Ryan Watkins on the 2025 crypto investment thesis

Transcript

GM good morning welcome to the milk Road show The Daily crypto show that's the Phil Jackson to your Michael Jordan here to guide you to Glory I'm your host Jay Hamilton and today we're joined by Ryan Watkins Ryan is the co-founder of syncrasy capital now this is a hedge fund making high conviction concentrated investments in you guessed it crypto so today what do you think we're going to talk about we're going to talk about some of Ryan's highest conviction bets right now we're talk about salana talk about hype if we have time we'll talk about Celestia 2 I hope we have time but there's just so much to talk about with Ryan before we jump in guys we got a surprise for you starting tomorrow every Saturday we are going to have a new piece of content coming out at 3M

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because I want to set a little bit of context of where we are right now so on January 21st you tweeted anyone hoping for a return to the easy days where you can blindly buy anything and expect to make money over time is fooling themselves then on February 1 you also tweeted BTC at 102 most alts near or below summer 2024 lows select assets like soul and hypee outperforming year to date but clearly pointing out things are a little bit different and then you also retweeted a tweet from Matt Hogan we've had on the show a few times where he said the traditional four-year cycle is over in crypto is this cycle

different yes it is and this isn't to say that we won't have Cycles anymore uh we will for sure have Cycles I think it's like it's a natural future of financial markets but uh what drives returns uh for assets in in uh in crypto I think will be a little bit different so to impact this you know really the the key theme so far from the lows in 2022 until now has been asset return dispersion and Bitcoin dominance rising and I think on the the latter point on bitcoin dominance Rising well Bitcoin very clearly kicked off this this uh this this entire bull market with the

ETF and that just had a very clear like structural bid all these institutions filing in and that was like the big cat to kick this off meanwhile a lot of the you know almost everything else I still think sentiment wise was dealing with the overhang of last cycle in the FTX and there's this General sense that none of this did anything it's worthless and to be fair there was also a lot of straints on the re side that prevented any of this technology from being used or FR of these products from even growing so I think unsurprisingly you've seen a lot of dispersion and this is also I think a sign of the asset class maturing and this is actually a good

thing because I don't think that you know it's a it's productive use of capital for everything to go up indiscriminately because then that way quality teams and Builders aren't being rewarded for doing anything and it's sending the wrong signals that you can just come in here and you can just build some nonsense get funded and then cash out a couple years later when this all stuff all gets liquid and that's not to happen anymore and maybe one final point I'll add to what's creating this dispersion is that and this was like one of the original thes thesis for for syncrasy when we first launched in 2022 is that we are starting to see the early signs of winners emerging in select sectors and that was not the case

early on in in Prior cycles and what this creates is a is a situation where you know the incremental dollar that's coming into asset class is less likely to want to bid the shiny new object when there's already leaders that you can clearly see are starting to reach escape velocity and you can see it in the metrics right it's no longer this argument about oh this system is technologically Superior oh like I like this founder better uh those are like qualitative points of views this is like you can make like quantitative Arguments for why this stuff is actually starting to run away with it and that's good I think it's actually better this way when you know people are investing not just

speculating okay this is a great leadin to you wrote a article recently called The Tale of Two markets uh I'm going to link to it in the show notes everybody should go read this article it's fantastic it is basically where you break down your hedge funds investment thesis for 2025 the way you see crypto right now can you explain this thesis to us and I know you're kind of touching on it with what you're saying but let's dive deeper into it yeah uh you know I I think as I was uh you know writing I was writing like a a letter um recently and I just was thinking about how sentiment was so

split on on Twitter and then among people I'm talking to people have done very well this cycle people done very poorly people who are very optimistic thinking about the institutionalization of the sasset class then people who are very pessimistic looking at all their stuff that's happening on chain just with meme coins and I'm just reminded of you know when I'm in high school and I read the book uh you know Tale of Two Cities and there's that opening quote from it that says it's the best of times it's the worst of times and it's just really uh contrasting these two different these two different cities and I thought the same thing is happening in the crypto economy where if you look at Bitcoin and maybe some select assets it really does feel like the best of times right like this is the the dream that

people been thinking about for a very long time that you'd have like a sovereign bid coming into Bitcoin you'd have the institutionalization asset class everyone in the world getting off zero regulation like this is this is like the Super Bowl for Bitcoin and then on the flip side you have like I mean just that absolute like nihilistic Casino of people just gambling their their life savings like losing money people extracting wealth from NASA class and that just doesn't seem great at all so what is like the through line of all this because you know once again it's like depending on which one you look at that can completely shange your views and the way that I think about it

is that uh these are really just two sides of the the same point and it's a it's a slightly uh cont like Nuance View and it can come off as just me being you know blindly accelerationist when you talk about how like all the speculation is good but for me when I zoom out on what are we doing in the what is like the grand project of the crypto economy uh it is about uh basically creating a new system of property rights for the world and getting and allowing people to to access this new this new system and this

is important for me because this is the foundation of wealth creation and there's like countless I think you know economic literature that shows this I even have like a chart in there that shows a very strong correlation between property rights and GDP per capita I think this is very important and you know what what in practice do blockchains do because you know there's all different use case we talk about stable coins dpin Bitcoin whatever I think what Bitcoin what blockchains really do is they just enable you to transact and enforce contracts without intermediaries right and that that's like very subtle bit it's very powerful and that is actually the foundation for everything we're doing in crypto right even things that may not seem like it like deepen like deepen in a way you're

just put you're creating new assets and putting it on chain right you're like financializing all these different you physical and digital resources and allowing people to to trade them on chain which I think is very very fascinating um so that is actually the core thing that we're doing here right enabling people to to create assets to transact with those assets then enforce these agreements on chain or in the cloud then what ends up happening when you put this power into the hands of anyone on Earth you get a lot of crazy stuff happening and I I I make an analogy to the you know the the the do com boom because I guess it's the you know other very relevant uh technological bubble we've

had in the internet age and in a way what's happening I think I put out like a recent tweet about this it's almost like a a DOT fund boom where you just have because it's it's now so cheap to create assets on a blockchain and trade them people are just creating I mean any asset you can imagine and this ranges from a lot of stuff that's like really ridiculous this outright scam just nonsense I mean there's like like tens of thousands of these being cre every day to actually projects that will will actually make a lasting impact on the industry long term and I think for me like the the purpose of you know this whole explosion of assets while it may

seem frivolous on the surface is that we're just getting more assets on chain and we're getting more people on chain and so long as directionally that is what is happening I think we're going to succeed as an asset class because we just need to get more wall to people's hands we need to get more wealth on chain and then as we do that of course there'll be boom and bust but over time the slope of it will be that there's more people doing this over time and once we have more assets on chain and more people using it we can find Productive ways for them to to use all this stuff and I think that's what's exciting to me you know when we think about what's going on underneath the the surface of all this right like all these assets being created and

speculation you start to see that you know what even though it may seem so ridiculous and so speculative and mostly worthless you actually are seeing uh winners emerging underneath the surface that are powering all of this new Financial activity and it is uh important because we are stress testing these systems before we actually have really high value Financial use cases like I'm tell when it when it when it's time for us to actually living our daily lives on a block blockchain we want to make sure that this stuff works the last thing you want to do is you want to pay for a hospital bill and you can't pay for it because there's you know Salon is

down that'd be that'd be nuts but we won't have that issue if we just keep pushing these systems to their limits uh before we end up doing that and then the second thing too is that we're just like I said we're just getting more users on chain we're getting more assets on chain and that should have a compounding effect as well and I think maybe that's where people are are are kind of missing you know what's happening here as like not being totally nihilistic is that there is like infrastructure that is maturing that is investable that is actually producing real cash flows underneath the surface and you can actually own this and underwrite this as a fundamental investor and that's really what the the thesis is here like that's

this the through line through it all is that this whole idea that speculative and fundamental crypto are totally separate is not quite true and if you just were to dig underneath the surface of all this speculation you can actually find what may actually be you know the next fangs of the crypto economy so that's I think very high level uh you know what the the thesis is about what the essay is about yes so I think the and and I completely agree with what you're saying I mean we're we're in a fascinating space where there is great things being built that are capturing institutional level

interest and investment and then there is a million shitcoins being built that are capturing media attention and getting more attention than some of the great things that are being built so it's very confusing it's very hard to invest in this space there is an overwhelming amount of information there's a lot of bad information there's it makes it very tough what I love about and I want to continue down path of this thesis that you have for 2025 is what I love about the way you put it is that there's a way to invest in both sides there's a way to capture this speculative what you might call Financial nihilism that might be a bit extreme but it is true to a certain extent uh the gambling casino of crypto and then there's also a way to capture

the fundamentals how do you do that who how do you get both yeah so our sense is you just need to look at what people are are doing on chain and being honest about it I I I have the I have the general sense that many people who've been here for a long time are very ideological or ideologically motivated and that's great I think we do need people that just want to do the right thing and are here for the right reasons and keep the big picture in in mind while everyone is going through this uh period of uh speculation but what sometimes that creates is this

sense that uh what what it sometimes create is people forcing what they think should happen onto the market when that's not actually what's happening so what do it mean tangibly if you look what's driving demand for Block St right now it is just trading it's it's trading and it's everything that revolves around trading and if you look at all of the highest revenue generating applications on blockchain they all Center on trading it's these you know telegram Bots it's the trading front ends it's uh it's the trading protocols right like the the the order book exchanges

amm it's uh it's stable coins which people use to onboard onto blockchains in the first place and then start trading with them and this is what is driving the usage both by in terms of the revenue that's collected and also in terms of gas consumption it's just all centered around around trading so what does this mean it means that you basically if you're investing fundamentally you just want to be long the volumes right like that that is the bet that you're making here over the next year if you think that we're going to continue on in this speculative period And there's going to be more users and more wealth that comes on chain is you just want to bet on volumes and that way you don't actually need to

invest in any of these meme coins right because that is becoming I think an increasingly challenging game to bet on them individually because just so many there's like an explosion of them but you can just collect like a like you're getting a take rate on all that right and the good thing about this too is that whatever is getting the most usage right now right like the the chains the exchanges the trading interfaces Etc the stable coins those are probably the ones that are most likely to be used long term and win long term and maybe one reference I'll make is I'm just going back to Def summer uh D summer I know people remember it as this like idealized uh you know period where you

know we were doing real things and that is true like we basically went from you know the expectation heading into 2020 after the 2018 bar Market was that like literally none of this worked it was all ideas it was all white papers so the fact that now had working protocols was a big aha moment even if they were very clunky and that was what people started to repic like the expectation that oh wow you know what this stuff actually works like maybe like how big could this actually get but def5 summer was also period of rampid speculation as well I mean the entire uh Paradigm was built around this uh liquidity boot shopping mechanism which is liquidity mining or yield

farming and that was very dis gamified as well and it almost is not too dissimilar from from meme coins it's like a different form factor of speculation but the effect of it is that by in the beginning of 2020 I believe there was maybe3 billion dollar in assets on chain like in in terms of like locked in smart contracts and then even by the end of the bull market or the or at the bottom of the bare Market in 2022 right this is after the peak we still had around a hundred billion dollars in assets and smart contracts right so this stuff actually did like this this this Capital these users they're they're stickier than many people would

believe and that's when I go back to the the point about making up meme points here and all the trading that people are doing on chain is that like once again people can say oh all this is not sustainable it's going to be a boom bus cycle but my intuition is that it will be very similar to def5 summer when this all uh you know cools off at the end there's going to be a lot more users on chain and be a lot more assets on chain and that's good it's like I said like the purpose of this is we just want to get as many people as possible to get their wealth on chain and start participating in this crypto economy hey guys quick break from the episode I get asked a lot what credit card I use to spend my crypto dollars if you're like

me you got money on chain and you want to spend some of it for everyday stuff you know you want to buy coffee you want to buy flights that sort of thing well I use the crypto credit card and I recommend you guys check it out too I like it because there's no annual fees you get cash back in crypto you get a bunch of perks and benefits like Spotify subscription for free Netflix subscription for free and a bunch more and also you get lounge access if you're a traveler like me great to have lnge access as you go so if you want a great credit card to spend your on chain dollars check out the crypto.com card today link is in the show notes now let's get back to the show and hear more from Ryan Watkins completely completely agree and it's it's where it is very difficult

when you have the one of the main issues that I see is this and I see this because of you know being in media and producing content every day if I put a very bullish piece of content out there about a token even if it's not a fundamental token we will get more views because that's what people want people want the speculation want the 100x return right and there's this expectation that has been created within this asset class that that is what you're here for oh like the the idea of I interviewed Johnny Matthews who's is a macro guy super macro the other day and he did 26%

last year and he was [ __ ] pumped about that like he was like you know and he's he's a trafi guy so in his world 26% return is amazing and I was like Johnny if I tell our audience that on our show like I don't even want to say that number because our audience will stop listening to you because they'll be like nah that's not what I'm here for right so there is a there is a misaligned expectation the the the wild thing to me though is that it's so I mean I don't know about you but it feels like it's so easy to do well in crypto it's so just if you just keep it simple as what as your thesis presents but so many people get in their own way in that process and I I want to

I want to get to talking about some of the the assets and the specific tokens that you really like but before we get there I just want to bring up this chart from your recent report where you talk about how winners are emerging because this really shows to me how easy it could be to invest here you've got you've got this great chart where you talk about the different categories of crypto where winners are really emerging can you just walk us through this yeah so basically what we wanted to show here is how uh you know I mentioned how underneath the surface there is uh you know infrastructure you know exchanges trading interfaces the

underlying blockchains that are doing very well fundamentally and not is doing well fundamentally but they're starting to consolidate market share over time so you can start to see these becoming uh big Winners and yeah that's basically what the chart is depicting it's it's showing you like kind of like how market share is trending and how like some of these top top players in these different sectors are are now basically just dominating the market so yeah that's that's the that's really all all showing here and it's wild like top three blockchains 93% of the market top three stable coins 93% of the market top three lenders 85% of the market top five dexes 60% so dexes

are still a little bit more distributed but wow like that just okay so here's the natural question that I have is we keep seeing l1's launch I'm I'm not going to name any names but every day there's especially in bull cycles like we're in right now and we're going to see even more coming is is there opportunity they get a lot of attention right like new L1 launches get so much attention is there still opport or is have have ethereum and salana captured most of the market and they're just breaking out and Bitcoin obviously but from a smart contract perspective is it is it a done deal in your mind I know you don't have a crystal ball and it's

difficult to predict the future yeah I I think there's opportunity but the the window is closing and maybe some historical context here is important why is everyone so obsessed with l1s I think it goes back to ethereum ethereum started off as a proof of work cryptocurrency and introduced smart contracts and the asset that people compared it to back in the you know 2014 2017 or 2018 era was Bitcoin it's like oh wow it's like Bitcoin with smart contracts that's great so what do people do well that is their point of reference for how to Value ethereum it's it's it's a it's

priced relative to bitcoin and mind you when there's a proof of work asset it didn't collect any fees those fees were going to miners just like it did with Bitcoin so people thought of it as a as a currency I think the legacy of this is that all of these l1s are still subtly being compared relatively to ethereum and then Bitcoin and what does this create well now when you're launching a new l and it comes out and it's or maybe even just going to the seed stage like you're seeding some new L1 and you're seeding it at $50 million which isn't cheap like a seed Stage Company but when you have

this idea that oh wow this this is I don't know potentially better than ethereum and ethereum is trading at 300 billion well then it looks extremely cheap and it's very easy to underwrite extreme returns and the same thing for when they go eventually go public and they're at 1 billion two billion 3 billion once again like these are these are these is not these are not cheap valuations for a a product that just launched and doesn't have users but people can still imagine that this should be worth like a 100x more because in theory appear is worth that much and you know what before any of this stuff was being used in in in Mass you could actually make that argument because what

is the difference between the one that's valued at you know 100 billion versus the one that's valued at five if none of them are going to use it anyways and that's kind of why I think the L1 trade works extremely well historically and why people still want to play it today but what is the the difference you know we're looking at that chart that shows the top five or top three chains by by fees well the difference today is that you know you actually do have l1s that are doing extremely well and have basically captured the the entire market and these are strong Network effect business businesses and long term I think it's going to get these these things have compounding advantages and

it's going to be very hard to break into that market without a any kind of you know unique value proposition so I think the opportunity is still is still there the window is rapidly closing or closing for the reasons I mentioned and I think that if you are going to attempt to break into this this Market you can no longer start general purpose general purpose is not an effective strategy to attack one of these players because it just doesn't provide any guidance for users on what to do on your chain or builders for what to build on your chain it's just too it's just too open so what I suspect is that if there are any new

l1s that can join the You Know M Rushmore of blockchains and kind challenge you know Bitcoin ethereum salana and even know one more I know it's supposed to be four in Rush more but it's really just three in crypto um if there's anything that's going to do that I think they probably have to start application specific first and just get get a f product Market Fitness application get the usage get the captive user base and then on only then can you start to expand horizontally or vertically integrate and that's what I think if we do have any new ones that kind of reached this this uh this this level I think that that's probably how

this this application specific yeah and let's let's Point directly to hyper liquid here as the prime example of what you're saying I don't want to talk about hyper liquid quite yet though um the one thing I just want to point out though to everybody listening is not everybody shares this View and there is still I think going to be quite a quite a way so I agree that the wind is shrinking for like from a fundamental perspective the opportunity for a general purpose L1 to to join Mount Rushmore is very low probability at this point there's way too many l1s there's way more l1s than there can be on R rush there's only really one more spot if we

say it's four but I don't know maybe it's five in the end maybe it's only maybe it's only one or two in the end right like let's be real it's probably going to be a a few that control the majority so but the VC money is still going to flow there's still is as you said there's still going to be VC appetite for a while I think and Retail money will also definitely flow because there's still this belief as you said of this hype of like l1's or where it's at and that's the safe fundamental bet in crypto and okay the next L1 could be the next big thing so I think as an investor you have to be really careful when you're you're looking at this because it's very easy to say oh that's an L1 that got VC funding it must be

fundamentally sound it's not a meme coin it must be you know VCS are in it somebody must have done the research it must end up being good but it's not I think you just be very very careful there yeah I'm with you I think that this this continues until you have these investors start to lose money right I mean so we talk about how the window's closing and we see you know recent launches that's not do as well uh it's the same chart every single time you know it gets the listing and it's just down only from there but even after these things basically you know crash they're still worth in many cases like billions of dollars if not hundreds of millions of dollars and the people invested early invested at you know double digit Millions so there still is

like so long as there's still easy money to be made by doing this it will be done so you need this like almost like public private Arbitrage for these l1s to completely collapse for this trade for people to stop funding this that's the only way it works so maybe it's another you know slightly ceration is view of like yeah you know what we probably don't need more l1s I'm tired of it but you know what the only way to solve this is just to go through you just got to you know have people keep throwing money at this and then eventually people lose money and then no one will do it anymore that's the only way that this stuff works oh what a world we live in what a world we live in uh okay let's talk about some of your high conviction bets

salana hyper liquid Celestia if we have time we see um I want to talk about salana first so uh in I think it was in 2023 you wrote uh your first public thesis on salana at the time salana was I think 13 to somewhere around like 10 to 15% of ethereum in terms of total market cap and you said hey look this is way underpriced right Solana should be more equivalent to ethereum today so that that trade's worked out great so far today Salon is at 33% of ethereum's market cap is it still underpriced I think for sure so I I wasn't even imagin doing another an

updated thesis on salana a year after because I just didn't think enough would change but when we first wrote The Thesis salana was still very much a story about its potential you know you're doing diligence on the technical architecture of the chain and basically trying to prove out that this has a structural Advantage for ethereum and that if we were going to have any kind of retail onboarding again this is probably where it take place because it has the throughput like the the best throughput by far for for doing all this and that was like I mean obviously there's more to thesis in that but that was kind of the gist of it right it's just like this is the potential um and then you think you know you pass forward like a year later and I mean even I'm shocked at the data I was thinking that

maybe this thing you know gets to like within like a third or half of ethereum's you know volumes or fees whatever right um but I was not expecting is it for it to grow this fast and now when you look at it I mean across any metric you would deem relevant to assessing the competitive smart contract platform salana is now on par or surpassing ethereum so you look at uh transaction fees in meev generating more than ethereum you look at the revenue that applications are generating the applications salana are generating more Revenue than app on ethereum I don't know what is a better argument for the success ecosystem than his applications making money look at

stable coin volumes about at par you look at exchange volumes I mean and this this chart you know right here is a little bit outdated I mean now it's like way higher than ethereum and l2s and you just start to look at this and I'm sitting here questioning like wait what is what is the reason why this Gap shouldn't continue to close if there's almost no fundamental argument you can make against it at this point um and I thought I was going crazy but maybe it's just a matter of time and maybe one last thing I'll say too is uh and this wasn't in that report but after the report I did uh in know additional i r these numbers again and what I found is that

when you look at let's say like the transaction fees and me and application Revenue it's not just that because like this this that report was really just contrasting with theum but when you even just zoom out on the entire L1 landscape I mean the picture is even more clear like this thing is just dominating the field it is has more than 50% of all transaction fees in MV like more than 50% of all application Revenue right I mean it's not even just like this is like outpacing ethereum it's just outpacing everything in the sector and it's starting to look like Sana has reached escape velocity and it's running away with it and maybe the last kicker point have here is that uh and this data

came out after we released a report is that salana is now winning over new developers faster than ethereum in the L2 ecosystem and that is very important because that might be the uh highest signal leading indicator of what could be built next so yeah that was the the gist of the the thesis and you know I thought about okay you know what are the reasons why ethereum may still have this uh you know this this kind of valuation premium and I thought to myself okay well it is more battle tested it's been around for a long time and people feel more comfortable holding their wealth on

ethereum as a result like ethereum doesn't have the same I mean SL hasn't had any up time issues in over a year at this point but ethereum has really never had any up time issues unless you count the times when you can't get inaction through because the fees are so high is you know kind of like an uptime issue uh and then two ethereum this institutional stamp of approval right it's it has the ETF approved and it is just like available and it's just it's just rubber stamped by you know black rock and all these these people and salana didn't have that but what I posited at the time is that post the uh the election is that this would rapidly change and we will get a salon of ETF in fact you can already see like many of the ma issues

have already filed for this and I think it will get approved at some point this year in 2025 and then once you have that it's like what is what arguments are remaining right like you you don't have this regulatory Advantage anymore as ethereum you don't have this institutionalization Advantage anymore I mean maybe the one metric you just cling on to is yet there's just more assets on chain like TBL but I it's probably a lagging indicator right you looked at um for example uh when Trump launches mem coin what three weeks ago my stable coins on salana just balloon from that one event I this stuff change very very very fast and if I'm just being forward looking here which what we have to do I think it's just can continue to grow

really really fast and far fast than ethereum and then in hindsight it will seem very obvious that this Gap should have close yeah it's at so many so many points there just on the the salana ETF uh we just had news yesterday uh that the salana ETF is getting more traction because basically for the first time ever the SEC acknowledged a filing in a way that they hadn't acknowledged a filing before it doesn't mean there's a deadline and we know when we're going to get the salon ETF but there is traction happening towards it it is very likely that we get it in 2025 it feels there's I would be shocked if we didn't and it could as you said it could happen fast like there's a

possibility that we get it in you know Q early Q2 maybe even late q1 like this could happen quite quickly the the um the counterpoints on salana are one it's all meme coins you know pumped off on leading the way uh I mean incredible the success that they've had truly unbelievable but is that sustainable is the big question that everybody keeps asking and then and then the other point is that Solana doesn't have the scaling ability that ethereum has because what a lot of Institutions and corporations are going to want to do is launch their own L2 and manage their own ecosystem which we're already seeing a little bit with various institutions Sony launching

their own L2 and deciding not to allow meme coins and doing a little bit of sensorship but like I kind of get that because they want to control their ecosystem in that way what do what do you say to those two counter points what are your thoughts there yeah so as far as the sustainability of the activity uh I am with you that me points uh are like boom bust assets and you know salana will need to move Beyond these to to sustain itself but I think it's important to just zoom out on the broader context what people are doing on Shain like we looked at for example like the stable coin volumes on salana being on par with ethereum I mean it's still

even for like these like non-speculative use cases salana is still about on par if not even still surpassing ethereum and I think there's two ways that I I assess this um one is deep in so the reason why deepin is Sal is is dominating deepin the reason why deepin is exciting is because it is one of those use cases that may transcend the circularity and cyclicality of the crypto economy the demand for these deepin networks uh is not driven by demand to speculate right like if I was want to use my phone I'm paying for 5G I'm just paying for 5G it's to do with

like prices going up uh if I want compute right or storage or whatever I mean there's so many of these depends I'm just paying for those resources and that's what I'm doing and you can actually see this although the sector is still very early stage if you look at the the data for you know like geonet render helium the revenue is actually just steadily grinding up even though we've had like these like cyclical periods even just over the past two years and that's very exting so if salana is going to lead in that category this category is going to be big then I think advantage salana over ethereum and then so what exactly is like this difference between ethereum Salon when it comes to to defi right

because defi still was driving majority on ethereum and this l2s as well I don't think there's material difference right it's not like people are trading Tesla on ethereum they're just trading a bunch of tokens so yeah I mean that that's really how I how I assess it I think that in know long term this is a a challenge I think every ecosystem will need to figure out but I think directionally like this maybe referencing the early part of conversation you just want you just want people to be here and care you want people just put assets on and trade there and you know over time the the asset composition will change right like if a lot of people are trading on toana and there's a lot of users there then you know what probably happens next is that's probably the best place where you want to go issue an rwa because you can

do it now the second point and this is really relevant to were saying about like salana or sorry Sony for Bell 2 um so I agree you don't get the same level of customizability when building on a general purpose Chain versus building a an specific blockchain that being said I think practically speaking what do these institutions want I'm not sure it is that they want this like full customization of the bir machine and to deal with these lower level infrastructure issues think in many cases it's about permissioning and token extensions uh on salana enable you to do this and you can basically set okay like only maybe you know these Whit listed addresses can interact with this token and send it back and forth and know we

don't really need to completely fragment the state to achieve the same the same goal so that's what I'd be looking out towards when we start to see more of these like institutional use cases come onto blockchains yeah very interesting okay let's go from salana to Hype lots of people talking about hype right now hyper liquid uh we just talked about it yesterday on the show with zenica I feel like more and more every day it's getting more attention what's your thesis on hype yeah uh you know I think there's the two most profitable businesses in the history of crypto economy are one exchanges into blockchains just selling block space we've never seen these two vertically

integrated this is the first time right so we've had binance cre binance SM chain had coinbase create base but these are separate entities with separate pnls and have like a and and this is the first time we're seeing this in in one one one package so starting with the exchange component uh The Exchange has done extraordinarily well even after the air drop when the incentives came off and what is droing this usage one is that it's cheaper to trade in hyper liquid like just straight up cheaper than it is a trade on binance it is more accessible it permissionless

system so now you can on board anywhere in the world rather than having these you know Regional restrictions there was greater asset availability so you you think of the Trump mcoin launch or whatever like it's usually the first one to list perks for these new assets and that is important because if you're a Trader you just want to have you want things to happen timely in a timely fashion and uh and that's really what's driving I think the the usage over the past the past year right is like those those three things it is like by far the best onchain experience now what comes next after you because it already is

dominating the onchain pur Market it's like you know 65% of the market it's not even close at this point uh and then next is well how do you actually expand beyond that well the good thing is once you've figured out how to do onchain perss it's quite easy to now spot and the first spot assets on hyper liquid were just like hype like hype is the most traded spot asset on hyper liquid and it's actually pretty genius the way that they did it because they said all right you know we don't need an exchange listings we are an exchange ourselves let's just list our spot order book and force people to onboard a hyper liquid to buy it and then by doing that you end up bootstrapping your spot markets and also just driving volumes and that creates more fees it's a little bit reflexive in that sense uh and

that's basically what they did now the only issue with spot markets right now and this the case for almost any chain is that well you can't access assets that are not issued natively on your blockchain right so if you're trading on salana you can't trade ethereum you're trading ethereum you can't trade salana how do you do that well hyper liquid is in the process of introducing spot markets for all the major assets like Bitcoin and salana and ethereum and that'll be huge because if you look at the trading volumes for binance what does it come from about like 70% of it is just like the majors like BTC Soul BMB e longtail doesn't

matter but the long tail is all we've basically been able to achieve on chain so far so I think when that gets enabled that'll be a next key step in the hyper liquid thesis in like unifying like this onchain spot and in ders market and then the the final thing and and mind you I think this alone is massive opportunity like if you can just like win market share away from coinbase and binance I mean this is still like a you know likely 50 hundred billion dollar opportunity alone right and it is also the foundation to be the place where not only cryptocurrencies trade but anything trades like eventually like I said we're going to get all these assets on chain

we're going to get currencies on chain we're GNA get stocks bonds uh we're do sports betting on chain we're going to do you know tokenized teal property I we're going to find a way to get every single asset on chain and these assets are probably going to trade where uh you know they whatever chains are getting the most volume right so that that's a huge opportunity now where it gets um even more interesting is when you start to factor in the the other side of this right which is the Smart contracts once again referencing the earlier article we had on uh you know the underly purpose of of these chains I really think that you know providing the ability to transact and enforce

contractual agreements without intermediaries is like the whole purpose here well one of the core use cases to nail for blockchain if this what you believe is the exchange function right and Hyper liquid is designed it's optimized around the exchange so as a natural next step like once you nail that what do you do you expand into smart contracts allow people to create these agreements that you can enforce on chain and I usually wouldn't be excited about the ability to just you know SP expand horizontally like oh like do we need another evm blockchain like probably not but the difference here and this kind of goes back to the point

where we're talking about how do you actually build a competitive new L1 in today's world is that you already have like a captive base of users that are owners of the platform because they got the airdrop and they all use the product which is the pers exchange so now when you create a new smart contract platform like the the hyper evm all the developers they're not lost trying to figure out like how do I get users they just build products for the users already there so my expectation is that when the hyperm comes out you're going to have a lot of applications that immediately get traction that are serving the Traders on hyper liquid so I mean you'll have this these are just

ideas but you can have like a almost like a tornado cache like set of contracts that enables you to submit private orders on hyper liquid order book you could have uh you could lend out your your liquid state type into a lending Market get interest on it and then you can use that as collateral in the purpose exchange right there's all these different ways you can compose with Exchange in a very unique way that I think will drive usage and Adoption of the hyperm and this is great because like I said there really isn't that many smart contract platforms Beyond ethereum salana and I guess Bas that are getting usage and this can be one of those ones that does get the usage I think that's that's that's a big outcome that is a

huge outcome because now you're talking about stacking a spot exchange fees uh perks exchange fees and execution mbv fees all in one single integrated system and that is a massive be opportunity and I think that could actually position hro liquid to be the top fee generating chain in the world uh hperm launches and if it gets traction and that's a huge opportunity so like I guess maybe my thesis is that this is this is actually something that has the potential to be like a a salana like uh outcome damn it it's amazing uh everything you said is just so bullish

like so incredibly bullish like there's so just you're just stacking so many massive opportun ities the thing that's tough for me with Hyper liquid is okay so for salana it's it's easy to make comparisons and make projections because you have ethereum and you can kind of see everybody it's not hard to think about where Sal's Market Cap could go to right hype feels a little bit tougher though like what's the do you have predictions for hype I mean Market Cap's at like s billion right now a lot of people a lot of people people fading it because they're like oh another another L1 I know it's an app-based L1 do we have another is another in the space but

then also all these things you're saying it's so new it's such a new opportunity how how do you forecast hype yeah yeah so I think maybe the the best way to to to frame hyper liquid is it's if binance and binance smart chain were one now how do you figure out the the value of those two combined it's a little bit funky because bnb's value is not totally derived from bance Smart chain it's also derived from binance the exchange uh and then vice versa but I think combined you know B&B is like a almost hundred billion dollar asset in binance is you I've saw seen estimates for binance

being anywhere from like hundred to 300 billion dollars I mean but I think it's very clearly like a cent billion dollar opportunity loan just for just for binance let alone like all the exchanges around the world um so that's like one way you could think of it uh another way you could look at it is just be do a simple relative comparison of uh like all the different l1s and how this is stack ring against those and could this get higher than like a you know aosu Avalanche you know whatever right um if this has more usage those are like more like the relative comparisons you can also look it on absolute basis right and this is I think both relevant for people who are very fundamental and traditional and just want to underwrite

this on a fundamental basis and they just want to see the fees growing and they say okay you know what it's generating you know maybe it's at like a 500 million to billion dollar run rate right now and I think that can get to I five billion dollars in the next year and then you slap some multiple on that and that's how you get to whatever your estimate is and that is definitely one way of doing it and I think for the Traders too I mean sometimes this kind of sounds like a little bit silly like a lot of people just don't know how to actually assess the value of any of this stuff right I mean we talk about for example that the smart contract platforms there still is no agreed upon framework for how to Value these things do you Val them like their money like

Bitcoin I mean that's kind of like a weird way of doing it there's no way you can disprove it uh and there's no way you can ever justify whether it's like cheap or or not cheap it's just all relative or do you valid it based on the fees but the problem with the fees is that well the fees are circular how how are you getting fees in a asset that you issue yourself it's it's kind of strange it does it almost doesn't make make any sense right so there's no valuation for this so maybe what's agreed upon valuation framework so maybe for some people who are just Traders are like all you know what I'm going attempt to Value this what I what gives me confidence to to bid this thing and to hold it is that it's growing very fast and I can pull up

a chart that shows me this thing is generating value and I can't do that for 99.9% of assets in crypto like when I try to pull up a chart of how you know random L1 is doing or random L2 is doing there is nothing I can hold on to that is fundamental value and that probably makes people paper handed because they know what they're holding is worthless whereas here you know that the thing you're holding has intrinsic value right you you're getting these fees yourself like the like the H hyper liquid The Exchange it's providing these fees it's buying by the token right you can stake it there's going to be the ex execution fees you layer on top of it that creates real value and you know this is maybe even just going back to the origal point we had about the dispersion we're seeing

in markets like there's part of me that wonders like why would you want to hold anything else but these real projects that have the actual like value that's discernable when they they exist like maybe Al just fine back in 2021 2020 when like nothing was making any money and none of this stuff work as much of like vaporware but when you actually have like these like these like actual like really strong businesses with like really uh talented Founders and they're growing very fast and they're really starting to compound growth and win market share like I don't see why you would not want to only own those things I mean this is like the beginning of the next fangs in the crypto economy like why do you want to own player number

five that's just irrelevant yeah yeah I mean you when you put it like that it's so simple is it possible that hype becomes number four on Mount Rushmore it is possible I mean and obviously it's not without risk right like you know I do think that uh you know for example uh we've never seen a a a chain like enshrine all this so like enshrine an exchange and all the infrastructure necessary to run it like the Oracle infrastructure when it does support spot markets you will in a way just be like uh almost not really say in shring but

supporting like a canonical bridge and that can create risk as well right um there's also this the risk that the you know evm uh doesn't quite pan out the way the people expect in fact there's just the risk that hyperli will never be able to globally distribute consensus because right now it's just a handful of valuators that are running in this same place what happens when you actually distribute that around the the globe like does this this performance AG great so there are open questions about this um what gives you the confidence is that the team has just executed so far and like I said there's this clear value here and mind you this execution risk matters is like um it's it's like there

for everything else too right but I think personally I'd rather take the I'd rather stomach the risk of progressive decentralization from a team that has proven they can execute versus the risk that some vaporware never finds product Market fit like that's a joke to compare those two things almost you know what I mean like that's it sounds kind of cynical but like you know we're sitting here and like I like people are all like cynical and tired and complaining about what's happening in crypto it's like yeah like stop bidding vaporware like stop like I don't know what people are doing anymore there's actually projects that work and

are and are jittering real value like maybe that's the reason why you're so frustrated because this is not like we're not environment where it's easy mode on you just oh this it's a big idea we're going to go change the world get a million transaction per second and then it just swaps yeah yeah well and as you said going back to your original thesis uh investing in the some of these fundamentals if you're long volumes you are also capturing the trading that happening is all on that vaporware right so if you're on salana then you're probably going to do well like salana to me is one of the purest bets on AI agents in the next year right you believe in AI agents just go buy salana you don't need to try to pick which AI

agent you can bet that a lot of them are going to be on salana and salana will do really well you believe in meme coins go buy salana don't try to buy the mem coin that's very difficult very very difficult like you basically have to decide as an investor you're either a short-term narrative Trader and you're gonna get burnt a lot and you're gonna you have to be you have to be a day-to-day Trader you have to make this your job quit your job and just do that or just be long on these fundamentals as you're saying it's it's it's so simple in so many ways yeah no I'm with you like you can definitely make a ton of money just trading The Narrative stuff for sure we do that ourselves to be fair with like a a portion of our of our book but uh you have to be trading it like

you cannot hold some of this stuff and on the flip side I think this is how you actually get like more institutional participation in the place when like you know we show you can show like okay like here here is how the market share is trending this is a dominant player okay this is actually these are metrical show this is compounding growth okay here is what demand is to servicing and here is what's driving the growth like when you can actually tell that story this is much more underwrite from like an Institutional perspective and that's how you get not only just like funds that are native to the asset class to start buying but eventually when these ETFs approv that's say you start to get like larger participation from these way bigger pools of of capital and yeah that that is the stuff that's going to get

bibed I mean quite frankly like these people are not going to go buy something that just doesn't have any intrin value or clear value that's just that's just not going to happen like these people are way smarter than that it seems so obvious when you say it like that okay let's talk about Celestia quickly uh I know uh we're getting to the end of our time but we have not talked a ton about Celestia on the show and I'm I'm curious to get your thesis on Celestia yeah so Celestia is a the way I frame it is it's a it's a dark horse B and basically what you are underwriting if you're underwriting it here if you're underwriting it here you're basically making a bet that

demand for Block space is going to grow exponentially and that the current blockchains may not be able to have may not be able to service this if uh because they can't scale enough and that's basically the idea here because what sles is funly doing the way I think about it is there's basically two con fundamental constraints on Wasing scalability uh one is bandwidth other one is data availability right and cushi is by far the leader in data availability it is winning these new Integrations with new l2s for this reason in fact many of the top new l2s on ethereum are just using slush for data availability because it provides us throughput and if you want to build an application that can actually get not

just like you know 20,000 people flipping shitcoins on chain but having you know 20 million people or a 100 million people even a billion people using this long term and there is going to need like way more throughput than what we currently have and that's that's What slushy might provide and we talk about too um maybe actually we didn't talk about this yet but there's also been this recent trend of applications starting to vertically integrate uh I think hyper lip is in a way an example of this but where like you know you start with maybe use like a you know Unis swap as an example Unis swap started off as like a very simple amm right like you just you just create the pools you trade on them and then now you

look at Unis swap today it's like well Unis swap has a has a wallet they have sorry they have a wallet they have a mobile application they have a aggregator they have a uh their own the chain and sequencer they have the you know the amm and before you know it it's like oh wow this is actually like a full stack application and it makes sense why they want to do this you can just control the user experience and you can make it a better user experience in fact there's part of me that thinks that the L2 fragmentation issue could actually be addressed uh 90% of the way there just by having a better use experience about

around swapping all the assets so that it's not as complex if you could pack just into one single interface that just does it all for you and this use whatever bridge on the back end it really doesn't matter then I think that's a that's a good product right and I think that's a trend that we've seen in the crypto over the past couple years is like this is what applications are doing you see it on salana to like with Jupiter for example is taking the same approach I think pump is is probably taking a same approach right um so if we're going to continue to see this trend of apps vertically integrated then I think maybe maybe the best infrastructure to do this is actually Celestia because it actually provides you with the full flexibility to customize everything you want about your

application all the way down to like the the virtual machine uh and consensus and the only thing that slushy will do is just provide this service that and this is like the hard part too like you don't want you if you're build application you don't really want to to deal with these like nitty-gritty consensus and data availability details you just want to build an application that people use and what you get in return for plugin celesia is you get to be interoperable with all these other systems and you get like the security that you for your application as well so that users feel confident storing their assets and interacting with your application so that's idea definely like a similar situation

to uh in some ways like salana in 2022 2023 and that you're really betting on potential here because the data is still very early stage you start to see the data like the data posted slushy is starting to really ramp up recently uh as more projects start to roll out and what you need to see next is you need to see the revenue generation come out as well and you know my my expectation is the team has some tricks up their sleep because I think they're they're they're a really sharp team and they proven they can execute yeah I think my question with Celestia is just the timing right uh it's you know like when do we need that much throughput because as you said we

don't really need it yet right now possible that it comes quickly with regulation and you know all of a sudden you get a bunch more funding flowing in but it's also possible to take like you know this sort of stuff can take time right this might be a you know we're not talking months here we might be talking years what's what's your thought yeah so timing is the biggest question you know there is a chance that I mean my sense is that the inflection point comes within the next six 12 months and that's when you start to see that the data like really start to inflect and people like aha like I got it and maybe you get the first application that has like breakout usage that the only way I could get that

breakout usage is by having this level of through CP but you're right the timing is the hardest part and uh I maybe what I'll say with that is just an antidote I remember when we were underwriting salana in summer 2023 when we originally bought it we weren't quite clear when the data would begin inflecting and at that time I mean it was kind of a wasteland like no one was using Sana and the narrative was said all the developers were leaving so you there was not really a ton of data to cling on to like I said you're really making a bet on like the the the the ecosystem the team and also just like the actual Tech like you just have

to do like some some diligence on there and figure it out and you know there was a chance that you know if we didn't get the Bitcoin ETF and you had the industry take off again it could just taken another year for the data to start reflecting where we longer it's really hard to call that okay yeah of course like Mee Point's going to happen and the data is going to go crazy that right if you were purely just waiting for the data to come tell you when to buy you would have waited you would have waited a very been late you would been late exactly yeah um so that's maybe the only mistake that I uh just don't want to make if I were to uh look at this situation is uh it just be a little bit too like and and maybe what is too is it's like a

sizing question right you know maybe you don't want to have like you want to be all in here with when you don't have a any indication on like when the DAT is going to inflect but uh you know you also don't want to have no skin to game because you might be wrong in the timing and then it happens and you have the thesis and it's like well you know that's on you yeah completely yeah sizing is the best way to put that get something in there if you believe in it and then add to it over time as you follow along Ryan absolute pleasure to have you on the show today this is definitely one of the longest episodes we've ever did done we usually try to keep it to 30 40 minutes but just had to keep chatting with you and pick your

brain really appreciate your time today you appreciate time as well this is great yeah everybody uh we're going to throw link to some of the reports that Ryan has written talking about the recent ones that we talked about his Salon of thesis we'll put that in everything we talked about today we'll put links in the show notes we'll also put a link to follow Ryan on Twitter if you want some of the hottest takes on a consistent basis Ryan I don't know how you do it you're you're every day throwing out great great takes on Twitter so shout out my man everybody listening in between the three we talked I'm curious what what what are you most bullish on you most bullish on salana hype or Celestia let us know in the comments thanks for listening in everybody have a weed awesome day as always if you liked today's episode

please hit subscribe and make sure you follow us so you don't miss out on the next one there's also a link in the description to our free 5 minute daily newsletter where we simplify crypto for you while making you laugh and if you're willing to step up your crypto investing game we're going to also leave a link for milk Road Pro you get access to our portfolio where you can see exactly what we are buying this is your number one resource to help you invest successfully in crypto one final note this show is for educational purposes only and nothing we say is financial advice investing in crypto or any asset is risky and you should never invest more than you can afford to lose thanks so much for listening in my friends have a

wicked awesome day