Santiago Santos on Why Most Tokens Are Not Investable

Transcript

Friend of the show, been on several times, absolute pleasure as always to have >> Yes, sir. >> the man, the myth >> Santi? the inverter How are you, buddy? I haven't died. You guys still You guys still haven't um, you know, gotten tired of me. No, I bring you the coffee so that I can I enjoyed every time. >> I think we're trolling you a little bit today. I think the I I think the marketing team put the headline as is is Santiago the biggest crypto bear on the planet? The biggest crypto bear in crypto. >> a lot of things. I have not heard that. Okay, well, today you have.

Um, no angel checks this year. Uh, tokens are are not going to perform as well as equities. The once prominent angel investor sitting in front of us is at DAS. Not wearing a suit. >> a suit. Not wearing a suit. I mean, what's going on, Santi? How are you, man? I'm sort of like the chameleon. Aren't you sort of constantly reinvent yourself so that no one can just pin you down? Right. I Look, I've survived this long. Right. But, um, no, I'm not a I don't know what you guys want to talk about. But, I'm not a perma bear. I don't I continue to believe a lot of tokens are just uninvestable. Yeah. But, that doesn't mean that Like, there's a ton of adoption. Like, you know, I was I was like I came in yesterday at 9:00 a.m.

There was like a line that looked like TSA. And and there's like a lot of institutional growth. Like, I could tell you like how many of the folks here do you think is their first time attending a crypto conference? Yeah, right. Decent chunk of them. Yeah. That I mean, I'll tell you that that to me is like the sign of the times as we look across the room. There are a lot of people here that are coming here not to buy a token. Yeah. Or not to understand what token to buy, but more so the CEO of their company told them, "Guys, you got to get your together." Yeah. I mean, just had the CEO of Western Union. You know how I feel about Western Union. And And I was like, "How real is Western Union about stable coins?" And I think if you heard him on stage, it'd be something

along the lines of it feels different than a pilot. Mhm. And from what I've been told is I'm excited to see how they report that through their P&L over the next year. I think they're going to save a like a couple billion dollars on the flow. I think they're going to they're which is crazy because you would have heard the CEO go back to like call transcripts as early as like two quarters ago. He was like, "I don't believe in stable coins." I think it's real. What do you think What do you think changed his mind? Probably the competitive landscape. The institutional FOMO. Yeah, I mean he's looking at like Visa Yeah.

>> in the space. He's looking at MasterCard doing a lot of acquisitions. BlackRock, I mean most of like so I did an analysis in looking at every single stock the day that they started talking about crypto and then when they implemented it. If you if you look at the stocks that are most of those early adopters were founder-led companies. Generally founder-led companies just do well better than the traditional company. But that basket of public company stocks has vastly outperformed the S&P. Yeah. Yeah. Yeah.

Since we last spoke, um there was this really interesting integration in the S&P 500 with hyperliquid and trade XYZ. This is kind of like the one uh token that you keep leaving out of your kind of basket of bearishness. Uh um I'm going [laughter] to put you on the spot here. But what do you make of this kind of uh 24/7 tokenized trading uh growth? Like like uh is this something that you think is an accelerant to um bringing new assets on chain, trading on chain? Like how do you how do you reason about the like this trend and then like investing into this kind of inevitability, it feels like?

>> Well, I remember sitting down with you guys uh DAS like in Brooklyn. Um I told you guys I was long volatility. I continue to be long ball. So, how do you express that thesis? You want like crypto sits at that intersection. Young generations want to trade. They want to trade all the time. Uh prediction markets are just one expression of that, right? The second to that is when you say we've always had this like 24/7 365 uh DeFi market, but the reality is not everyone wants to trade your tokens. But they they want to trade commodities cuz they see Stan Druckenmiller go up and say you got to long copper.

Uh and then silver did what it did uh a couple months ago. Uh and now oil is front and center given geopolitical tension. So, Hyperliquid has just become that venue. And I haven't seen the numbers, but I'd be really curious. I could probably say the amount of volume that's coming in. There's like now over 1.3 billion of open interest on commodities after Hyperliquid. Super impressive. I think that 10 10x or 100x in a year. Uh but it's not your tokens. Like people want to go long these things. So, I I you guys probably heard me say I was sitting in a room over the weekend when the war broke out. And a lot of these PMs, some of the smartest macro guys were Like I was just sitting in in in a lunch. And they're all pontificating, oh you know, what's Monday going to look like? I'm like,

what are you talking about, dude? Like, have you heard about Hyperliquid? They're like, Hyper what? Pull up my phone. Look at the chart. Like, stock's already at 86 bucks. Yeah. And they're like, holy Yeah. And I've only ever felt that with stablecoins like 6 years ago. Yeah. Where when I was fundraising back in the day for DeFi when before DeFi was a thing, and I would convert like everyone was like, you're going to invest in what? I'm like, DeFi. And like, we don't understand what that is. I was like, go try a stablecoin then come back to me. Yeah. Like you see the the light when you when you sell a stablecoin, you see the light. With with This is happening now with with Hyperliquid. And of course it paints a it paints a picture of like it's commodities. I'm not sure stocks are going to take off as

much, but commodities I'm super bullish on. Yeah. Yeah. I want to use Hyperliquid's uh you know, revenue generation buybacks as a as a segue. Um intertwine that with what we saw in DC last week, you You SEC CFTC working together on some of this guidance. Uh they classified tokenized commodities, tokenized securities, couple other classifications in there. Um I'm thinking that we're going to start to see the token economy reflect what we see in the equity uh asset class. Meaning, you know, right now we have growth stocks and then we have dividend stocks.

Um and we're not We don't have any dividend tokens or or companies in that space because that would classify them as a security. But now that we have regulatory clarity is that the right way to pass revenue and value accrual back to token holders is, you know, a a relatively stable coin token, but paying a a pretty nice dividend from the revenue generated on chain? You know, I'm I'm not I'm not a regulatory expert. Uh so I can't really comment on like is that going to be enough to convince people that that's something that they want to hold in their portfolio? I think the market's fairly narrow in why they want to buy something. And And the the the narrative around Hyperliquid is very strong. It's strong because it's it's tokenized commodities. It's strong because it was

a community launch. Last time we saw that was with Wi-Fi. Yeah. You know? Yeah. Andre Cronje. Boy, were we heavily involved in that as a I was a farmer back in the day. >> Yeah. Um so I don't I'm not sure. I mean, there's a there's a whole body of like psychological studies as to why people hold stocks. There's something really true around if you the narrative needs the mind can only comprehend one concept at a time. Stocks that have like different narratives don't don't people don't really understand that. Um I think for Hyperliquid it's very pure. Uh what is it? They they do a lot of buybacks, right? They subsidize part of the fees. Like it's a it it is the token that most resembles stocks. Yeah. Yeah. Yeah.

And it's backed by like very clear understanding that like you're seeing basically trading for tokenized commodities go parabolic. Right. Yeah. I'm not sure how much volume and open interest there is in the S&P one, but I'm tracking that as well. It's the it's starting to become one of the top five now in terms of volume. Yeah. But I can see what you mean by commodities maybe stronger and provide more volume for longer than just individual equities or indexes because they they can be way more volatile and there's a lot more geopolitical dynamic happening right now that has created volatility in those commodities.

Um so you said that you're not doing really much angel investing as of now. Your your former firm Parity just announced a $450 million raise. Um what do you invest in right now? Like what do you do with $450 million looking at the landscape? There's prediction markets, there's AI, there's crypto. Like Like how do you allocate hundreds of millions of dollars into the current landscape because clearly you're not seeing opportunities for, you know, your angel uh checks. So how are funds going to be allocating going forward? Yeah, I mean I I don't know.

Um I'm tempted to not go too far and say there's no investable opportunities. >> Right. But you're seeing a lot of the larger players uh like Rain. Uh certainly Polymarket and Kalshi. Like those rounds are getting larger. The The stuff that There's like a very clear divide. The stuff that is working is is really working and they're getting a easy You know, those guys are not struggling to fundraise. But I I mostly traffic in early stage. Like like you guys, like first check in, second check in. I I do across stages, but that's sort of been where I mostly have deployed in terms of number of deals, not necessarily dollar amounts.

And I haven't I haven't seen that much. And And that is consistent like I'm like, is this a skill issue? Maybe people are not reaching out to me anymore cuz I'm bearish or they don't want to work with me or I'm a terrible angel whatever. Uh so I go out and talk to a lot of venture funds. I'm like, are you seeing quality deals? Um And And they sort of say the same thing. So I mean, I guess I'll catch up with Ben tomorrow. Um I I most likely think that they're going to be investing at this intersection of fintech and I mean Paradigm has always been a DeFi focused shop since I was there.

That's where I see most of the opportunity, Cam. Like the lines between what was a standalone fintech Silicon Valley startup and crypto are converging and they're one, right? You're seeing funds like traditional VCs like Sapphire Ventures. Like look at look at the funds that have invested in Rain's last round. Rain, the the crypto card. It's mostly fintech VCs along with some sprinkled crypto native VCs. But that that distinction is going to go away. In fact, I would argue if you're going to want to be successful in crypto, you're going to have to quickly become an expert or hire partners and investment professionals that really understand fintech because that's you know, you're seeing that convergence. So I think there's a lot of

opportunity to invest meaningful size into those. Um I just this morning I was on the way here, I I got a pitch for like a a different flavor of prediction markets using like consumer data. Is that going to work? I'm not sure. But you know, they're raising two to three million bucks at a sensible valuation like 20 million, which is you know, where I you know, anything above 20 30 you start thinking twice. Um So again, I think it's a very interesting time in the market if you have capital because you always want to deploy uh in this moment where valuations are compressed as people are being skeptical like me and um the only difference this cycle versus

others is that there's all I think there's like a Stanford um engineering index. If there isn't one, I think Electric Capital talks about it a lot cuz they built a developer ecosystem map. They track the number of developers as a whole coming into crypto. And that's a great That's a great barometer, but it's sort of like a lagging indicator. Like your Stanford engineer is captivated by AI. Like we didn't have we did not have AI. Like I'm fascinated by AI. Like like I can tell you >> I always have I continue have this imposter syndrome as a builder. Like it took me so much to get out of my seat and say I can actually build a company because I always felt that I was disadvantaged not being technical.

And the first thing the first advice I got is like you got to go hire a CTO. In fact, go go look at my first post pinned to my profile. I said I want to hire a chief of staff and I want to hire a CTO. If I were to write that post today, I wouldn't include those two. Yeah. And so I guess what that all means is if you're well capitalized, I think it's quite difficult to fund raise right now for funds and just traditional retail's not here. But it's the best time to deploy. The question is are you seeing the smartest guys want to build? And I'm I'm I'm just not seeing that. I don't know if you I mean your guys are active on the venture side too like I haven't come across a team that I'm like It's electric. I just Yeah. And maybe it's a

skill issue. I don't know. Maybe I'll bust my ass and >> you haven't done too many deals. Or seen a whole lot either. >> It's been a lot of tinkering and I think a lot of it is consumed by AI and that requires a little bit of a different skill set. Yeah. Yeah. But but it's it's a you know a gentle commerce. I think a lot of people one thing I will say is it's very tempting to say um like tokenized stocks are not going to be a thing or a gentle commerce is not going to be a thing cuz like look at X what is it 402 volume and it's like it's it's declining right and and it sort of fizzled out.

Um I remember when I did the seed round for Polymarket. I had lost money in Augur and Gnosis and but I was fascinated by the idea of prediction markets. I was like something will work. And there's um you got to position yourself so that you can win. You're not going to get it right. You're never going to get timing right. But put yourself position your portfolio. You know like a gentle commerce is going to be a thing. You know that AI agents are going to want to use stable coins. And gosh, we're going to be here like we're going to look back in 10 years and it's like why were we overthinking this idea that markets should be 24/7 365. Like like in fact it is is going to be nonsensical markets that are not 24/7 365. So

position yourself to capture that value. So this is why I think I'm I'm going like The counter to what I'm saying the tokens are not investable is I think I think there is room to continue to innovate. There is room to continue to fund the incremental L1 because I don't buy this idea that we've solved the L1 scalability. So like layer zeros zeros really interesting as much as I'm an investor in Brian and team and Ross I they would say we've reached like this is the this is the end state.

I I don't buy that because because we haven't really seen a proliferation of use cases on top of the infrastructure. Now now we we even hyperledger like we've reached the point where like the infrastructure is no longer the bottleneck. It's no longer the handy and you could argue that over the last few years that's we've been in that state but it takes time. Yeah, it takes time. And and and that's typically the the evolution that we see happen right is you know the infrastructure reaches a critical point an application gets some product market fit it ends up juicing the infrastructure to the extent where it does break the underlying and then we kind of reset the cycle and we go back to the infrastructure and then kind of expand the throughput from there.

I've kind of gone on the record here and said that I think the next L1 trade is the the New York Stock Exchange is the NASDAQ some of these guys that are but you know fine. >> [laughter] >> Inversions in there as well just not from the from the tokenized equity's point of view. I'm just curious I mean do you put inversion into that group and if so like do you agree that is the next L1 trade? Well what you're saying is very similar to my house view, which is uh what does the NYC, NASDAQ, Western Union have? They have distribution. They have flow.

And and that's my whole MO is I'm going to go buy something that has distribution because I don't want to build distribution. I I I want to acquire it at a really good price. The best part of all this is um you know, people are like, "When are you going to announce your deal? You know, are Yeah. So so I I I've started >> have been acquiring for 3 years. I've been acquiring [laughter] for 3 years, but I promise we'll do it now. For better or for worse, um what we've done over the last 12 months is really narrowed down the scope. Cuz we started with this and still is a very flexible mandate.

It's like, you can buy anything. Right? And so and so what I can tell you is as much as we love AI in-house, the AI will hallucinate because it is going to scrub all the different pages of all the different vendors out here that are claiming a lot of stuff that hasn't been really implemented. And so you know, we've looked at different sectors like FX. And when we actually collect field data, it's like, "No, you can't really make that business more efficient with this stuff. Not now. It's a liquidity game, so crypto doesn't solve that." We've looked at a business like Figure as a really good case study of, "Okay, this is an interesting business that has dominated HELOCs where other banks were not servicing them. How much of that is related to what they've done on the

crypto side? Or how much of that is a combination of Mike being Mike, a phenomenal builder, um also using a lot of good technology, traditional technology, and then some crypto stuff." Um so now we we really narrowed down the focus of where we actually think this technology is really useful for. Uh and of course, we're the first and likely will be the like dominating the field of what type of business can use this technology. But it's equally valuable to understand stuff that you definitely don't want to buy. Cuz I mean, the whole point of inversion is don't buy stuff where you just don't die. Yeah. Don't do a stupid deal. Like like Berkshire Hathaway, like Warren Buffett, his first deal was a textile business.

He bought it I think for a couple million bucks. It was a terrible deal. Like it wasn't It was probably one of his worst deals. And then he bought that insurance business for 8 and 1/2 million. And that kind of set the stage. So, I'm I'm kind of paranoid and maniacal to not buy a business where the AI or you go talk to a lot of these folks and you're like like stablecoins are going to transform the world. Yes, but how? And in what sequence? Because I do think there's a lot of I mean crypto's phenomenal at over-promising and under-delivering. I want to do the inverse. Yeah. Yeah. Um so, I'm not going to go on the record saying I'm going to buy something now, even though I got 48 hours to close.

Like sign a pretty definitive agreement on a transaction. Where I feel really confident in what stablecoins can do and what tokenization can do. Um again, it just goes back to something that I posted earlier, which is we sort of have the We know there's a foundational stuff in crypto that will really really work. Yeah. Um like and and it just goes back to a very narrow use case of 24/7 364 um markets. And const- like we've built internet capital markets. I'm not saying that, you know, gaming is not going to be a thing. I'm not saying that NFTs will never come back. They will.

Um but the big big opportunity for us is um you know, stablecoins. Getting stablecoins in the hands of people that really want it or using stablecoins in a particular financial workflow that can cut costs in the same way that Western Union sort of woke up to that idea. Yeah. I I just I I remember This might be pushing back a a little bit cuz just cuz I remember, you know, we were sitting at uh at Permissionless. I think this was last year. And you were very concise and direct and said you wanted to buy the second largest uh telecom business in Latin America.

And it felt like, okay, you already knew what you wanted, what you didn't want. And but but and so was that still just kind of like a theory and you had to go out and do it and just confirm that thesis and that that's what you've done over the last couple of >> agree on price. Yeah. So like price dictates the return that you get. >> Yeah, yeah. Like again, Ethereum could be a great asset, great technology, terrible price. Mhm. It's not worth 300 billion. Certainly the market agrees with me since November. Like these things are not worth what they are. Right. So um in that particular transaction, it's it's a lot of it is price. As much as I like it, as much as I think it's a Telco is a great asset.

Um your Telco provider should give you more, should be your financial institution. You've seen it in Asia. It will happen in Latin America. Latin America continues to be a cash-based society. So there's a lot there's risks in that deal that I need to underwrite to then derive to a price. Now, if the seller doesn't want to agree with me on the price, I I walk away. Yeah. Yeah. Again, I don't want to do The worst deals that I've done are because I chased the deal and uh in ventures a bit different because the difference between 25 million and 30 million, you know, uh pre-seed or seed, like don't overthink it. It's like you're investing in a killer team that is going to drive through a wall and make a good investment. Don't overthink it. Yeah. Like don't nickel and dime on the venture side.

On the on where we're now operating, you definitely want to nickel and dime and you want to structure terms. You want to meet the team. And and in this particular case, we're still hunting. I mean, it's a core thesis that I have, which is I stable coins have really worked in the developing world. Look at Tron. Yeah. In the US, yeah, people are not like jumping out of their seat when you tell them, hey, you know, there's this thing called USDC. They're like, yo dude, I have Venmo. Like, what are you talking about? Like, get your head out of the gutter. Like, what are you guys cooking up here? Like, you're you're fixing a problem that needs fixing.

Yeah. But you when you go out in Mexico, uh you go out to Brazil, you see how quickly Brazil has digitized because the government during COVID said, "We're now going to introduce pics." Yeah. Overnight the economy went digital. So there there are risks when I When I say, "Okay, I want to buy the largest telco or one of the largest telcos in Mexico." If I get it at a good price, I get access to 15 20 million users. Mhm. Most of them are using remittances with someone like Western Union. Most of them are paying month to month, you know, $5, $10 at a time to buy data.

I can get data cheaper. Yeah. I can use data to get them to fund an account. And what And you look at a company like Nubank, 70 billion. They jumped on the opportunity in Brazil. Mhm. They had the timing right. They've invested a lot of money, but you know, they they've tried to penetrate other markets like Colombia and especially Mexico. You look at the customer acquisition cost, very very different than Brazil. So I compute all that in my thing and say, "I I'm going to acquire" Again, I think it was like Travis Kalanick uh the the founder of Uber Mhm. that went on uh another show, not yours, and said, "The most important thing is LTV to CAC." Like, what's the lifetime value of the user? What's the customer acquisition cost? If you look at the world through that lens, you stay really

really disciplined. Yeah. But for me, it's I think So if I look at go Here here's an experiment. Like if we could walk around, we could go on every booth out here and ask them like, "What is your customer acquisition cost?" And none of them >> Yeah. When I say none of them will tell you that. Like go talk to Beecham here. They don't know. They don't know. Yeah. And how crazy is that? And some of them will tell you, "Oh, you know, we don't know the user behind the wallet." I'm like "Okay well air drops don't really cost" And like they definitely they definitely cost you money. It's part of your equity. I mean like So I'm very focused and disciplined on acquiring a business with distribution. And I look at the world through LTV to CAC.

Yeah. Now, when I think about what does what what is LTV go from in a just a Telco business and people have $5 $10 to spend on a monthly basis for Telco. You're not going to squeeze out an incremental dollar for these guys. But they don't have banking services. And so I think it's like the classic D5 wallet that I didn't coin that term but I think it's very good. Um so all this to say is it's a core thesis that we have. Um it is a bit more fun and center. It's one of the rare cases where I actually do want to buy a business that is B2 B2C. Yeah. In a market that is very under penetrated. But you know, when I when I stay very disciplined on the price. And they came at me and said

we're going to sell this business for like three times the amount. I'm like good luck. Yeah. And lo and behold, I'm not going to sleep for the next 48 hours because I never want to chase a deal. Yeah. Yeah. That deal did not go through. And it's still still there. Yeah. Yeah. So um I I don't want to Here's what Inversion should never do cuz you always want to know in the classical inverting sense, know how you die and then just don't do that. >> Yeah. And then don't do You don't have to be incredibly smart. Just don't do dumb >> Yeah.

I can tell you don't over don't overpay. Yeah. >> Especially when you have data to underwrite right? But it's crazy here I'll I'll give you an interesting stat. So when you look at all the different FinTechs in Latin America, uh Felix Pago and Dollar App and um the market is willing to pay on average a thousand bucks per user. So and and the simple calculation is like if Nubank has X users, their valuation is Y, divide Y by X, you get to average price per user. So I have a like a comp sheet of all the different FinTechs in Latin America, all the venture rounds, all the public companies, Mercado Libre, Nubank, all.

The average and the median are there's like a pretty big divide cuz some of these rounds are pretty over overvalued. Yeah. But the market is willing to pay a thousand bucks dollars per user, fintech user in Latin America. So, if you're going to fund Felix Bago or whatever, they're using WhatsApp and stable coins to money can people can send money through WhatsApp. I'm looking there and saying, "Okay, this business is worth a couple billion and they have like 300,000 users." I can buy a business for 280 or 300 million that has 21 million users that are not fintech yet. Yeah. Oh, if only I could use stable coins cuz I know and I'm not theorizing like I'm not prompting the LM. I'm going out to the convenience store, calling a customer, meeting a customer. I

I hired like 20 interns in Latin America. I said, "Go and talk. Every week you have to meet the people." It's crazy like simple things. You want to become a better investor? Do things that don't exist online. Yeah. Now, I said just as an a fun anecdote. There's a really good investor. I've been talking to him for like a year and a half. Every so often we catch up. And every month he he's like, "Look at this a nice dashboard that I've created." >> Yeah. And I'm like, "Honestly, better than what I could do. Pretty impressive. How did you build this?" and all this stuff. And he's like, "I'm really I'm ready to go buy like a plumbing business or an HVAC business. It's all the rage these days. Like AI resistant businesses." So, he wants to go buy a traditional like a plumbing business.

I said, "Listen, your dashboard every time I talk to you looks better and better." I think you're using it. You're sourcing all these your CRM looks great. You have all this data on these companies. Uh have you called any of them? He said, "What just stared at me blank. And I said, "What is stopping you from calling the founder?" He's like, "I I I don't know." I'm like, "You realize AI is not going to do that for you, right?" I mean, maybe you can create a I'm like, "There's nothing quite like going to a conference, sitting down with someone, looking at them in the eye, and reading their body language, and saying, I'm There's a very human element that will never be outsourced by AI."

The temp- the temptation is like you're you're here and like we love Claude and we're using a you know, every the best model and perplexity and all this stuff. There's just certain things that if you want to go out of your way and do things that don't scale, especially that the AI won't do, there's massive amounts of value. Yeah. For us it's like doing surveys and like looking at a Mexican consumer and saying "Okay what is a consumer between the ages of 18 and 25? Do they have a bank account? Are they using remittances? How much data are they consuming? What apps do they want to use? Can we create a partnership with TikTok or Disney or ESPN?" Um and that the difference between the user that is 18 to 25 is different than 25 to 30 and 30 to 40. And so uh a lot of this data doesn't exist

online. Yeah. And so you're still very focused then on this market and and on finding a product where you can basically insert like a form of neo banking into a existing set of just of users or customers and effectively become like their banking layer as a part of a of a Yeah, I mean And better You guys have a great neo bank report. It's embedded finance. It's like integrating a financial solution that is powered by DeFi that is powered by um a stable coin. >> Um the the the the the other sector we really like is is is credit. Yeah.

Especially at a time where it's probably the most contrarian take that I I know you guys got to kick me out of this thing cuz I've talked for too long. No, you're [laughter] good. It's uh short duration credit. Okay. Now, this is at a time where you've had the most amount of DeFi like like hacks and DeFi have really gone up over the last year. Uh it sort of spiked up quite a bit. I think there's 132 million of of hacks and losses. Most recently the result Was it resolve stable coin? Again, an oracle problem. guys, you know, like come on. Like just get your oracle right. Um but um I think that there's there's a couple there's two things that I think we we're very focused on which is um fixed rates.

Most of the of rates, if you want to borrow, most of that is recursive leverage. It's like funds just doing loops and loops and loops and loops. Like again, back in the day I was a farmer, you know, you could go yield farming. Um so, it's very short duration. Cuz money's moving around very quickly in the incremental farm. But you haven't had like a fixed-term loan >> Yeah, like longer-term crypto. And the reason that is, I think, is there hasn't been quality opportunities on chain brought on chain. Um a lot of the RWA platforms have a principal agent problem and an adverse selection problem.

I've looked at all these rounds. I passed for the same reason, which is you didn't work at Oaktree. So, your underwriting standards are not going to be as good. And the stuff that you're bringing on chain is the bottom of the bottom of the bottom. Is it the it's the equipment financer that that couldn't get credit on in the real world and and and a word of caution for like if you're if you're looking at like capture these opportunities from an investing side or you're like a vault manager, you got to make sure it's quality paper. Let let let's for once crypto should avoid the problems of TradFi and what you're seeing in private credit and duration mismatch and asset-liability mismatch.

Um that's where we come in because if we're buying a business So, so in the case of Toko, right? Why I like it again is there's a lot of smartphone financing. They're right now selling those receivables for 80 cents on the dollar, 60 cents on the dollar. We can bring that on chain. Right? If if if the incremental user needs financing for their smartphone, I'll provide it. I own equity in that business. And I'll bring that credit on chain for someone else to take that receivable off my books. So, that's not my core competence, right?

And I think that you can get better terms on chain. And it's quality, right? You're underwriting against a smartphone that has value against a user that is paying you month to month. So, you can underwrite credit. I'm skeptical of like these vault managers because and certainly automated strategies. Like you have to be close to the customer to underwrite credit. This is why figure is perhaps the most bullish case of how this space is going to evolve, right? They took a segment of the market which is non like HELOCs, home equity lines of credit. And Mike said, "Why does it cost like starting like subtraction?" Yeah, I know. Why does it cost 11,000 for a bank or non-banking financial institution to underwrite a home equity line of credit?

Think of it. You know the zip code. You know a lot of data of that the house that you can underwrite against. So, why does it cost 11,000 bucks to do that? And Mike just I think just being Mike just built a really nice business off of that and he's not going to stop with HELOCs, right? So, in a similar way I think that credit credit on chain will be a big opportunity. I do worry that a lot of the hacks, a lot of the stuff the paper that is being brought on chain is not high quality. Yeah. Because the people that are bringing it have nothing to lose. Yeah. And they're just looking to sell it to somebody else basically on chain. And Apollo is going to jump on it because you know that there's a lot of brokers in that assembly line.

Yeah. We are not brokers. We buy the business. We underwrite. We put equity on the line which is junior to debt. And I think that's the way it's going to work. Yeah. Yeah. Santi, just closing out here. Um quick thoughts on just the state of this conference and the state of kind of institutional adoption of crypto. I I know you you kind of have this phrase the great valuation disconnect. It's clearly happening. Um close this out here. I mean it's very exciting. I mean I still go back to the days where I was showing up in the Bitcoin Soho Center trying to buy my first Bitcoin and I was in a suit and tie coming from JP Morgan trying to squeeze out uh when I was a young investment banker and people looked at me and saying like, "What is going on?" Right now, if I if

you're not wearing a suit and tie I wouldn't go as far as saying a tie. If you're not wearing a suit, like I'm not going to looking across the room. Pretty much everyone's wearing a suit. So, I think again this is this is the state of the market. And it's incredibly exciting to be in New York um to see a a of like even booths I just can't even recognize half the booths in the in this room. So, >> uh very different crowd. I think very institutional. Adoption will continue. Adoption will 10x from here. Your typical token is not going to do that. Uh but I do think that a lot of these opportunities a lot of these new companies are going to emerge. And in fact, I think the biggest benefactors of this technology will be companies like Western Union.

Let's see how much they implement and execute on that. But companies like Robinhood Klarna this year I'm paying a lot of attention to those companies in the public markets. And I want to really see how they can especially Klarna. Klarna is a really interesting one. Yeah. Uh payouts to creators, what stablecoin does to that business model. Once that happens, and the incremental company that reaps benefit and outperforms the index because of crypto, I mean, that that is that is what detonates the next leg up. Uh and that might push tokens up and I might be looking like an idiot here saying, "Oh, you you really picked the bottom." I hope that's the case. I mean, I don't want this space. I mean, I Lord knows it. I still have a lot of

over 256 Yeah. private investments of which more than 2/3 haven't launched a token. Yeah. And so, I want you know, I of course I want teams to win. I think in order to win you have to be smart. Um and it's not going to be let's slap a token. In fact, I don't think you should launch a token. Like kind of wait 6 months to a year, figure out how regulatory clarity is going to evolve, maybe to what you're referencing, Robbie. I mean, we're certainly not eager to go launch a chain until we have scale and users. Um but no, look, really exciting conference. Appreciate you guys having me on. You guys aren't tired Thank you so much. You haven't tired of of me coming here and regurgitating the same stuff yet?

>> that we got the inversion stuff here. Uh it was it was much needed. Nice little investor update. I think that folks will be happy to hear it. All right. We're we're building in the open. But no, thanks for having me on, guys. Thank you. We'll see you next time. Thanks, Alti.