The Stablecoin Boom: Why Institutions Are Betting on Stablecoin Growth | Round Table

Transcript

kind of to box earlier point like I would expect a ton of new issuers to enter the market but if those issuers can't get meaningful distribution um why whether it's through their own platform Integrations with uh Merchants point of sale payment rails defi um I would expect a ton of flops by the new entrance as well um that being said like even if you can get a few 200 million in underlying deposits in a stable coin um and you're a trafi institution with um hundreds of billions in assets under custody already the free cash flow of that vertical is still

going to be pretty attractive nothing said on zerox Research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice but AO Ryan and our guests May hold positions in the company's funds or projects discussed hey guys welcome back to another episode of zerox research uh it's been a bit some of the folks here from Das have finally rejoined us here uh on the show and uh I'm today I'm joined by picachio Luke and Mark we got a full research crew today um wanted to hit them up and get their thoughts and kind of big takeaways from the Das event but before we dive into that um we do have another

event coming up permission list coming up this year as you know the code is always the same 0x 10 and hopefully we'll see you there later this year um anyway jumping back into today uh let's dive into just real quick uh our thoughts on the markets lately I think a lot of it is confusion uncertainty um Trump and the admin lately have been kind of back and forth like Hey we're going to do tariffs they're going to be crazy hey we're going to be lenient on tariffs hey no the tariffs are actually going to be insane um the markets it seems like don't really know what to do with this like there are days when you know Bitcoin and alts are running and then giving it all back the next day or you know after market hours um what are you guys thoughts like are we doing

anything right now are we just like touching grass because this is crazy and nobody knows what to do how we feeling I have two things first of all I want to say that um everybody should get the permissionless tickets it's going to be like e Denver but better because it's not in Denver um the second thing is with regards to the markets um the only thing that I've been doing is farming stuff and I realized that I'm losing money on farming stuff so now I stopped doing that as well there's like no opportunities out there bar chain was quite good for some time um and then now it's now it's not as good anymore and like you said I feel like people are waiting for tomorrow to see what they're going to do how they're going to allocate um I think it's a good time to

probably actually don't know this pod goes live in a few days so maybe by then it'll be better but right now like April 1 it doesn't feel great yeah I still a view um kind of all risk assets equities and crypto is being in bearish Trend right now um that being said given the several weeks of consolidation and sell pressure we've seen I think we're we're getting closer to like a tactical multi-week multi-month bottom and my expectation for forward returns looking at like Q2 and Q3 this year is quite favorable um q1 we saw a lot of really attractive stable coin yields like you get 33% fixed on susd principal tokens

but those opportunities have uh really come down a lot to maybe like 10 to 13% and with that like the the expectation on returns for for risk assets like Bitcoin I'm I'm I'm much more favorable on at this point yeah I definitely agreed um looking at your markets kind of means I'm looking at Bitcoin as The Benchmark and you know q1 with down 12% and we were up like 50% in Q4 of last year so it's not as bad as it seems given like last year was like a 100% return for Bitcoin maybe more something like that so I and I kind of low key like these kind of environments where a lot of the noise in the data

start to get flushed out so like you know if you're looking at app revenue on you know blockworks data dashboard or rev like you can see who's holding relative market share and who's actually gaining market share and then I think like that's a good indicator for how well they might do in the upcoming I mean with the eventual next cycle Bull Run phase whatever you want to call it whether you believe in a super cycle or not when prices go back up is what I'm saying so I think now it's a good time to like just kind of like dig through the data a little bit more and like find those potential winners yeah I agreed with that I also want to say two things first of all I think a lot of people who listen to the Pod um like if you're retail you might be like oh no I'm down

um as far as I've heard and spoken to people most funds are also down like liquid I know liquid funds will held it all down um so that's one thing and the second thing is agree with you Mark is um there's a lot of stuff like the data has cleared up and there's you need to be looking at like what's actually gaining market share now what's becoming more relevant but the second thing is a lot of projects are launching um new and new updates like we have first of all we have new chains coming up plasma and one money um but we also have like EP is going to launch their own chain and they're also launching like her STS um and a bunch offchain Labs released on chain Labs which is like supposed to be their own form of incubator so there's a lot of updates going on um I think even

if you're not trading which is probably the right call I do think it's like I spent the past week working over some of my um research Frameworks and figuring out what I need to keep tracking what I need to not keep tracking and that's where Mark what you said comes in where it's like you need to to um filter out some bad data and look at like what's becoming relevant again and what's not relevant anymore um also monad and Anisha those are other l1s Mega Eve like these things are going to launch and you want to be you want to have a short list of what you are interested in um and then potentially try those out and see if it's worth what they come out at Etc yeah the the svm chains as well like yeah Fogo I think just announced their

testnet as well so yeah I definitely agree I mean there's a lot of new things that are sort of Brewing that aren't quite here yet but it's definitely one of those times where you want to be looking around and kind of aware of what's going on um before it happens you know early to the news rather than rather than late to the announcement um I think on your point on farming too like I would agree like Luke and Bach I think you guys both kind of commented on this like yields have come down the activity has come down you know General leverage and craziness on these chains has come down so those types of like free kind of yield opportunities have gone away though I have noticed that there are chains and opportunities like like Aptos andu they're doing like crazy incentivization programs right now where

you can get you know double digit sometimes 20% plus on stable pools um paid in you know in Native stable coins so like a usdc maybe fds USD um usdt and then paid in like a sui or paid an Aptos or um other tokens so there there's always some kind of opportunity out there if you if you look hard enough now obiously these won't last forever like they're not going to same with you know PayPal kind of had their run at at paying out pretty crazy incentives early on in their like growth attempt um you're not going to be able to afford that forever but you know for people who are who tuned in you know that's that's kind of maybe a yield opportunity you can go after um but let's maybe jump into D in the event um guys kind of

highlighted General thoughts on the market but like what are some of the big takeaways from D the event like you know I think you mentioned you know retail guys are down liquid funds are down obviously this event was pretty focused on institutions like how are the institutions feeling what are we thinking about and what are like the big categories and Trends apps Etc that that we're thinking about right now more heavily Luke Mark you guys are GNA have a lot more to say than I do so I'm just gonna put out the obvious stuff first of all um stable coins I don't know how the hell you're going to get exposure toward probably Aina um I know Luke has some thoughts on tangential money marketpl I'm like I don't know how much I like

that um that was the big thing stable coins the second thing is and mppa has tweeted about this um there's a massive Divergence in how we not we but like crypto Twitter or like I guess the natives think versus how the institutions are approaching it to in like it doesn't matter to institutions because they're like this is a long-term place I'm like five 10 years I think this is a valuable asset class I want to get involved I want to build it like I want to use it in the back end for settlement I want to buy the ETFs I want to offer ETFs whatever um versus for us it's all doom and gloom and I'm gonna kill myself and everything is going down horribly um so I think there's like a massive difference in how we view it um

versus how they view it and to them it's a very like everything is becoming legitimized um regulation is coming in so it's a lot easier for them to have whatever may come up um so that's like the biggest thing that I noticed is like I almost kind of left a bit disappointed just because I was like this isn't really representative of crypto like they just want to use it as settlement rails and buy Bitcoin for like 0.1% of their portfolio um but overall like it was like positive from them I want to dig on that Bo actually before Luke and Mark get deeper is this point I think it's not surprising and this is a conversation I we've been having on a lot of different pods Dan

Smith as well he's he's perplexed by this Gart tweet from weeks ago um but I think it's not surprising when there's a lot of sentiment now that you know hey they they'll come in and just use the tech and make all the money um and I I think maybe that's having a lot of retail people like rethinking you know maybe my alts or whatever my bags are aren't going to like perform because they won't acrew any of the meaningful Revenue in the future it's going to be you know the black rocks and the whoever else's that roll in and use the tech can you know get incremental revenues out of that either by displacing their existing like Tech Stacks um or offering new products and services like I'm curious on your thoughts there like has that modified your thinking as well just in terms of like you know I might not be

able to just like buy these you know public liquid tokens in crypto now because it's not so simple anymore you know if it's institutions in private maybe private businesses that are going to reap the rewards yeah I think we really need to wait for that like Market micr structure build to figure out how that's going to work out but that is one of the scary thoughts is like okay Unis swap is fantastic the underlying like contracts are great it's been working for God knows how long it'll like V4 is fantastic it's open source um I guess you can't take V4 but you can take V3 because now the license ran out um so Robin Hood could just

build that on their back end and the thing that these guys are great at isn't like they're good at backend but they're what they're great at is making the experience actually good um so that's what they're going to do they're going to take that they're going to put it into the Robin Hood app or whatever like other provider that you can think of and they also don't charge any fees like Unis swap charges fees but on Robin Hood you're paying different kinds of fees to different kind of people so it's like to them it doesn't really matter that much it's in a controlled environment um I don't know how how they're going to be approaching that I imagine you can't just offer any token to anybody um but yeah like I agree with what Gart said I think it's a scary thought if

you're but also on the other end like we're seeing a lot of these protocols also adopt um institutional facing products like a has Horizon if has I usde I USD I don't know the exact name but they they're all building out some form of an Institutional product so maybe those will do okay um I guess like money markets Etc I feel like those aren't going to be easily adopted by like Robin Hood and stuff um maybe they are uh ideally everybody goes their coinbase way where they are just implementing like coinbase implemented Moro um ideally they all do that I'm not sure if they will it depends on the economics and the incentives if I was them I

wouldn't want to deal with the backend stuff and I would just say backend like you guys handle this take whatever fee you have when I can just work on the front end because then you don't have to maintain an entire code base all the time um but we'll see I think we need to wait for that build to come out and we need to wait for coinbase I think will go that way of like Moro and then inter like adopting other Tech into it uh we'll have to see what the actual big guys do that's not a great answer but I hope it works no I think it was good and I think coinbase they showed their hand again because they're going to be using Unis swaps V4 for permission pools as well on base and that kind of continues that Trend um yeah Luke Mark let's continue

from there like other big takeaways Bach did mention stable coins um what else are we thinking about coming out of Das I just want to piggy back quickly on box same point like one of the talks in Das um one of the panelists mentioned that same same similar theme to gu's tweet that you know these web two companies Shi companies will just come in and build existing code and the talk was on the crypto the trade of the Millennia and that kind of first of all that kind of frames how these institutions are thinking about it like the title of the pan panel is in you know Millennia very long time years decades thinking right and then secondly the panelists were saying that public equities might be

that trade specifically the ones who adopt blockchain rails on the back end they might be in the position to have you know the most value capture from that and I don't think that's too far I mean like we're seeing it with coinbase already and then Robin Hood to an extent I mean these are obviously a little bit more crypto native crypto adjacent companies but you know we've seen trials with this before with like Starbucks's loyalty points program and other web two companies as well right whether they were failures or not you know so you know with regulations it might become a little bit easier to do the experimentations but even even existing crypto companies like Unis swap um you know

Bach was saying like you can you can you can use them you can integrate them into coinbase but they have unisoft Labs right they have a unisoft wallet and these are the front ends that they build to capture some of the some revenues from the protocol that they build that doesn't have any revenues and then we've recently seen arbitrum do something similar with onchain Labs um like as as a sort of an advisory Council to help developers build on it and you know there's a few others who are who are moving towards this shend crypto companies who've built these protocols that might not have the greatest Revenue capture versus market cap and plus token dilution and what they end up doing is they create they spin off the foundation and then they spin off a Labs entity which they then use to try and get value

for the team and there was a great chart that I saw where there's the capital structure where you have you know Bonds on top then preferred Equity then then regular stocks and then at the bottom of that pyramid is tokens and I and I really like that capital structure and it you know highest risk less rights to any claims on cash flows assets bankruptcy anything so I I kind of think that that's a good framing for how tokens should be viewed and valued going forward um but my over my overarching point was that it's not just web 2 that's trying to circumvent and bu use all of the hard work all the open source technology it's the crypto protocols

themselves as well yeah my takeaways for das were is probably my favorite conference I've been to in crypto which gets me a lot more bulled up for permissionless and just a few months the quality of attendees and speakers was incredibly High and the sentiment was serious focused and had high intent and there was no signs of froth uh nor sorrow from q1's uh poor price action which was really nice to see and experience um in person at the conference themes that I thought were most pertinent were certainly Bitcoin and stable coins um

nothing about the conference got me bearish Bitcoin dominance at all um and I think two themes coming out of it that stay bullish on are Bitcoin dominance Trends higher and so does stable coin dominance as well um particularly with pending regul in the United States with the genius Act and the Staple Act that sure we'll touch on later in this podcast but I would expect a huge influx of new issuers to enter the stablecoin market as basically a First Avenue to both utilize and offer like an onchain crypto product um looking at the stable coin Market at

large it's continued to make new all-time highs and the total stable coin Supply I think eclipsing just under 240 billion um most of this growth has been driven by tether um followed by circles usdc um those two combined make up about 90% And just under of the total uh stable coin market and really I don't see this trend stopping um particularly as uh stable coins on chain on these chain venues can offer like pretty attractive risk premiums to Falling risk-free rates in trafy markets um I

think that the incentive to both deploy and utilize stable coins on chain and in defi for lenrow or speculation um is just quite compelling and yeah looking at like top stable coin issuers tether number one Circle Number Two And there's really this huge long tail of uh other issuers that are either centralized or decentralized that make up a few billion or just under a billion in total Supply that really have been completely unable to gain U meaningful market share against those two incumbents um tether and circle but that being said like if we look at tether's profitability perhaps

we could move to one of those slides um tether like demon rates super normal profitability and margins compared to pretty much any business uh existing or ever um looking at like their profit per employee um this is of course taking their uh third party audited financials um for face value their profit per employee is um sometimes like 1 to 200x the level exhibited by uh major us-based tech companies or traditional Financial firms and like in the presence of any Market that like

really it isn't too hard to issue the stable coin and it'll only get easier with the pending regulation I think the incentive for these trafi entities to enter the market and try and compete in the same vertical that's offering these super normal margins um is just so high and attractive um and I think like once the genius act gets rolled out and there's this uh red carpet for trafi institutions to enter the market you're going to see a huge influx in new issuers so yeah big big theme from Das is bullish stable coin and stable coin Supply um and as an analyst that covers stable coins like

I'm already so exhausted with the number of USD with a prefix or suffix tick that we need to monitor um I think it's it's only going to get a lot worse from this point in time this episode is brought to you by Ledger the global leader in digital asset security celebrating 10 years of innovation Ledger Remains the most secure Hardware wallet for your crypto and logins trusted by 7 million users and securing 20% of the world's digital assets follow the link in today's show notes to grab your Ledger now do you have thoughts Luke today on the genius and stable bills acts as they you know I think the are sort of evolving they're going through um the sort of governance process of you know the US government

today um what are your thoughts there just in terms of like what we're seeing in the language and how that might impact the existing sort of like defi stable coin landscape I think there's like maybe a caveat there in terms of how we think about like decentralized and centralized issuers and and what that might mean for the future like Bach mentioned Athena earlier um you know what is Athena versus like tether Circle or some of these other big institutions that might enter the space um look like in a few years with with some of this legislation in in place yeah so right now it looks like the genius Act is marginally the the front runner piece of legislation um that will likely get passed first

compared to the stable act um genius Act was moved out of the Senate Banking Committee on March 13th and an 18-6 vote in favor of it so is now going to move towards the full Senate chamber for a debate revisions and ultimately a vote um at large those pieces of Regulation are highly favorable for us-based centralized issuers um I think if you're an existing us-based depository institution um you really have like a a first step in getting the required approvals and Licensing in incorporation to be able to offer a payment stable

coin um the regulation is less clear about the implications for decentralized issuers and offshore issuers um that being said there is a clause within the bill that basically mandates the treasury Department to perform a thorough investigation on algorithmic or endogenously collateralized stable coins which could potentially include uh maker Dow and Athena into to that bucket um but at large like issuers must maintain onetoone cash reserves um holding deposits in cash cash equivalence short-term government securities or

money market funds and have like publicly available Redemption policies um so it looks like basically just a green light to Fork the tether and usdc model um and to do so in a regulatory compliant fashion which a lot of these traditional institutions have needed that that uh green tape if you will to enter this Market I guess there's a like you mentioned there's maybe a risk there that we sort of provide a what in the past has been a a roadblock for everyone or anyone to enter the space here in the US might become a sort of like limited um Lane for you know like you mentioned

if it's only these centralized specific us-based Central issuers um that might not be so favorable or positive for like even a tether or if you consider something like an Athena in the future um you know I don't know I see a lot of people very excited about like tether's new chain that's upcoming obviously Athena is working on their own chain and you know trying to build out this large um decentralized stable coin but you know basis point trade essentially to back this thing um I guess there's maybe a massive risk here that the US just says like no stop like we're gonna we're going to pick our favorite guys and and they're going to be the stable coin guys I don't think they'll do that I think the bigger

risk here is that is actually due to fragmentation um and every bank has their own little stable coin um and we apparently this is how it used to be like how money used to be is like it was and you couldn't exchange and then they would apply discount rates based on um how far you would have to travel to actually exchange that so it would be like per bank I would get like the bank of Danny and then Luke is all the way over there so I would have a discount rate for it um I think that's the bigger risk is fragmentation and I actually think that's one of crypto's probably best um use cases in like for stable coins best use cases because you could just easily build a wrapper and you could take on that risk as a um as a

product think that's a I guess I want to poke that like do you think that's a real risk because if I use any of the brokerage brokerages today and I want to hold like money market funds I mean all of those are like like a their own separate wrapped version of like treasury bills of centur right like Fidelity has whatever they call it fra or something and other place has like spaxs and these different just wrapped versions of like what are essentially USS that you hold in your account when you hold cash so I don't know if it's a stable coin behind the scenes in in the app does that matter I don't know Bank risk seems to not matter until it really really matters so I'm not like I don't want to say it won't matter but um like you said like it's probably at this

point fine like I said I think the opportunity there is that we already have this in crypto though like if you're buying um what's a good example I can't think of a good example but like there's pools where you can oh free curve is a used to be four um and then it was you know USD um so that was it and we've had this in crypto for a really long time so I think for us it'll be relatively normal um I do think that if you're a regular human being and you see oh like this is um Bank of America USD and then there's also like JP Morgan USD um that might be a little bit wonky for you so I think they're gonna have to build out some

rappers um on the other end I think this is actually like from what I've heard and seen um they do want a relatively broad array of providers like even on the the by by decentralized here I mean tether which isn't decentralized but I'm just GNA call it it's more decentralized than Bank of America so I'm gonna say that um so I think it's gonna they're gonna be able to I think a lot of stable coin providers will be involved and I'm like Paulo was posting fits of him in Washington DC so I'm pretty sure they're gonna be okay um I'm sure the fina team has everything locked down uh usdc should be okay so I think we'll see um all of them get some form of the pie

they might get squeezed out by Banks who realize that there's a lot of money in this business um one thing is Luke you might be able to confirm this I read this thing about stable coin yields not being returned right am I wrong yeah per the St per the stable act um it's forbidden to have a yield bearing stable coin as a payment stable coin yeah so if I'm Bank of America and I can issue a stable coin and just keep all the T yield I'm I'm doing that and there's nothing that anybody can do to stop like it's a money making machine tther has been making money usdc has been making money I wouldn't doubt that they don't get like I I imagine they're

going to be very aggressive in getting in this business if there's a lot of money to be made but I have heard Bankers specifically say that they actually don't want to do it so I don't know to me it seems like a one of the easiest opportunities out there for like a bank to make money the the yield bearing no yield bearing like Luke correct me if I'm wrong but this feels like more of a technicality than anything right because like yeah my dollar in my bank aren't yield bearing technically but when I deposit them in the right place then I get paid by the bank who's generating the yield on on their assets elsewhere so I don't know if this is just like the asset itself can't just like sit there and acrew yield like naturally be how it's designed and they have to like

obfuscate the potential to do that yeah not obice gate but maybe like wrap it put it behind a like sort of regulated interface essentially maybe that's the way to say it yeah I think you uh you hit the nail on the head there um about the technicality of not having the instrument like red denominate um and maintain its one toone parity as a payment stable coin um I think a lot of that line item in the bill is also um to an extent to protect the profitability of us-based depository institutions and allow those entities to basically pocket the yield from the government securities um if it if it didn't have that line I

would expect uh kind of a race to the bottom where all that yield gets returned to token holders um and really just the issuers clipping uh 10 bips as opposed to the full 100% of the treasury rate look one thing is like Apple pay offers 4% on deposits but not everybody's there's a limited amount of money that has flowed into Apple P so I'm I'm wondering if if they could have just gotten away with it this isn't very crypto related but I would like to hear your thoughts on this because they're offering like I'll nobody uses it yeah I was gonna add and say like doesn't the race to the bottom happen anyway right like there

are many institutions where you can go and get what is essentially the full risk-free rate and then they you know they take what a couple some bips on that and they pocket that versus you know a savings account that's only giving out like 0.1% and pocketing everything yeah so at large it seems like pretty much anyway anybody can get away with it as long as they're an offshore issuer not offering the instruments to US based persons um which is of course a difficult thing to gatekeep except for the point of mint and Redemption um kind of to Box's earlier point like I would expect a ton of new issuers to enter the market but if those issuers can't get meaningful distribution um why whether

it's through their own platform Integrations with uh Merchants point of sale payment rails defi um I would expect a ton of flops by the new entrance as well um that being said like even if you can get a few hundred million in underlying deposits in a stable coin um and you're a trafi institution with um hundreds of billions in assets under custody already the free cash flow of that vertical is still going to be pretty attractive Ledger is the global leader in digital assets security trusted by 7 million users in securing 20% of the world's digital Assets in recent years Ledger has built a comprehensive ecosystem of products

and services making digital ownership more secure and accessible for everyone Ledger's newest devices Ledger stacks and Ledger Flex introduce the world's first secure touchscreens making it easier and safer to manage your transactions and assets alongside Ledger stacks and Ledger Flex they have also launched The Ledger security key app offering a safer alternative to traditional passwords and enhancing your digital security follow the link into Today's Show notes to get started with Ledger today I want to bring up um plasma and the other guys and specifically in we mentioned that these guys are launching their own chains and I think Plasma's kind of positioned to become kind of a home and so zina's convergence

for for these um for these new stable coins because as far as I understand Tron has gotten actually quite expensive to use um which is why they've decided to launch plasma and then have like zero gasped um I imagine both plasma and EAS conver converge and um one money Etc make a bid for these new new um stable coins that are going to be launched by Banks and whatnot um so that's potentially something to watch out for um and on that end for defi integration I think they're like I think what PayPal did with the 20% we'll see a few more of those instances if somebody

actually wants to get involved in Defi and I don't think that they necessarily have to but if a bank I guess like a or like whatever payment provider some form of a traditional financial institution once to get involved I think we'll see some elevated yields um maybe later on this year early next year from some of these stable coins that want to increase utilization what what do you think about the success of plasma they say it's going to be a decentralized chain TBD but they say it's also going to be free transactions and if it if that's the case it's going to be the first real major like free transaction stable coin purpose chain like how do you think you think they're going to be able to handle

that in Mass well I imagine this is like just them going to they don't need to make money on plasma they just need to increase tethers um like usds usable I mean tether already makes billions of dollars they don't need to do anything they just like more from the spam is yeah the spam will have to see I I I imagine they have some thought process behind that I'm sure I haven't read their docs yet have you read their docks no okay very so two guys haven't read their dos I like hyper liquid has no gas fees but they have they take trans like maker

and taker fees so they kind of um do okay off that I imagine what they'll do is they'll have Whit listed contracts um potentially like REM add some form of kyc um even though they say it's going to be decentralized I am like surely they thought of that and they're not just going to launch a chain that's going to get spammed to death yeah they're using Hot Stuff consensus some version of it so I guess we'll see like basically what Cosmos uses yeah yeah and and I guess I mean decentralized is not it's like a very gray word and yeah a very sliding scale and we've seen things become generally more centralized than maybe they would

be in the past and still be referred to as decentralized so you know if that means it's only like a few validators versus like just one or two um maybe that's decentralized enough for the purpose but yeah I I think we'll kind of have to wait and see so if there's going to be this huge stable coin boom like what are the best ways to play the opportunity do you guys think get some private Equity into pakos no but that's a joke but I I don't know I think Bach has been rattling his head on this for some weeks now it's a I've decided it's aen finish up sorry no no no I was I was keying you up I want

to just add to Mark's thing of like if you're do you think it's Athena because you're excluding private Market opportunities or do you think it's Athena anyway like even if you ENC account for the fact of of private opportunities I wantan to I think it's meaningless to talk about private Market opportunities because not all of us have the same access to private Market opportunities like if you're um so in my mind I'm just I'm kind of baiting you because we're getting back to the point of like are are people in this space and is retail upset because they're missing out on the opportunities that they think would otherwise be a great like entry into like the stable coin Market Per Se dude Felix got

everybody got access to the plasma R I didn't get it so I have to do my work in the public markets um I think it's AA still like there's nothing else that I can even think of maybe maybe you can play other Stables like liquidy and stuff but I feel like those are not like liquidy to me has always been the case where you buy it if like a stable coin is De pegging you buy liquidy like that's it and it goes up 80% that week and then apart from that you don't touch it um I do like the team and I like the product like I think it's cool you should have a decentralized alternative but like that's what the token has become um versus withina I think it has the stable coin headwinds um and it also has its own like guy is a

good founder they they have a pretty clear road map um that makes sense as well they're not like launching a social fight platform on polygon they're like building out actually useful stuff for deina product um so I think it's that I know Luke has some horrible takes on money markets that he can I want I want to tea up Luke um but I I do think if you want to go like tangential and not directly trying to like long a stable coin team then like my first thoughts would be something like maybe a Pendle and you can a pendall like product where you can bet on like interest rate markets in the

future if you think institutions are going to get into the space um you bring up a good point there around borrow lend but Luke is kind of the genius here so I want him to to espouse the thesis yeah usdt to5 is the Play No but um you can't really get direct access to a lot of um the private opportunities um I would say like the first order consequence of the opportunity is like direct exposure to the winning issuers that are gaining market share within the market um which does I would say include Athena um ssde usde has been an incredibly attractive uh product that's

offered like very compell rewards but if we look at like the second order consequence of a growing stable coin Supply we've seen about like 30% of the total stable coin Market basically be held by centralized exchanges for trading pairs at or as margin for derivatives contract but then if we look at the second top venues for utilization of stable coins on chain it is predominantly money markets um with a in particular having the the most stable coin deposits followed by uh Sky savings rate and maker and then Moro another

money market as well so if you have this Outlook that stable coin supplies growing from 240 billion to 500 bill or a trillion I would expect a lot of that maybe not all but certainly a lot to end up as liquidity provided on money markets and I think there's good reason for this as well a lot of these venues particularly in a bull market will pay a stable coin supplier a attractive risk premium to the risk-free rate and I think the yield that you need to justify that position um is really not that high uh if you think of a they've originated

currently about 12 billion in loan that has turned over multiples of times and they've only incurred I think like 3 to five million in bad debt historically so the yield you need to justify lending secured and over collateralized on chain um I really don't think you need that much of a premium for it to make sense and a lot of these venues have consistently offered that um that being said if you were to see bare market trends continue and the yield you get on stable coin Supply positions on money markets where to drop beneath the risk-free rate um I would

get pretty bearish uh the the trend in the overall stable coin Market um then one I want to highlight in particular is if you expect um a lot of new decentralized issuers to enter the market we've seen Pendle be um perhaps the premere go go to market venue for getting liquidity and deposits for um new stablecoin tokens where frequently the decentralized issuer will offer boosted incentives um to either the LP on Pendle or the YT holders which allow the yts to be um pretty effective vehicles to get leverage exposure to air

drops or emissions from that issuer so then what happens is everyone Apes the it it drives the implied yield higher and then you can get really attractive fixed yields on the underlying stable coin and of course Pendle as a protocol basically gets to clip 3% of the overall emissions um and yield paid out to the YT holders and we've seen pendel have huge success with um the launch of Athena's usde um and a number of others uh level um resolve I'm sure there's more that I can't even name because I can't keep track of them but that one in

particular I would expect to uh benefit from decentralized issue a growth I do want to make one caveat here and that's that Luke I agree with your thought of the money markets and Pendle I do think that there are good ways to get exposure to this um two things is what is the new like who are who's the new class of stable coin issuers that is coming into the market like is it mainly going to do defi or is it like I imagine it'll be payments and maybe people parking into um this was a big D takeaway for me was settlement like people don't really care about decentralized Finance they really care about settlement they care about t0 um

no like T2 and T1 um so I imagine a lot of it will probably park into like Biddle other onchain um uh kyc like real world asset funds so a lot of it could also go there which is something that you need to be careful about just because there is like 400 500 billion dollars in stable coins coming in a lot of it might actually go into those funds and then um just sit in like some wallet for payments or it could go into under collateralized lending which I feel like will maybe take off this time around we'll see um so that's something to to consider before you say well you didn't say this Luke but I'm

going to make it seem like you said it like oh all the new money is going to go into a and Pendle I don't know if that's going to happen but something to think about I will say that Pendle has come up on your radar if you're monitoring market share on Revenue Pendle is definitely a good one but I do think like this you know during Das obviously stable coins a big thing and then this this topic of how to get exposure to it is and then you know the main way was maybe private Equity but everybody can't do that which kind of was another big Topic in Das which was tokenization you know and you know just you know quick Spiel tokenization it it's kind of like a no-brainer for a lot of these institutions it you know it enhances liquidity profile of the assets you know

you get some C savings from efficiency you can tap into other permissionless networks you know basically democratizing access of it it's transparent it's secure you know and it's programmable you can composable you can do more things with it and but I think most importantly it's it it opens up like different avenues for generating Revenue um which is probably one of the most uh like under talked about topic about tokenization and so with the same private Equity private Equity like we've we've seen public equity on the Chain already with back and stuff whether or not that's legal or regulated that's not I'm not debating that right now but it does exist and it's it's a more it's a low hanging fruit but I'm sure most

people in Western you know the Western countries can get access to coinbase stock or Tesla stock if Apple if they really needed to um it's more it's more these opportunities that maybe some of us many of the listeners and who here who can get access to is these private rounds and I would love to have more tokenized opportunities on chain like I would I you know I'm looking at you know years ago I was looking at trying to get access to open Ai and and or or maybe SpaceX stock and it's a very roundabout way through Shepherd something a mutual fund I get 1% exposure you know it's not it's not very clean um and I think by you know private Equity private Equity onchain is going to probably make

private Equity look worse in terms of its profile because I I think private Equity looks good because it's not volatile and it's not volatile because it trades very infrequently but as soon as you get put some liquidity behind it that sharp ratio is going to compress um but I but does it really matter like I want access to these private markets and and you know IPOs are becoming less frequently not just in America but everywhere around the world um companies that do IPO are staying private for longer so a lot of the a lot of the wealth generation is being made before these equities even become accessible to the majority of people so I think if you can open up tokenized private equity and this is not only good for investors but

it's good for Founders too to for raising Capital um you know not having to deal with the headache of maybe I don't know uh series a or I mean sorry not a series a the IPO process with all of the legal and and paperwork that comes with that if if they can use less resources in raising money and just tap on tap into onchain liquidity I think that would be that would be a great um great step like zero to one move for finance Mark I completely agree with you on the public Equity side I do think that it should come on chain and just for like one very simple I think private Equity is more important but I think there's a new class of investors that are increasingly using crypto as their main venue of buying and selling stuff

like there's a lot of money in crypto um active money as well so I think that's definitely still something that people might want to capture um especially since a lot of people don't want to take money off of crypto because they view it as like a safe haven and that they just want to keep it there and this isn't like non-western countries I think maybe like um a significant portion of that is also in places where you can get access to test and Apple stock but all your money is on chain or most of it is on chain so you want to you want to use it that way I also want to be able to lend my Apple shares and buy something else too you know plus plus collect a dividend hopefully the I do think it's interesting seeing Larry thinkink and

like Vlad tenev of Robin Hood on the same page on this one where they're very I think they're very interested in using tokenization as a vehicle to get like retail and like the democratization of private markets like made a possibility and I don't know if that just the tokenization and putting those things on chain prompts that discussion of like at least in the US this is a a thing where you know KY and in credited investor laws would limit that level of activity today though you know these guys have Global scopes for their businesses so you know at least I guess outside the US that might be a little bit different but um I do wonder if it's prompting that discussion of like is this just like the next step of you know the Robin Hood

Playbook was you know commission free trading just let anybody mother and brother like go ahead and buy stocks and then later crypto like on their phone um if that includes private equity in the future that's kind of like just an additional step of like trying to coales all these assets under one roof um so I I just think it's interesting to see the like super retail focused Robin Hood like fixated on this idea as well well as like the massive institutional player Black Rock Larry like fixated on it as well that's I think that's usually not so common to see like those two sides of the spectrum like in complete alignment well both are going to make a lot of money on it so

yeah that's the big takeaway but it's interesting just in this particular instance like the the future Direction it seems that we're sort of headed that way um and it's just a question of like what are the regulations to come that are stopping them no yeah completely agreed I think that was the big big what I said at D was the Divergence in um opinion and thought between CT native and like the big guys is is really that it's like you have V and Mr Larry think agreeing and then we're all crying in the casino so it's like everyone's crying holding their alt bags mad that they couldn't buy the private

round of of their favorite stable coin team um awesome I think that was a great conversation we got a little deeper into the weeds than I think some of the previous combos um I guess if you guys had one big takeaway for next couple of weeks next couple of months for our listeners what are we looking at what are we digging into I mean we talked about stable coins tokenization um Luke you mentioned money markets like what's what's our big picture right now we're we all we're all crying in the casino and there's no winning no I think I'll say a few things I think you should be looking at um Echo stuff I imagine there's going to be some interesting stuff coming up over there

um apart from that like I said there's a lot of new chains I think you should be building out some form of like understanding of them and what um like if you're interested in or not I know people who are interested in monad and not interested in Mega E some are interested in Mega E and not monad um plasma e like whatever it's coming up you should be looking into those um I like money markets in epina but I'm sure that will get better and better ways of um getting exposure to these things like I wouldn't be surprised if you if they would launch um public raises on Echo and stuff since that's be that's become more and more um normalized um apart from that I think it's like really the time to just hone in on stuff

that you haven't looked into like I know everybody has a list of things that they need to do in crypto and they haven't done it because the bull was there and now we're like kind of in a lull so I imagine people should take some maybe a couple days to really read into Moro or uler or something Oiler I'm gonna get killed if I say youer again I think I think eeko is a good shout I also just want to reiterate what I said at the beginning of the show like start to look at more fundamental datas who's gaining more market share you know these more quote unquote defensive plays in crypto even though I don't know if that really exists but then also you know if you look at like Leverage data annualized basis you know SKS like it's

really come down a lot like even to like pre-election levels like way before pre-election levels November 2023 levels in some in some cases so a lot of the leverage has come out to the system and I might be a broken record when I say this but I think ETFs are some a key like metric to look at um into Bitcoin and it just we just seem to be in a position in the markets where Bitcoin will rise first and the others will follow and so with leverage so low if you can monitor you know Bitcoin ETF flows movements get some kind of signal on that why not you why not have a position there as the starting as you start to move down your risk curve you know so I think those

those two things would be my big takeaway for the next couple of weeks yeah building off that like it's hard to find a lot of relative strength if any in the alt complex right now but looking under the hood there are projects that are gaining deposits gaining borrows or gaining market share and I think the token prices haven't necessarily reflected that re recent growth in those particular projects so if you can look under the hood and filter for the relative strength the fundamentals I think those projects will be best positioned for the next leg H

when it does come awesome I like all those uh maybe just a tie it back to where we were just saying I it it's funny that Larry thinkink Vlad tenv and Kobe are all on the same page they want to democratize access to these rounds so um check out Ekko if you haven't already it's an interesting one um and maybe you know pay attention to what Larry's saying when he's talking about his plans for the future because it's seems like that's going to be a big big impact on this industry going forward but uh thanks guys for coming on thanks all for listening go ahead Bo make sure to buy permissionless tickets using zerox1 it'll be in Brooklyn see we'll see you at permission list in a couple of months all right see you

guys [Music]