want AI exposure sure you can invest in the stock market sure there's like you know Google Facebook uh not OpenAI but like all all the other like AI gargantrans out there but then also there's going to be a like explosion of1 to$100 million market cap AI related project startups that are like it's worth paying attention to and that's what we're trying to cover here yep yep agreed um but actually speaking of that uh you know AI rate of innovation explosion um David do you remember last week uh on the episode you uh threatened to fire me and replace me with yeah an AI podcaster well that time that time might be today um th this new company called uh Hideera

3 or I think it's called their product is Character 3 Audio um created this this demo or like released this demo of this girl who's like you know talking about like you know kind of different rates of innovation of tech and then I realized oh [ __ ] that's AI um so she she is not real and to be honest if you're like looking for it there are definitely some obvious tells and gives especially the voice being the most obvious one but it's kind of crazy how like I was watching demos of you know fake podcasters or fake you know image to um video generation tools before like about a year ago and they looked terrible David um but the fact that this is like improved so quickly means that you know

I might not be the best looking person on this on this podcast anymore you know say she's prettier than you yeah dude yeah it's a it's a it's a shame but it's been a good run so you know I'm appreciative of it um what one crazy thing by the way is this female podcaster that you're watching right now was generated from a single image okay so they whoever made this had an image probably of an actual real human and they uploaded this no no no an AI generated human like you they went on Mid Journey and they said "Hey yeah could you create a female podcaster that has a neon red light in the background?" And they created that image and then fed it into this product

Hideera and it generated this like you know her moving around speaking into the mic all that kind of stuff it's pretty insane yeah look at this demo not not Hideera the blockchain hedra Labs hedra Labs yeah this demo is pretty cool you you can definitely get the tells where the eye movements and the way that they move their head is not how a human would do it but it's definitely like you know you know the idea of the uncanny valley yeah like so the uncanny valley is like there's this weird valley of space where like things that are attempting to look like humans they're they're a little bit too close where they're they're not

quite human but they're really close and so it's eerie it's uncanny and to me this is like actually we're coming out of the uncanny valley we are no longer going into the uncanny valley like like we're thoroughly progressed through the candy valley we're not yet out there it's you can still identify as AI but it's it's becoming pretty good david can you give us an example of where the uncanny valley existed before AI or was it is this just an AI thing the the first time I think I really saw uh the uncanny valley was with robots so there's like robots out there with like synthetic rubber skin and you look at it and you just know it's not real but like it's real enough that it tricks your brain to like you know fire on its like

you know facial recognition neurons even though you know that it's a robot um and we are this is the early stages of the uncanny valley we are definitely on the other side of the uncanny valley right now okay but in major news this week David um Google released um their new uh AI model with a really cool editing feature which I actually think is going to change media generation kind of like forever so it's called Gemini 2.0 Flash uh with native image generation and editing and the main thing that's getting people excited is the character consistency of images so what I mean by that is let's say you generated an image or you uploaded an image of like a person or an animal or a dog or whatever you can now say uh can you change the

color of this dog's fur to golden uh and it'll do it and it looks like crazily realistic right um and so it's also able to like add text to images really easily which was previously like a really you you might be surprised but like a really tough feature for an LLM to to add and it kind of reminds me of the old midjourney product days um but there's an array of like really cool examples that put this uh to use David like like really effective e economic changing things like uh lying to your boss for example right so there's this tweet here where uh you know she's like late for work or whatever so she takes a selfie at home and then she says "Show a selfie

of this woman on the 14th Street platform of the NT train at New York giving a thumbs up with teams of frustrated MTA workers standing in the background servicing the tracks overhead a small LED screen displays the date March 13th uh 2025." She's making a fake time stamp in the real world yeah yeah so she makes like it's kind of like a creative example to kind of demonstrate the text editing and all that kind of stuff um no more trips to Walmart David you can now basically take any image of yourself and say "Hey can you make a passport photo version of that?" Um and you know you can kind of like sort that out so like all these like little

gimmicky type situations that you can do i think like uh the bankless graphic designer tested it out on you didn't they yeah okay so this is actually the first time I ran into this the bankless graphic designer i I don't think I've run into anyone who uses AI more than Gordon so the what you on the top right corner this photo right here is just a normal actual snapshot of me on a podcast great looking guy don't really need to do any AI to it uh but then it really is helpful when like you make me do this openmouth YouTube cringe like thumbnail expression and so he just he can turn me into a YouTube cringe thumbnail version of myself what do you think David do you think that looks like

you on the bottom well there's obviously some stuff that's going wrong but no the answer is that when do I ever do this i don't know could you could you give us a reition i'm not going i'm not moving on okay moving on to more serious edits um or or what this tool can do you can now create like really cool gameplay with this thing right so the example that's used here is okay they upload an image of like some kind of anime looking character and then it prompts and says hey can you put this character in a game um where the image needs to be kind of like a typical screenshot of gameplay and then the next screenshot that you see is you know this character character in the game yeah in the game right and

so you might be thinking okay who cares this is just like a still version of whatever but then you know you can see the sequence of prompts that they make which is like okay can you make the character move forward and then you literally see the character taking a step and then you could say can you move the character until it gets to like the building with the you know where the building is on the left side of of the image and and so you can kind of like live action roleplay a bunch of these games interesting yeah and I thought that that was like super cool cuz like imagine if you put this image David into that model that we just showed about that podcaster moving around and talking right suddenly you go from like AI generated image to moving video and maybe even a live footage game in like a

couple of seconds which is just freaking insane another thing that I thought was pretty cool is uh I I think like product demos or mockups are completely dead in terms of like human design you can now just kind of photography right photography specifically yeah yeah well well I mean like so here what we what we're looking at right now is uh what starts off initially as a model uh posing and I don't know if that model was also AI generated that's you know where things can get a little confusing and then someone uploaded just a still stock image of like this jacket you know like outerear jacket um which you know has no association with the model and says "Can you just let this model wear this jacket please?" And literally the

next image is super realistic of this model wearing the jacket you know there's shadowing on it it it l it's you know it it's now unzipped versus in the original stock image where it was zipped up so just some really cool tweaks that we can see on the consumer side of things with AI with this new tool that I think is just like super super cool i think for anyone who's listening to this on the podcast they're probably like "Yeah like I've already like assume I've seen some versions of this i've already known that this capacity this capability is here it's kind of hard to uh articulate how good these images look how realistic that these images look."

Yeah you got to be watching this on the video the the v the visual quality of these things are like we are especially this one since it's not a video and I can just this just a still image still images are now basically at parody with like real real pictures I would say and that is what this one looks like well well I I'd actually disagree with your first point saying that you know or agreeing with people that like you know they're they were already around I would say they were around but they were in to your to use your term the uncanny valley they just weren't realistic midjourney was generating things that I didn't ask for and I had six thumbs for some reason do you know what I mean so I'd say the rate of improvement is pretty nuts you may have

already heard about Infinex infinex has in my opinion the nicest crosschain swap and bridge feature that you will find anywhere it is called Swidge Swap and Bridge and we're going to show you what it looks like first we're going to log into my Infinex account with a pass key now there's no seed phrases in Infinex this was a one-click setup with biometric pass keys but in addition to that my Infinex account is fully non-custodial so bam I just logged in it was two clicks and I'm already into my Infinex account so let's go make a switch i'm going to go switch my USDC that is on base and I'm going to buy Barachchain which is a completely different chain uh so we're going to switch this i'm going to press that button and then Infinex is going to execute this order this crosschain order for me and now it is done but actually

I'm not really feeling bearish anymore so I'm going to go from Barra uh to Penguins i'm going to buy a Penguin on Salana so I'm going from the Barra chain to Salana see no transaction signing no gas to worry about you just switch across whatever chain that you want with Infinex that was so easy go check out Infinex and try your first switch today in the wild west of DeFi stability and innovation are everything which is why you should check out FRA Finance the protocol revolutionizing stable coins DeFi and Rolex at the core of FRA Finance is FRAUSD which is backed by BlackRock's institutional bidd frack designed FRAUSD for best-in-class yields across DeFi T bills and carry trade returns allinone just head to fra.com then stake it to earn some of the best yields in DeFi want even more bridge USD over to the Fractal layer 2 for the same

yield plus Fractal points and explore Fractal's diverse layer 2 ecosystem with protocols like Curve Convex and more all rewarding early adopters fra isn't just a protocol it's a digital nation powered by the FXS token and governed by its global community acquire FXS throughfra.com or your go-to decks stake it and help shape FRA Nation's future ready to join the forefront of DeFi visitfra.com now to start earning with FRAUSD and staked FRAUSD and for bankless listeners you can use fra.com/r/bankless when bridging to Fraal for exclusive Fraal perks and boosted rewards introducing Uni Chain built for DeFi and powered by Uniswap uni Chain is the fast decentralized layer 2 designed to tackle blockchain speed and cost challenges with this

mainet now live you can enjoy transactions that up to 95% cheaper than the ETH layer 1 all while benefiting from an impressive 1second block time that will be getting even faster very soon uni Chain is the first layer 2 to launch as a stage 1 rollup on day one that means it comes with a fully functional permissionless proof system from the start increasing transparency and further decentralizing the chain more than 80 apps are joining the Uni Chain community including Coinbase Circle Lido Morpho and Uniswap you'll be able to bridge swap borrow and lend and launch new assets and more from day one built by Uniswap Labs the team behind the protocol that's processed over 2.75 trillion in alltime volume with zero hacks uni Chain truly enhances DeFi experiences with faster cheaper and seamless transactions even across chains

and soon the Uni Chain validation network will allow anyone to run a node and earn by securing the network visit uniswap.org and swap on uni chain today all right so China is now also back again like it's been 3 weeks of China's back David so I think China's just like here and kind of like staying this time the Google of China BYU releases a model um that is now officially better than GPT 4.5 which is OpenAI's latest model and 50% cheaper than Deepseek R1 so which was the cheap one deepse the cheap one yeah it was the cheap one already i think it like reached like I don't know 10% of OpenAI's then leading models cost and now we've got another model coming

out from the same country but a different team that is 50% cheaper than the cheap model so I I I I just my takeaway here is that I think it completely obliterates OpenAI's costs china is competing on price extremely aggressively but also innovation typically China's only competed on like you know copycat kind of models but now they're kind of like paving a new path forward and I just think OpenAI's moat is no more David i don't know what you think but like this whole idea of like commoditizing these different AI models is now here yeah as a I if I was given the opportunity to invest in any of these companies who have like these frontier models I would actually not invest because it seems so cutthroat and

they are just sucking up money and in just materially commoditizing all of their competitors products there's so many of these there's like 10 wait which which company wouldn't you invest in the and none of them none of them okay yeah they're all well they're because they're all producing frontier models and they're like under they're all undercutting their competitors so So what you're saying is you you you don't have a clear insight into what the leading model is so therefore you wouldn't necessarily right now invest in a particular company yes that's right that that that is definitely right and like and then it still begs the question like okay maybe maybe you know God comes and whispers in my ear and they tell me like oh it's actually um it's actually X AI Elon Musk's AI or like or it's BU

they they actually win win the race they make the best model i actually still don't think I feel good about investing in like the winner that I would already know because all of them are commoditizing each other they're all like just cutting through each other's moes i don't understand how any of these companies are supposed to capture any value when there's 12 very strong like competitive models out there well well it's a good question then so let's take that the next step right where do you think they'd capture value David i I have my thoughts but I'm curious what you think i that's kind of why I'm much more into these like you know I think why there's going to be like one million

different opportunities out there that are between$1 million and $100 million market cap stuff like smaller individualled like one two four team person team projects that are much smaller and then like I I do see the benefit of like even though for some reason like Meta has apparently like dropped the ball and they're like pretty far behind in the race at least they have like business opportunities and proprietary data with Instagram and Facebook and WhatsApp that they could actually like leverage but man I actually just don't know how these like almost trillion dollar like model companies grow any sort of like justify any of their market caps yeah yeah so I I think my view on it is kind of similar

uh I think what you're getting at there with like distribution and data is it's the app layer basically it's whatever the product or service layer ends up becoming that uses these AI models will like be the most valuable mode right and therefore I think whatever models are being used whether it's kind of like proprietary or not like you said is commoditized at that layer so it's it's whatever apps gets created whatever distribution happens um there's actually a really interesting analogy to this David so I I was reading something the other day where it was kind of uh talking about um the uh price history of uh oil right back in the day when it was just not a thing and it was like a new brand new commodity there were monopolies that were forming like one or

two major I forgot the name of the major one right they were charging $5 a barrel right and then obviously oil refineries became like a major big thing and it became you know global worldwide which drove the cost of that very same oil down right so what would you expect you'd expect that monopoly probably lost its kind of like status to an extent or it wasn't really the most valuable thing right like to use your kind of like words earlier you probably wouldn't invest in any of these AI model companies but what ended up happening was that same company still remained that top monopoly the reason why is they had built out the leading distribution for their entire oil supply okay yeah so

everyone basically relied on them and they had economies of scale in many different ways that were separate or removed from the cost of oil per gallon so I think where I thought you were going to go with that which I think also probably happened is like well when when like monopolies and economies of scale emerged around the oil industry the next big thing that happened was the combustion engine probably got a ton of innovation and a ton of just like manufacturing so there was a lot more combustion engines out there so that means like oil was being consumed a lot more and that's where it actually became even though that there were like a lot of competing businesses demand was so incredibly high yeah yeah regardless but but like if we use that example which you're describing Jevon's paradox right

you you would expect that the monopoly wouldn't have any kind of a moat who cares if the combustion engine was created why would I use um you know that leading monopoly if I could just get the same price per gallon on another one it's because they built up this entire like distribution network and I think that's exactly what we're going to see play out with AI models they're all going to be doing the same thing but whoever has the best service layer app layer which currently like looks to be like the tech monopolies will will still win in my opinion yeah cuz that's not OpenAI what What does the tech layer for these AI models even look like because like can't you just bump out a old model and bump and like plug in a new model as they update like why is the app layer

beholden to the model that it's built on top of it's not right it's not yeah i mean like the reason why you I think the the value gets found in the app layer not at the model layer yeah I think that's where the majority of the money is going to I I think we're going to fast track um basically web 2 infrastructure trends right and we're going to go straight to like the Instagrams or the new Facebooks um being created out of thin air and to your point David I think it's going to take like a few people versus like many hundreds to create and they're all going to be like between a hundred to $200 million market cap or whatever that might be yeah interesting okay what yeah what What does the app layer for these models even look like though like what what are the apps because right now the

way that AI has impacted my life is I use chatbt to access knowledge and intelligence just have have intelligence at my fingertips that's like 90% of it and then I do some fun very non-serious meme joking image generation and that's like 10% yeah so I think it's going to materialize in a few ways number one is uh you know how you use chat GPT to just get a bunch of information right now um you're going to be able to soon use it to do a bunch of stuff for you as well this might be like hey can you just like I I've got to go to a doctor's appointment in the morning can you just handle all like my work

emails and stuff and maybe like work out on like a a framework of this like product document that I need to kind of create here's some of the context and here's like access to like my Google doc folder or whatever that might be where I've like written down some thoughts and it would start like automating a bunch of your like work or daily habit type stuff for you right isn't that just an assistant that's turning an LLM into an assistant is that what the app layer is yeah well yeah well I think agents are inevitably going to end up being your assistant to start off with right they're going to end up enhancing whatever you do David right that's what like the mobile phone did that's what computers did it it basically made you kind of robotic in a way it made you a superhuman kind of person and I think

that's what these um AI models are going to end up doing that's what the app player in my opinion is going to look like it's going to be agents it's you're not going to be interacting with websites and mobile apps and you're not going to be downloading like oh like should I download this editing software whatever no just like ask the agent to do it and it'll figure out what tool um or program to use and with that Jaws let's get into the crypto side of uh this conversation because of course uh we're going to have to talk about all these crypto tokens because that's where I'm going to do most my actual investing in this space before we get there though a message from our friends and sponsors over at Ronin ronin used to be a permissioned blockchain i don't know if most of you guys knew that but they all

the games and apps on Ronin were curated by the Ronin team they have since taken down their walls they are now fully permissionless so you can join the Ronin movement and experience the ecosystem with the Ronin wallet which is tailored for gaming trading and exploring Ronin uh bankless.cc/ronin_wallet there is a link in the show notes okay and Jaws uh prices prices are down ether is above 2K for the first time in like 10 days or something but other than that uh prices price is not great um give me give me your takes i I mean David like normally when Ether is outperforming the entire market that's typically a very big nuisance um yeah it's it's been brutal um last week we didn't really get much time to

cover the crypto stuff so we want to kind of like prioritize it on on this week's episode so let's take a look at the overall market right um what we're looking at right now is Cookie funds dashboard which tracks a lot of the AI agent tokens specifically um as you can see we're sitting at about $6.1 billion market cap total market cap of all AI agent tokens now this is super painful to look at given that this was at like what 25 to 30 billion at its peak David i thought I remember 18 at the peak but I could be wrong go i mean that would make me feel much better if it's down just like 3x but um I I I think it did peak a lot higher than that um and another thing we've noticed is that agents in general just aren't being

created as much anymore now this is like a double-edged sword because I think on the one hand um you know we were definitely getting high on our own supply in a way like you know agents were being pushed out there were these crazy use cases being pitched and none of it really actually came to like you know real life you know they weren't really like impacting our ways in any kind of material way um so to see a reduction in that and a refocusing of teams or certain teams on creating actual valuable agents super important but I mean look at this David uh one thing I've noticed that you pointed out earlier actually is it seems like the Ethereum ecosystem of agents is now higher than Salana and the reason in terms of market cap and that's really

interesting because Salana typically held the lead for the majority of AI agents um life cycle actually mhm yeah salana is coming in at $1.8 a billion dollars in market cap of crypto agents and Ethereum is over over two billion bass not even on the chart uh 1.5 if you have you have to look into it but Bass is at 1.5 billion to Salana's 1.8 and then a very distant fourth BNB chain at three4ers of $1 billion but uh Ethereum is what what makes up this $2 billion market cap of Ethereum that's got to be like 50% virtuals right yeah it is mainly virtuals they they kind of like put like a bunch of like the other ones on there like uh Fcoin and Banker i think Fcoin is Faulcoin or Solano or

base i fcoin is on Salana on Salano right i I think it's largely virtuals that is making up a ton of that but um uh you know we've seen surging in prices from a bunch virtual is on base there's this Fetch what's Fetch AI because that's coming in at 1.4 billion and I've not heard of that so Fetcher AI is an OG Ethereum uh AI project like we're talking like 2017 Ocean Protocol like the original did Do you remember these David extremely vaguely yeah so what Fetch did was they merged with Ocean Protocol and one other to create a super intelligence token or something like that but they didn't do anything with their old token and for some reason it

is at like the highest FTV it's ever been um still like uh the of the new one fetch fetch yeah fetch AI fetch AI that's it yeah it's not even showing up on coin f yeah oh okay artificial super intelligence alliance uh wow that is an old chart all right I'm regret even asking uh moving on yeah moving on anyway so what I wanted to point out is Okay right so there's been a lot of heat being given towards the crypto AI sector specifically agents David because it's all crashed and everyone's like well what do you mean like was none of this ever like made of anything and that's part true right because it got hyped up in typical crypto fashion everyone likes

to hyper gamble on random ideas and [ __ ] but also this is part of um a broader market dump a broader market draw down it's not just crypto AI um everything is getting crushed including like stocks Like if you pull up like the S&P 500 chart you'll see that everything you know it's had like some of its lowest days um for like the last 10 years right and this comes amidst the US government cracking down on their debt uh issues via Trump's tariffs which has just generally caused a lot of fear in the stock market right and if the stock market it's very rare that crypto outperforms the stock market if or inversely correlates with the stock market rather right um another thing I

want to say is that crypto always dumps the hardest especially alts um and especially the newest alts and crypto AI definitely falls into that last bucket where you know it's it's new it's largely unproven and so it's most subject to huge speculative moves in price action right um couple that with the fact that it is the most polarizing sector in terms of sentiment you know a lot of people love it a lot of people also hate it and you end up with the craziest fluctuations in kind of like market volume and price low market caps and volumes especially tend to get a lot uh easier to to manipulate in terms of price movement right if you imagine if it's like a small market cap it's easy to kind of like push that price up or

down if liquidity is like low and case in point um I I I'd say the token that best represented this this week David is ARC fun we've spoken about this team a lot before their token has been absolutely getting hammered right so we've spoken about ARC in the series um they focus on a a lot of product and progress for making contributions towards the AI agent space but despite this uh progress there ARC token seems to have been one of the tokens that have been hit the hardest and this this tweet they were the one it was holding on for a really long time it had toforming everything yeah yeah and then it it got hit the hardest and this tweet kind of explains what what's actually going on right a potential theory being

that Wintermute uh a very well-known market maker in crypto uh is manipulating the price action driving prices lower while shorting the token on an exchange so it like makes profit in that way it's it's it's hugely extractive um and despite all of this Yeah go ahead uh it is when whenever that there is a vibrant community about a token I always hear that there is some large entity out there some Goliath out there that is manipulating the price of their token down how do we actually know that that is a big claim how do we actually know this is true yeah so if you if you look at like what this guy claims um he he's basically tracking a bunch of wallets that are trading like the majority of volume for this token

ARC every day and it's been labeled and pegged and and this has been for a while as winter meet wallets but I thought I'd test this theory right i was like "Okay well I'm just reading this on like Twitter like could this be true?" So I ran a bunch of transactions uh on chain on Salana like buying and selling Arc and uh all my transactions David you know how typically it's like oh it's like spread across a number of different transactions cuz you know that's how dexes typically work it was one transaction field and it was sold to Wintermute or bought from Wintermute so it is literally just trading through the Wintermute wallet at this point they are market making the entire thing it's pretty nuts what is the significance of this why is this a big deal what does

that mean the big deal is um you are now at the whim of whatever's intentions are with that token they are holding a bunch of that token and obviously market makers tend to not really lose they they make the most out of fees and also doing alternative trades if they see where market certain uh where certain token price is going up or down right and so the the suggestion here is wintermute and I don't know if this has ever been proven but they've been accused a number of different times in previous tokens in previous cycles that they do the opposite of where they drive the price down for a particular token or up so if they're driving it down they're shorting it if they're driving it up they're longing it or whatever that might be take profit and then like you know take

the opposite side of that trade so they're playing on a lot of human sentiment the reason why they can do this with ARC uh I'm guessing versus any other token is because it's at a small enough market cap that they can like you know manipulate it and it's not too low a market cap that it's not worth their time basically yeah okay so it's not that they're suppressing the price because they are trying to buy low because they're bullish on ARC they are just suppressing the price because they have a short on it is that the claim yeah yeah yeah yeah that's the claim yeah and it's it's not an uncommon i'm surprised you haven't heard of this this theory beforehand no I' i've heard of this theory and like that market makers suppress the price i hear this all the time but I just don't know how to verify

it for myself and it also feels like very easy scapegoating of some like nebulous third party like it's a very easy scapegoat to me and I don't know how to verify it and so I've just kind of discounted all of these so what for sure I I think another proof point to look at is um Zerbro as well do you remember that token um which saw very similar price action and I think there were similar claims coming up so yeah you're right it could all completely be cope but I think there's a number of onchain transactions and tools that you can use that tracks that it's actually Wintermute wallets that are you know just pump faking a bunch of these different tokens and they're all fitting under a certain market cap range that allow them to do it

okay and so what's the takeaway here i'm still kind of confused as to like what I should know about that yeah so so the the takeaway here is is it's not specifically about ARC but it's specifically about the crypto AI tokens specifically the fact that they are low market cap that is leading to the most volatility that's coming through and I'm not saying it's all winter mute stuff i'm just saying it is the most prone to volatility and these tokens are taking a hammering despite all of these different things so where do I think this is all going well I think at this point it's fair to say David that this sector has kind of like been blown up with hype at its peak you had chat bots valued at like billion dollar plus valuations but I also think that this is just classic crypto which is largely just sentiment

driven versus fundamentals we saw that you know mostly when Trump launched his memecoin and sent it to $80 billion market cap only to watch it fall off a cliff right the circus is now kind of like cooling off people are tired of pretending 99% of tokens are worth their market cap you know memecoin mania is dead and the market now is currently very much dependent on macro which means like the wider economy and it's such a boring answer but I do think it's true David once we see signs of the economy stocks and BTC that is back on the rise we'll start to see a resurgence in alts uh when this happens I have no idea but in the meantime we are still seeing pockets of outperformance actually if you pull up um this thread from Sammy's recap today I don't know if you you have

access to it David um you'll see that you know he highlights a bunch of uh web 2 AI stuff which is amazing that we tend to do in these episodes as well that is just kind of like fascinating but then he talks about you know pockets of out performance in BNB chain right so CZ has been pretty vocal about a number of different AI coins that have launched on there I think um uh I'm trying to remember the name of the project that launched through Binance's launchpad um that basically like created like character AI but for crypto so basically you could interact with like these different AI personalities of your favorite celebrities and interact with it my shells my shell my shell yeah yeah my shell exactly so they launched through BNB and they like had a really successful launch and their tokens been

you know kind of like been going up and being bought and doing really well in that Asian market um you you you've got like uh these new protocols like hey anonai with integration through Venice protocol uh Venus rather protocol on BMBB chain um and then there's a few other things like we spoke about last week banker and Clanker still seeing a number of different like uh success in terms of like fee generation and stuff which caused their token to to pump a bunch and then like retrace a bit but again because the broader market is kind of like having this really tough moment we're not seeing like sustained pumps right um what's interesting for me David is where I'm seeing the most activity for trading and volume are two particular categories and it's two that

we've spoken about a lot on this show before which is um token generation agents which is like your banker or your clanker type situations or DeFi abstraction agents if you like and a lot of the core um platform plays for agents that we're seeing so that could be Bitensor um with a bunch of their agent subnets that could be um uh AI6Z with their new platform that they're going to launch soon or virtual announcing like stuff with ACP which is their agent commerce protocol which we're going to talk about later so uh we're still kind of like playing around the same sectors but very specific tokens only yeah I think um maybe you can correct me if I'm wrong clanker which is the token

deployment bought on Farcaster and Banker which is I think the same thing but on Twitter for for Twitter kind of same same ideas but just different ecosystems these are the only two coins that I think have been materially holding on to like really solid market caps correct yeah like Banker is up 27% on the week it's been bouncing around between like uh maybe a $15 million market cap to $40 million market cap wow these are really low market caps and and then Clanker is at $66 million market cap but at least it's held on like Clanker is towards some of its its higher prices uh and these are the only charts that don't look completely ugly

or unless there's any others that that uh No no you pretty much called it out i mean like we should take a look at Grock actually david can you pull up the Grock chart the Grock the debt relief bot token the debt relief token that's right that one's on the on the ground yeah coming in at a $7 million valuation but but Grock I think has half a million dollars of this token in trading fees 700k 700k you know so So So maybe fundamentals don't matter anymore David or maybe they never mattered you know maybe it was all sentiment i definitely think they mattered i I a lot of this stuff like the virtuals price I think is um the virtual price of course is the virtual is the uh launchpad on base uh I

think I'm willing to bet that that is almost one to one correlated with the fees going through the virtuals ecosystem uh my god look at that chart dude that is insane okay so in like September of 2024 Virtuals was at a $50 million market cap oh yeah uh and then in January 1st it was at a call it $5 billion market cap and now we are at a $500 million market cap i I think this all relates to fees like fees are driving if you are not a layer one asset or a blockchain asset i think you are deni like your price is denominated by how much fees you have yep i think that's a really good point um and my take is fees were generated in the wrong

way for a lot of these agent protocols they were just focused on like agent creation which in my opinion is not going to make it similar way that like you're saying like all these AI models you're not going to invest in any of them because like they all do the same thing that's what all these agent platforms do i think it'll it'll come down to like whether these apps are like really good or not right whether these agents actually do something i I think that that point about like I'm scared to in I would be scared to invest in any LLM model is the same point about being scared to invest in any agent framework whether it's virtuals AI6Z ARC like I all think they all kind of collapse towards the same product i think so i think so actually like speaking of virtual should we dig into like what the

latest is with them David i think we haven't spoken about them for a while um okay so let's get kind of like the ugly stuff out of the way or the obvious stuff out of the way which is virtual's activity and revenue has pretty much fallen off a cliff here right if you pull up this zero yeah basically zero so if you pull up I I read I saw a tweet the other day by the way which was like uh virtuals generated 500 bucks in uh like fee generation from agent creation that day right um so the point here is like this activity or the original notion of what made AI agents in crypto successful like creating agents is no more and the only future that any of this stuff is going to happen is an actual like utility that comes from

these agents right well this latest update from Jansen which who is a co-founder of virtuals we've had him on the show before um talks about a major update which might suggest that they are focusing more on you know the quality of these agents specifically their autonomous nature and how multi-agent they are now if you remember a few weeks back David we highlighted something they launched called ACP or the agent commerce protocol right and the idea of this product was to enable real agents to talk and transact with each other autonomously but to be honest I'm I'm kind of tired of the talk of products like what can it actually do well this is what Jansen's speaking about here he he um he describes two phases that will

start rolling out soon phase one is allowing clusters of these agents to run autonomously for four weeks so for a month and the goal by the end of the four weeks is that these agents must have produced something of net value to the economy that is greater than the sum uh that is greater than each of these um agents individually so there's two ideas that he's pitching number one is an autonomous hedge fund so imagine a number of agents that are going to be uh taking in people's money analyzing markets analyzing market opportunities investing in tokens and their goal is to outperform the general broader market and outperform you as a singular investor right so they're creating a an autonomous hedge fund basically made of

different agents and we've heard of this theory before but it'll be cool to actually see these agents trade real money the second is a media cluster so it's some something along the lines of a marketing or creation studio which will design and create viral videos which will be linked to like different social media apps and I think what I'm most pumped about um here is something that he mentions right at the end of this thread which is he talks about the levels of intelligence of these agents david essentially he calls most agents that exist in crypto today one to level one to two so they're kind of like slot bots that don't really do anything autonomous but for his new product for these new like autonomous hedge funds he'll only allow level three which is basically like they have to be

autonomous they need to be self-governing and they need to actually be like earning money or making money um this could be really bullish for virtuals right but again it comes down to the execution it comes down to the actual live product but they seem to be taking this pretty seriously David like to kick off this new kind of like phase for them they've announced a $100,000 hackathon where they're inviting people to also come along and build some of the best agents right um uh or or businesses um and then another thing that I think is is really interesting on the virtual side is they're um officially updating their fee split so they allocate not just swap fees to creators but 50% of those swap fees goes to the agent itself so this is cool but like in my opinion

uh I don't know if we should be concerned that the trading volumes of these tokens have dropped off a cliff right so my question is like what is the best proxy measure of like how successful these agents might actually be in the long term you know Zello is transitioning from a mobile first EVM compatible layer 1 blockchain to a high performance Ethereum layer 2 built on OP stack with IEN DA and one block finality all happening soon with a hard fork with over 600 million total transactions 12 million weekly transactions and 750,000 daily active users CO's meteoric rise would place it among one of the top layer 2 built for the real world and optimized for fast lowcost global payments as the home of the stable coins CO hosts 13 native stable coins across seven different currencies including native USDT on Opera Mini Pay and with

over 4 million users in Africa alone in November stable coin volumes hit $6.8 billion made for seamless onchain FX trading plus users can pay gas with the ERC20 tokens like USDT and USDC and send crypto to phone numbers in seconds but why should you care about Cello's transition to a layer 2 layer 2's unify Ethereum l1's fragmented by becoming a layer 2 cello leads the way for other EVM compatible layer 1 to follow follow Cello on X and witness the great CO happening where Cello cuts its inflation in half as it enters its layer 2 era and continuing its environmental leadership imagine a world where your day-to-day banking runs on a blockchain that's exactly what Mantle is building powered by a $4 billion treasury and poised to become the largest sustainable onchain

financial hub as part of their 2025 expansion Mantle is introducing three new core innovation pillars that bridge traditional finance with decentralized technology first is their enhanced index fund aiming for $1 billion in AUMUM by Q1 it provides optimized exposure to Bitcoin E Salana and USC complete with built-in yield opportunities next Mantle Banking promises to revolutionize global value transfer through seamless blockchain powered banking services bridging crypto into your daily life finally Mantle X blends AI with DeFi to deliver an intelligent user-friendly experience for everyone and the best part is that this is all in addition to their already launched products like Mantle Network ME and FBTC ready to step into the future of finance follow Mantle onx at mantle_official and join the

onchain revolution today the Arbitum portal is your one-stop hub to entering the Ethereum ecosystem with over 800 apps Arbitum offers something for everyone dive into the epicenter of DeFi where advanced trading lending and staking platforms are redefining how we interact with money explore Arbitum's rapidly growing gaming hub from immersed role playing games fast-paced fantasy MMOs to casual luck battle mobile games move assets effortlessly between chains and access the ecosystem with ease via Arbitum's expansive network of bridges and enrich step into Arbitum's flourishing NFT and creator space where artists collectors and social converge and support your favorite streamers all on chain find new and trending apps and learn how to earn rewards across the

Arbitum ecosystem with limited time campaigns from your favorite projects empower your future with Arbitum visit portal.arbatum.io to find out what's next on your web3 journey [Music] okay so we're still figuring out how to get AI agents to actually um grow money accumulate fees uh our favorite AI XPTt agent who's still still somewhat popular on crypto Twitter uh he's actually learned a way to lose money uh this week new feature update new new feature update from AIXT loses money uh what happened here okay so um Sammy kind of breaks it down really well in his uh post here um there's a recent event that

happened literally I think yesterday or two days ago where someone was able to trick AIXBT into tipping them $100,000 worth of ETH david we have a we have a prompt engineering on Twitter uh to give them $100,000 oh yeah yeah they did this by remotely accessing um its secure terminal right so you know the terminal so it was a straight hack okay it wasn't just a Yeah I would I would des well so the way that the the the unique part here was they queued up their own tweets to be a priority for the agent to respond to so they basically manipulated the that its terminal so that it would respond to its tweets and then the hacker was like "Okay uh now I'm going to tweet to the agent to tell it to tip me or to prompt to give it me to

recognize my tweet as like a good bit of advice of which it should tip um and then decided to tip it uh $100,000 from its Simulacum AI wallet now this is a product actually that we mentioned before on the show David uh way back when uh agents exploded and do you remember like Bankless the official Twitter account got tipped money or I think it was you as well David that was that was through this simulacrome wallet right and it's important to note that the wallet itself didn't get hacked it was the agent well it operated as intended yeah yeah correct the agent was just tricked to give a tip yeah exactly so you know it's important to know that

this doesn't mean the agents own wallet or keys were compromised but more so the intermediary service provided by the simulacum um wallet was right which was the agent's terminal essentially um so yeah like you know first time that this agent has lost like you know money of a significant amount yeah I think before we see agents that hold material amount of capital we are going to see like commerce agents more than we are going to see investing agents i don't I would not trust an AI agent holding any any material amount of my money i would I would I'm happy for like uh Bankerbot to make transactions on my behalf yeah but I guess if they have access if they have

permission to my banker wallet my privy wallet then like they do hold that money i'm I'm don't I just don't feel great about agents holding my money okay well how about agents trading your money David boy do I have a pitch for you coming up next oh no okay okay so there's this new subnet which launched on Bitenser um for those of you who don't have context Betensa is like an AI protocol that has a bunch of DAPs that are built on it by different teams and they incentivize these teams to build the best version of their app right um and so this trading subnet got announced um which is on their Betensa network and this new app was announced called Subnet 53 which focuses on AI powered trading

strategies for crypto options so an option for example might be a long or short option call puts you know trap by kind of things which then moved on to like crypto instruments and it's been live since November and it's deployed over 140 plus trading strategies for these options David and it's earned yes emphasis on the word earned and not lost $22 million in cumulative trading profits since it was live and And since November since November David since November yeah i don't know if you're impressed or not impressed by that i'm extremely impressed by that a bot made like our our Billy Betts bot who's

making bets on Poly Market i looked at it right before we did this episode he's down something like $20,000 this bot is up $22 million trading profits yep yep been live since November and it's awesome in my opinion because to date most AI crypto trading apps or trading agents don't actually trade real money they just paper trade right um what's more is they're actually profitable right so proving that the model works but why this is cool is Subnet 53 team care a lot about having skin in the game apparently so much so that they've forced the miners that are competing to propose like the best trading strategies uh for their subnet to have a large amount of active funds actually being

traded on that strategy right so you know these miners that are submitting strategies have to have skin in the game in order to you know back their strategy or or like for that subnet or creator to to you know use that strategy for their agent or for their subnet uh the subnet has also earned $6 million in Tao rewards and Tao being the native token of Betensa for delivering a really good product which emphasizes the design of Betensa is kind of somewhat working right it's incentivizing the best teams in AI to build actual useful crypto AI apps and I think this is like a trend that I've noticed for Betensor in general David um I think they got a lot of flak when they first launched because you know they they were giving something crazy like $20 million worth of tow

incentives per month uh to random different teams and then they went through a major upgrade which we spoke about on this show a few weeks ago called dynamic tow and the result of that is the quality of these teams are going up which might make Tao a really good buy now you know one thing about this trading pot that made $22 million in cumulative trading profits like my first question is okay how how do I get how do I get $22 million of trading profits and I don't think that this model scales very well because if everyone is allowed to invest in this bot then the alpha goes away like we we just lose the arbitrage and so this this seems like this $22 million is like proprietary and not open because if you

have if you have a secret trading strategy the last thing that you do is you open source that secret who said it was open source it is completely proprietary well I want to get how do I get rich off of this so you go onto this subnets's website and you can deploy with them yeah and I give them my capital yeah exactly but then I'm going to have to start like sharing the alpha with like other people uh you mean sharing access to this product well the way I think about this is like imagine you invest in like a really good hedge fund or a fund and they make you know annual or quarterly or monthly returns for you if you like it I don't know do you tell your friends about it David maybe you don't i might because I'm a good guy but you know you

know I'm just saying if everyone invests in the same agent doing the same strategy then that $22 million spreads out between like say there's $10 billion of TVL because everyone's so hyped on this bot that then then it spreads out over time yes but then the alpha then becomes okay if we know that the majority of the market's money is going in a certain direction it stops becoming the alpha and you can start going a new agent to invest in the new new alpha okay that's why we're terrible traders David that's why we're always So does this just is this like the first indication that there are the future of trading will be agents not humans yes like humans are just going to get out

game well well actually I I would take a step back from that and say cuz like you could slap an agent on top of this you could slap multiple agents on top of this right but what I think is really being proven here is crypto incentives being used to design a trading mechanism okay that's what's happening right okay so like this is a team that was like "Hey I have a design for uh trading creating a hedge fund basically onchain but I don't know which strategies to use and I'm not an expert but I will pay you tower rewards if you give me good strategies that you already know." And you might be uh a a hedge fund in the centralized world that trades a bunch of

crypto options you could be a single solo DGEN trader that also does this from his mom's basement could be any of you as long as your strategy is good enough and as long as you've proven that you're making returns we'll use your strategy and we'll try it over a couple weeks period and if it works and it earns ourselves money good if you're bad you get knocked out and replaced by someone else with a better strategy and the only reason why people are doing this is because they get paid in rewards okay okay so okay cool all right i'm into it yeah you're into it would you give this money would you give this agent your money still no okay fair enough but I'm but I'm happy that other people are making money for sure for sure all right hot off the press David

um a company or team called Plurales Research um just announced their $7.6 million seed round led by some pretty big u you know heavyweights Union Square Ventures Coin Fund um and their goal here is to make open- source AI a reality and that honestly sounds super vague and I don't like that description so I kind of want to give my own spin on it um the TLDDR of this team is they're building out a decentralized network that is focused on training foundational AI models and monetizing them and it'll leverage things like compute and data right now if this concept sounds familiar to everyone listening it's because on previous episodes we've

mentioned teams like News Research and Prime Intellect who are doing something similar but Plurales has a very important differentiator which makes them stand out in my opinion now when someone trains a model on their network the model itself is split across the different computers that are providing compute to train it this is known as something called model parallelism parallelism my god I can't say that word parallelism parallelism thank you David um but um something which has actually long been thought of as unsolvable everyone before this has been using or training models in a decentralized fashion via something called data parallelism

parallelism which means you need to have a full copy of the model and its weights on every computer that's providing compute right so you can kind of like it's it's open source it's design is you know copyable basically right to your point just now David you're like why on earth would I put money into this hedge fund thing if like the design is not proprietary well what this network or team has cracked is they've made it proprietary so why they they found a way to shard up the model so that you no one can steal it and run with it and commoditize it exactly while still leveraging open- source decentralized networks to train it right so why it's incredibly powerful is now as a model

creator you can leverage the power of decentralized compute to train their model without open sourcing the model weights which is the secret source which means that you're effectively training proprietary models in an open source manner so you know people some people listening to this might say well why on earth would anyone provide their compute then right and the answer is the people who the compute exactly train yeah receive part ownership of it and therefore any kind of money spent to access the model and by the way the only way you can access the models that are trained on this network is to pay for it via the network is split I love this exactly it's split between Amazing amazing it's split between owners um and they end monetizing the model right so

you get all the benefits of proprietary secret source models whilst leveraging open source mechanisms to train and own them right so this is a really innovative new idea i'm bullish on the idea David but like to be honest it all comes down to the team and whether they can execute it right um I looked into the backgrounds of this team uh they're actually pretty cracked so they all have I would imagine that this is very frontier technology yeah well well thankfully their backgrounds demonstrate that they they pretty much all have PhDs in AI and ML research they've all authored leading research papers on training models and they all used to work at the AI team at Amazon but they left to pioneer their own way of training models which led to you know

Plurales this company um so you know if anyone needs a reminder I think that the necessity for having a decentralized network that trains AI models for us is because the current setup only allows for rich companies like Microsoft or Google to train their own for tens of millions of dollars but now let's say David woke up tomorrow and had the most pioneering idea for a new uh AI LLM that could replace EAZ as his co-host um he but he didn't have tens of millions of dollars to train that model he could just come onto this network theoretically and you know split up ownership in return for training that model and you know he gets paid for it okay so we opened up this podcast with me talking about how I wouldn't want to invest in any model AI lab because of

how it's just a commodity and they're all just going to commoditize each other and they're just going to eat each other's lunch and nothing's going to be left and then you you give me the perfect answer to that all the way at the other end of the podcast you saved that's the best bit of information in this podcast that I think that we did all this whole hour i got to make sure you're listening David for sure wow this is really cool i I love this because it's like it's giving it that you're giving this model the value of the model to this open source network that open source network owns is the operator of that model no one else can have it not one single person can have it but it's open ownership since it's a decentralized protocol i'm assuming it's it's something like a blockchain or some

like decentralized network where owner ownership is also comes in the form of a token in theory and and then it also just solves the earlier problem I talked about that's I think that's great that's really cool yeah super cool well EJ well done on leaving the best bit of alpha at the very end of the podcast for for all the people who made it to the very end uh really appreciate you guiding us through all the alpha this week my man no worries dude bank Nation you guys know the deal crypto is risky crypto AI even riskier you can lose what you put in but nonetheless we are headed west into the frontier it's not for everyone but we are glad you're with us on the bank's journey thanks a lot