TradFi is Coming: Has Crypto Changed Forever? | Analyst Round Table

Transcript

it was trafi that created the 2000.com bubble it was trafi that created the real estate Bubble at the end of the day humans are emotional they're greedy and I I will say um having some way to Value protocols right and obviously a cash flow-based DCF model is is one way to do that that would tether some valuations closer to reality but I don't think trafi and ing the market is going to lead to less bubble like behavior in the long run 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 bacho Ryan and our guests May hold positions in the companies funds or projects discussed what's up guys welcome back to another episode of zerx research today I'm joined by Danny Ryan and Daniel Shapiro a new firsttime guest uh from blockworks research to talk about all that's happening in the markets and across crypto um first of all guys welcome back how are you all doing fantastic doing great yeah doing well happy Monday everyone happy Monday everyone um just as a reminder if you're a listener it is actually Wednesday what

are we all looking at in the markets what's happening yeah I think one to bring up quick is lots of activity on poly Market um there's been a lot of excitement over the past week you know political related activities people trading election outcomes um you know Biden dropping out um there was a lot of excitement and movements in the in the pricings of the of these events over the weekend and over the past week so um we've seen a lot of excitement around poly market and I think you know you've we've seen people proclaiming on Twitter that it you know it's an app with like the the most clean and secure pmf I I think there's maybe some still questions there longer term about that you know post elction um does that does that remain but um definitely some excitement around it how much do you think other

ecosystems have offered poly market for them to launch on like how often do you think that's happen so far because I feel like it's definitely been done right like if I'm an evm I'm going to poly Market probably like once in mon from saying hey guys actually we have this huge program specifically for you why don't you come and launch over you okay maybe this too risky of a topic tough to say I you know I don't have any inside knowledge so I don't know but I think your point is fair like if I'm running Bas or blast or any of these chains or salana or you know any of the main competitors these days like you see

the success and the activity there and um it's the same with all these apps that are really popular if you're the chain that has it you you know you get a lot of activity and excitement and fees and and user metrics around that so um it's certainly valuable so to your question on you know what they're throwing at them I mean who knows one more thing I have with this one is pmf does poly Market have strong pmf or does it just have more pmf than everything else that we're like wow this one has incredible pmf yeah I don't think that it's clear I mean clearly like I've said in the past this has been one of the most successful applications this ccle and great like that's fantastic it fulfills its Duty um but it's participating in a market that

historically has not been um hasn't reached escape velocity let's say um there may be some reasons for that you can think of like capped payoffs you can think of like the um it's really not necessary like within a portfolio like it's not a very obvious Hedge for like a trafi guy right like you can probably get more interesting um you can express more interesting hedges in traditional financial markets than like directionally betting on a candidate or on some event um so you know I'm not exactly sure why prediction markets haven't hit escape velocity quite yet but my my kind of

hunch is that the way to differentiate itself poly Market in particular is to like the way dex's win compete on listing different markets unique markets [Music] um it's kind of clear to me that the most successful dexes have had the broadest listing strategies I think back to FTX and now hyper liquid um it's how binance kind of rose to fame like to the enabling users the ability to get interesting and differentiated exposure as opposed to like copy pasting everything from predicted which is is another popular and successful

prediction market like I think as the best strategy going forward um what products they'll offer like after election season like TV not sure yeah I think um actually the the first application ever launch on ethereum I believe was augur which was a prediction market and it never really took off um I think to answer your first question maybe they're waiting to um for some interoperability infrastructure to become more developed and maybe have a CR train a cross chain strategy as opposed to just separate deployments on multiple chains um with respect to their product Market fit personally I think it's it's very clearly the election that is um generating that hype right now I

think problem with prediction markets historically is there's just very low liquidity and that drastically limits uh their ability to be adopted and if you think about you could say people putting risk gone in the markets anyways typically you have some type of thesis right like I think this president's going to be this President and so therefore these assets are going to do well and so there's other ways to um I guess represent your thesis and different assets you can buy than directly you know betting on some type of prediction Market outcome so I think it's naturally pretty idiosyn idiosyncratic events that you can even bet on and that kind of limits their

their growth um so we'll see I you know I I would expect post election for it to the hype around it to kind of die down but I I don't have you know strong Alpha there per se yeah and in crypto we have a very clear way of expressing that bet which is a meme coin on Solana that's misspelled the spot man way um for political candidates so I we'll see I I think people are becoming increasingly political um potentially because everybody's online all day so I don't know how like like you said I think maybe after the election cycle we'll see but I mean until then I think everybody's just constantly trying to

put something some form of bet on a candidate so yeah I was going to Echo the same point I think really to measure their lasting success and and you know P the question around pmf is you know post election how does that success continue um if if metrics drop off because that was the main reason people were going there then they either need to find you know additional things to to bet on um outside of Elections um you know maybe the Olympics maybe big sporting events but you're competing with sports betting apps in that in that case so there's a lot of competition around these types of things where in comparison to to elections which pre previously have not been so um

explicitly traded yeah there there's an interesting compounding Trend in the market where um look we're we're like financializing these um these like we're financializing like world events and like social happenings so like for example post Trump um assassination attempt if you went on to pump. fun and spread your bets accordingly like you probably did very well like I know that that's not where my head was at but some people's were and there's evidence of people doing very well post that on chain there's also like this morning we're watching I think it's like this new laser eyes magga meme that

different um people in technology are using uh as their profile pick on Twitter dark me if yeah yeah something like that like if you bought and again if you're oriented this way and your first thought was like okay this is an emerging Trend like go to pump. fun and do that thing uh buy whatever token represented uh that kind of social movement like again you did pretty well today and yesterday so there is this kind of like emerging financialization of like social happenings and like poly market like kind of fits that Trend and as like the cycle carries on um and the longer we go without recession like I assume this activity is going to compound you're

seeing that market develop on the pump. fun side where pump fund tokens represent you know you know Danny we were looking at into this anywhere from 20 to 60% of sana's onchain volume in a given day um like poly Market can definitely catch some spill over from that like emerging onchain Mee Market we're already kind of seeing it on base happen as well so like as these events get financialized like maybe New Market behaviors emerge I I don't think that that's crazy um I don't think that that's a crazy kind of like long-term view of the space um it's just like does poly Market have enough cash like stick around during a bear and then realize that on the other way out like who knows I mean didn't they raise 70 mil from the

founders fund they should have more than enough cash to stick around a bear at this point then I yeah I in my comment that then they'll be fine yeah I think the other question to your point Ryan is like you know at a point you end up competing with with mem coin activity as well right people make like on pump.on and and these other application you know there's a base fund as well um people are making meme points for all events in markets there were events related to the the Trump incident last week so um you know I think the question here is if um you know is poly Market GNA have to then compete with like memec coin activity right people are using meme coins as means to basically trade events as well like like

you mentioned um the activity on pump fund is is a good example people are making tokens for everything the the Trump incident last week I mean there were ear coins no ear coins um stuff of of all this variety so you know you then have to ask the question if if if these apps are kind of um leaning towards retail participants um you know they're relatively lower liquidity when they start and um they're quick events that happen you know in in days or hours sometimes um you know these are the competitors are you know a meme coin that people are hoping can do 100x or a a betting Market where maybe you're betting on something that's 50/50 or 2575 and you're you know those are your expected outcomes so um I think that's a there's like a fundamental question

there of will you know retail users decide to go one way or the other yeah I think I think that that's right I think that like it's it's an uphill battle I think meme coins are the are far closer to pmf um I think that they're very low friction uh I think that the payoffs happen quicker which is very important for real retail applications you want a tight feedback loop and not a long feedback loop um uh you want to kind of get action like betting on the president like immediately that's all indications from like consumer application market tell us that that those applications are more successful so yeah like um as a pair trade I'm I'm bullish mem coins and and short poly Market frankly um but

like does a social Norm happen where like we expect just like this activity to steadily compound over time like I'm not ruling that out mcoins have had pmf for some time now like 2017 one thing that I wanted to add to this is that I'm not I think poly Market's cool I think like it actually does have it we'll see what happens after the PO like the election cycle but I think it's like it's definitely the only useful app on polygon and I would say it's like one of the best apps on the evm right now I mean I can't think of like just consumer facing I want to start hedging um the bearishness of people from now on because we've been

getting a lot of comments about I think we're falling into Ryan's trap of making everybody no that's not true he's not bearish yeah I was just gonna say not bearish just just bullish meme coins so yeah that's true that's true no I just want to hedge it out so that zerox research isn't known as the bear the bear podcast that would ruin my ego and my psyche if people knew me as the bear talking about things that you cannot be bearish on the E ETF tomorrow what are we what are we thinking Ryan what's the PA trade here say that again what's the pair trade here what's

the I mean the most interesting thing about the ETF is the sole eth pair um that that's the most interesting thing um look people try to get in front of these trades um The Narrative is that flows just indiscriminately lift price that buyers do not care they cross the spread um however uh so e is up like 30% over the last month um I think you know I I have my hunches as to why like from a relative value perspective eth is trading like at over 300 times uh tev or total economic value which you can think

of as like a price to sales ratios for chains Salon is anywhere from like 82 100 depending on the day depending on the look back window right so there's just like an very obvious relative value trade there and I think that as the incremental dollar into crypto becomes more institutional than it is retail and that kind of then you should kind of see that Divergence um there's clearly like less of a bid for like just eth as the asset as like fees have compressed an evm land um especially like just looking at like you don't need to pay $500 for gas on the e L1 to execute a trade you can just do it on nl2 so just structurally there's just a little less natural

demand in the market for E to take advantage of big Financial opportunities um so it's not like I think three months ago if you told people that that were happening on the eve of the ETF approval they wouldn't have believed you um today however like that's the case and um it's unclear to me um when that trend is going to stop because frankly like the next ETF to be approved given the shift and reg or the likely shift in regulatory environment that we have coming is um like with a sole ETF right so I think that this can

compound for a while here yeah I think um the the sole eth ratio has been interesting um you know I think for me I'm just bullish both I'm really bullish both um Soul's lower market cap and so it can be moved the price can be moved easier so maybe Soul keeps outperforming you know on a risk adjusted basis um you know maybe eth takes that back um but I don't see any reason to fade eth the asset it is going to be one of only two with an ETF and you know at around a third fourth the the market cap of Bitcoin if you get market cap weighted

allocation to the eth ETF then it'll probably per it'll probably start to outperform bitcoin right and then you get the eth fly flywheel going um you know with more L2 activity those act as a supply a supply sync for eth um use in defi uh you start to get more eth burned and so I think generally eth is a little more reflexive than Bitcoin and so I think all those factors will lead it to start to perform and then I think obviously the sole eth ratio matters but also the the eth BTC ratio matters and if eth starts outperforming Bitcoin maybe that's a

little bit of a narrative jump that needs you know that's needed for for it to get going um but yeah I mean I see no reasons to be both to be bearish salana as well so you know I think I think they're both great trades but I will say I do think there is some game theory around the market you know you could say the operator um composite operator lulling people to sleep with eth and then right when people expect it expect at least to perform well that's usually when it starts to perform well and then if you go six months in the future and look back on this moment you'll you'll say that it's obvious and so you know I do

think that eth is having a little bit of an identity crisis um salana is definitely legit competition but eth still has all the liquidity um all the stable coins it has a ton of teams building out l2s competing for usage which although they are parasitic to some extent uh l2s do return some value to eth um the respect to eth being utilized as their gas as as the gas token still so get a monetary premium effect there's Supply syncs so yeah I think there's a ton of reasons to be bullish eth and I I think that this you know I think the summertime um seasonality component

of just slow markets is in the short term you know might be enough to uh make the launch kind of uh not not as impressive as as you know the Bitcoin one once that started to really get going but once we get into Q4 and potentially regulatory Clarity um I I think eth is going to do really really well yeah I completely agree with Daniel shapir I think e is on their own and I think we're going to actually do really well with the flows um with that being said crypto always looks for what's next and it's very clear that Solana is

what's next and I love Solana so like yeah we can't give Financial advice none of this is financial advice we've already heard the disclaimer at the very beginning but I see no reason to just not own both I think epher is God's chosen currency and it's incredible and it will do well but and I think people honest no but genuinely I think people kind of underestimate at this point there's definitely metrics that show that salana is I guess more attractive um especially with the tev and the fact that all of narratives are currently on Solana but I do see I think a lot of people are I guess underestimating what the ETF fls are going to be like and obviously like

nobody has a magic Crystal Ball but I I don't know I guess I'm just overall excited for that it I think that to say um eth is under owned um what what would the evidence there be that eth is under owned I Feel It In My Bones yeah like it's hard to it's hard for me to think that a 400 billion market cap asset is under owned yeah that's true there's a lot of eth out there people have a lot of exposure I guess more so what I mean is that it feels like Solana is becoming bit of a consensus trade as opposed to e and I feel like people aren't generally less interested in

ethereum and I think the flows my surprise because my my entire like thinking around this revolves around the fact that and I assume we want to talk about this later this institution like the as the next buyer thing but I I think BTC has a very clear Nar narrative which is digital gold but it's not as attractive as ethereum narrative which is it's the whatever the the App Store of the internet or the internet Bond whatever you want to pick but it fits into a lot of these and I think like the way that this became clear to me is I was watching the SN I don't know how you pronounce is son son you know what um and they pitched e on it and they pitched it with whatever like you

hear on Larry think talk about on television is that tokenization narrative and I think that's something that I guess institutions are going to find quite attractive and I'm not sure if they if there has been prepositioning and I'm not sure if they've positioned already into this but I I expect the maybe it's just my side of CT and Twitter but I feel like a lot of people are expecting the flows to disappoint I don't think they will I think the narrative is quite attractive especially for uh institutional buyers who like some form of native yield and who like the fact that it's a productive asset yeah I I agree with Bach because

um I think that price leads narrative and I think under own might have been the wrong word to choose but definitely um from a narrative perspective you would you have to think eth is near some type of local Minima right and I'm not saying salana is near a local maximum um salana could still be on the up and up but I I think from a narrative perspective eth has been pretty beaten down and uh from that standpoint right if eth just gets market cap weighted flows um from trafi and it goes up a lot and now the price is up then narrative is is going

to fall that and the narrative is going to naturally come right and potentially all we need for that is just Mark cap weighted trfi flows so uh yeah I'm I'm I'm very bullish on it I'm also very bullish on salana so I just think um eth might surprise people in and if you if you know if you said that in 2022 around the merge right you know eth was the mo was the hottest thing in town right it was outperforming Bitcoin off off the lows after the big crash like eth um was kind of the consensus of winning asset so it to me it's lost that shine clearly at this

point which makes it attractive yeah I will offer one Counterpoint since we're we're talking a little bit about sentiment here around eth just just the comment that I think if you look back like pre- Bitcoin ETF I would venture to Guess that many deep in the space were probably maybe overallocated to eth relative to bitcoin prior to that event and I do Wonder like what what amount of the sentiment today where people are saying you know we should expect you know incredible price action for eth off of you know the eth ETF similar to bitcoin you know how much of that is you know people who maybe missed out on the Bitcoin event because they were overallocated to eth at the time and now they're maybe still allocated to Ethan expecting the same you know price

appreciation there um it because it does feel like that was some sentiment at the time as well many people you know they're like eth is the future and they went all you know in terms of allocation of their portfolio they may have gone heavier eth than BTC and then did not get that reward um when that b you know when the BTC ETF came around and we've seen what what what happened to bitcoin I mean we'll see trading starts tomorrow I I I you're right I I do remember that where everybody was like oh just own e forat it'll be better but we'll see trading Ryan do you have any final thoughts yeah I mean I just just I I think just hoping for flows is not enough I think you need some identifiable Catalyst um from a

revenue perspective and like if you look at what eth is trying to do they are trying to minimize the amount of value capture that they have and salana is trying to do the precise opposite with something like fire answer um if you look at like Dex valume market share there's a clear Trend toward salana arbitr and base and away from eth now you can push back and say that that's by Design but just because something is by Design does not mean it is good for Value capture market right so like I don't think that trafi I I think that like these guys are data dependent uh I don't think it's the same Market participant that we've traditionally had and as the space learns or as I learns

more about this space I I don't know if simple like flows and market cap waiting is enough especially in a nent asset class and like like look eth is a $400 billion do asset it's probably like a top 30 asset in market cap in the world it's not cheap um and I don't know I I just don't think that try indiscriminately buys um I think that they'll put pen to paper on this and um it's not obvious to me that there's just like a massive bull case for eth for them to for them to allocate to the counter point to this is that Solana has downtime issues which might freak traditional buyers

out um but yeah I guess like what you say makes sense it's not a particularly cheap ass I I get what I've heard or like read on Twitter about ECC is that this was one of the main discussion points and it's this leaking of value to not only rollups but also app chains and generally losing um value of Cruelty ethereum and activity especially to because of just complex UI modularity is bad like at its current state it's bad um and e made that bet but I mean like if you look at what vitalic was

talking about and that's reducing block times um and as far as I've seen like basically every talk was on some form of abstracting away of ux issues I don't know how that would help leaking value because at the end of the day I think you're just making it easier to leak value and you just don't let the customer realize it but they definitely do have an issue in terms of what direction they're going in like I completely agree with you on that is that just because it's on purpose doesn't mean that it's good I would have probably preferred just keeping all activity on E and making people pay $300 per transaction at least it's really safe you know before we move

on let's have a quick word from pancake swap thanks to our fantastic sponsor layer zero what's up guys for this week's layer zero snippet I'm joined by the head chef over at pancake swap Chef kids uh thank you for joining us hi hi Tim thank you for having me here just to start us off do you want to give a short introduction uction of pancake Swap and what you guys have been focused on over the past few months yeah yeah for sure um so pancake swap is a leading multiple um you know chain decentralized exchange that operate on um you know amm model built on several chains were originally built on BC but gradually we expand to different chains currently we're operating online chains and we launched in 2020 you know pancake

swap is one of the most popular decks in the cryptocurrency industry due to you know its lower transaction fees you know highspeed treating and also the user experiences um and also currently we have over 750 billion in total tring volumes and over two billion in total um you know liquidity locked and um we are you know making it you know as a leading um multichain deex in the industry perfect um and how does layer zero fit into pancake swap well layer zero you know plays a crucial role in our journey into a mod deex because you know since 2022 we have been fortunate to collaborate with you know strong Crossing Partners such as

know layer zero um their robust cross chain massaging infrastructure has been pivotal to our Evolution from um you know uh B&B CH predominantly based the platform to a resilient Marchin Dex and as I mentioned you know currently we're operating across nine chains you know including um integration to eum ecosystem and moreover you know uh pancakes has became you know the preferred trading venue for a lot of you know of project such as Pap you know ether we uh HH and also usdv um layer zero also Powers you know um pancake swaps Crossing gauges facilitating the semless movement of Kik um you know

tokens annual through the of standard and also enabling voting across chains so as a one of the Pioneer in adapting the of standard for our cake token pancake swap has been partnering with lar zero since 2022 to establish you know crucial Bridges so in summary um layer zero is you know integral to you know pancake swaps Crossing operations significantly um enhancing our platforms functionality and also adaptability um this integration actually enables a fantastic user experiences and introduce a lot of innovative features that distinguish us in in the deck sector perfect yeah you guys have had a

great multi-chain expansion um especially over the past year do you have any exciting plans over the next six to 12 months yeah yeah absolutely um you know we have several exciting plans in the you know in upcoming U month time including two major product uh firstly you know for sure is our you know pancake swap V before uh which we covered in depths you know already in our previous podcast with you guys um So currently it's on track you know to launch in Q Ser this year and we'll start with Bing and etherum and also Will Follow by you know will be followed by many other chains um so um for the benefit of you know those who might not

be familiar with us I will give a little bit elaboration on you know pancake SW V before um you know so basically pancake SW V before is the latest iteration of Our Deck you know uh where we introduced the several key features the first one is definitely you know the flexibility via hooks where we can bring in new features such as um dyamic fee um customer articles and a lot of other things the second thing is adaptability where we can support new am models on the go and lastly is the efficiency enhancement via gas savings you know uh from uh flash accounting and single T technology so we have a particular including myself you know we have you

know very excited about the s um you know as with developers you know the sky is the limit nobody knows you know what you know developers can came up and we are excited as well so who knows maybe you know we'll see uh lar zero you know hook that utilize cross chain liquidity for ofs right and and also important we understand you know on the whole V4 you know U vfor saying you know the dep support is the key you know so for um developers guys if you are you know who are interested in building please visit our website and where you will find the most the information you need and also you can join our Discord Community uh I do look forward to see what you guys can come up with um the second product we

are currently working on is to um you know enhance our users swap user experiences uh we aim to secure the best price for users by tapping into the liquidity from multiple sources and also leveraging you know our cross chain liquidity Network this is you know all the alpha I will share here so far um but if you guys you know if you want to know more about us you know about this product please uh stay student uh stay tuned about you know our upcoming product announcement so in essence um you know our strategy revolves around enhancing our you know corn swap product with the Best in Class technology while ensuring you know our um robust supporting functions so we are

sured uh especially myself you know I I'm I'm very serious about what is ahead of us and I do look forward to sharing you know more update in upcoming um several months time with our community SW perfect that all sounds very exciting I'll make sure to link the pancake swap episode under this one as well because that should contain a lot of alpha um yeah thank you so much for joining us thank you thank you for time thank you one thing I kind of touched up on that I want to talk about that I want Ryan to talk about is what happens when the marginal buyer of crypto is institutional yeah we kind of just touched on it um thinking you know I

think one very obvious place that things go is more cash flow oriented um I think it's very obvious that once try comes to this space and they understand it deeply you know tokens ACR cash flows most of them and like everything on the planet that does ACR cash flows is to some degree valued on the basis of those cash flows so I think you'll see the market kind of or orienting around those assets I think things will obviously get a little less crazy I think like there will be V compression in a lot of assets um I think that like as you go down the risk Spectrum like your kind of airdrop opportunities kind of dwindle over time

because it won't it won't be a secret anymore um now obviously like a lot of this is far off and I think of you have to think of like what's coming first and and like I think ball compression and like orienting toward valuation are like two kind of obvious more like near-term maybe like 12 to 24 month things that you should start to see in the market uh assuming all goes um well on the crypto regulation front by you know December and onward or sorry November and onwards um I definitely agree with you in terms of V compression um where I have I guess slightly more questions and and obviously you'd have a better idea about this than I do but it was trafi that

created the 2000.com bubble it was trafi that created the real estate Bubble at the end of the day humans are emotional they're greedy and I I will say um having some way to Value protocols right and obviously a cash flow-based you know DC F model is is one way to do that that would tether some valuations um closer to reality but I don't think trafi entering the market is going to lead to um I guess less bubble like behavior in the long run um I think Trad fight's kind of this nebulous word

and I think there's still probably a vast majority um or it's I'd say the vast majority of trafi probably are still um you know not not these hyper sophisticated actors by any means um there's definitely going to be actors that come in that are highly sophisticated and are going to out compete uh crypto native um participants in in many different ways but I don't know I I think based on um kind of observing markets over the past past couple decades I I tend to lean more towards uh the the theory of reflexivity

um being kind of the the main basis of of how I believe asset prices asset prices move as opposed to you know everything kind of getting have having this value and things kind of um you know over time going towards that fundamental value so um we'll see though right like I think right traditional markets have Circ Breakers and they have different um rules around trading if you have 247 Global you know tokens that are being traded I I think that we're still going to have some um you know crazy volatility moments maybe you know VA will be compressed generally but yeah I'm curious what your guys's thoughts

are around that the main thing I think about is how this will affect I guess lower market cap tokens and more so like will there still be an edge in I I feel like the word trenches is now overused but like being in the trenches I guess like just spending more and more time in small to Mid market cap like sub 100 Mil like looking into those do because at the end of the day we've always experienced this thing where or at least over the past few years we've seen where you know as Bitcoin and E do better A lot of money flows into lower

market cap tokens but I think that's with the expected notion that okay like these buyers are going to come and buy from us but I don't really see I guess traditional Financial players buying into some random telegram bot token on a random chain um that sub 100 point you know what I mean like I don't I don't see how that would affect it I feel like the ball there would just St same because we already have our own money that we play around with like sub whatever market cap and that's for us and I I feel like that wouldn't change too much yeah I'm hearing a lot of good points on both sides of this spectrum here I think to Daniel's Point um

especially around just the animal spirits of people that interact with markets um I think you can look back to 2021 and and baky just mentioned like you know what institutions are going to buy 100 Mil market cap coins or lower um maybe they won't but we had you know we had artists and rappers and large institutions and I think even banks in some cases that bought like nfts to put them into their collections at that time there was some very crazy behavior going on in 2021 that I think no one expected prior to the heights that the market reached at that time and I think we can sit here and kind of like ask the same questions of like who will those people

buy these things like is someone going to buy this tiny market cap token at a fund but um ultimately I think you don't really know until if the insane crazy Market moves happen and and people get wrapped up in the price moves it's you know like like Daniel mentioned it's the same as as the.com bubble people paying hundreds of of multiples on earnings or maybe no earnings for Stuff um that just didn't make sense but they get wrapped up in it so there's always the chance for for people to get just go crazy about you know wild price swings when when we had that um I met a few analysts from Banks and they

were they were coining as well like you know so obviously they they're not just because some guy's coining doesn't mean he's going to make the bank buy into it but what I mean is that it's I feel like there's this General notion that a Bankers are going to come in and buy our bags that's probably not true but we have to see is what Danny thinks we have to wait a bit maybe they will we've had crazier things happen but the second notion is that Bankers don't know what's happening or like trafi doesn't know and I don't think that's true like that hasn't been the case let's say for a few years now and a lot of these like analysts are they they hold crypto um probably more than a lot of people who say oh Bankers don't know so I I also

see that them I guess maybe as like the acid class becomes a bit more legitimized in in their boss's eyes they might be able to participate in it more but we'll see I don't know how that that side of the world works at all I think the other point of it is like you mentioned the multiples on I think the VA compression is a good point I also think like just multiples compression on on you know smaller cops as Bitcoin makes moves I mean you can see this very naturally if you go back and look at the charts right like hitting 100,000 is on all the random coins that came out in the Ico Mania in like 2017 and then you go and you look one cycle forward and it's like slightly compressed to lower multiples and then if you look today you know we

haven't there are a few cases right like there's meme coins and there's specific coins that go onchain from you know 100K market cap to 100 million a billion and those are wildly insane but on the average and on the whole you know the across the board those multiples they have reduced over time as as the AET class has grown so I think it's it's natural to just expect that to continue as well I think another major thing will be the index ification of the space and so I I I think somewhere um around 60% of all money in traditional markets are in um some type of ETF or index and um I think it's around 67% of new money

coming into the market is um literally going directly into Target Market date funds which are effectively index you know ETFs that then also um as you get older closer retirement change your change the allocation of your funds over time maybe becoming more um heavily allocated to bonds for instance and so I think there will definitely be you know a top 10 index top 50 index top 100 index you know the the 250 the 500 right all market cap weighted Maybe equal weighted um maybe there'll be sector indexes right like layer ones or AI or whatever right and

so there's you know the marginal buyer honestly it's probably re mostly retail through 401K flows and all that's passive so um that's another interesting component and I think the result of that is um Vault compression but not necessar neily um well all right not yet not necessarily multiple compression due to the market cap weighted Dynamic and Mike Green is someone excellent to listen to to kind of better understand um those Dynamics at play yeah I don't I don't disagree with a lot of the points I think that yeah in your small caps just

they're not going to play right they're not going to play the Market's not going to change you could have quantitative funds that run sophisticated strategies right like these are like permissionless like open apis it's going to be easy for like like today right you can like download Twitter data figure out what's trending and then long things on pump. fun right with an llm um pretty trivial to do I imagine more more people are going to do that but like look things are still going to be crazy right it's like a totally open and permissionless Market um just some data I wanted to draw some attention to my my buddy actually sent me this this morning uh large uh small mid and large cap uh indices and just like the valuations

over time um they don't become untethered like yeah bubbles happen in trafi but like so for example like a small cap index the forward price to cash flow ratio has never risen above 19 times like never it topped out around 17 in the early 2000s topped out around 17 in uh like 2014 2015 and then around 17 or 19 looking at the chart in like 2022 um same thing with like mid uh sorry small small C value um small C value like that that forward price of cash flow multiple has never surpassed

13 or 15 times looking back 20 years so like there's some degree of discipline right like people look like there's some degree of discipline eventually you run out of buyers even in Mania things like people start to realize like this can't go on forever and you don't have like the filecoin 150 billion fdv event uh I think that's unique to crypto um and I think that as the marginal dollar changes mostly in the large caps right you're going to see some Behavior change but I I you look we'll still have our fun it's just not going to be in the same places I guess sorry I just read a chart to you guys it must have been

painful no it's good that's really good data it's really good data and honestly like we're I guess you can say we're starting to see that Trend now with the whole fdv um low float discussion right like people are getting getting smart the market is evolving all right last up for today I think we want to talk AER right so Daniel Shapiro you wrote the best report on Aerodrome last week um do you want to kind of talk about it a bit Yeah so um kind of the idea behind this report was uh to Target the leading protocol in the Bas

ecosystem and I'm very bullish and I think block Works research is in general uh very bullish on base um just looking at their their growth in terms of of number of transactions number of active addresses uh tvl stable coin growth um it's all the metrics point to the that ecosystem is growing very rapidly and there's also fundamental reasons for that for instance their smart wallet which abstracts away um the need for having to create a uh some type of soft software wallet um and and you know Pass Key it it provides a pass key way to log in um and also bases uh I guess you

could say their um customer base which is 110 million but I think closer more like eight 10 million active users but still nonetheless um they have a ton of users to direct uh towards the base ecosystem and so um very bullish on base and so getting into what aerod Drome is um aerod Drome is a decentralized exchange that is a fork of Vel Drome um it is a specific deployment for base um because the team expects there's going to be kind of unique offerings uh institutional offerings That Base provides that other chains don't um to where they will need a a separate unique deployment on base

itself um what what makes Aerodrome unique compared to a DEX like coinbase or like Unis swap um is that it uses is a vote lock governance model similar to curve or convex um and this model actually gives the token Arrow utility because uh LPS must lock that Arrow um in turn giving them governance power to direct where the protocol emissions go so you lock your tokens you pick a pool to direct emissions to and in term you capture the fees associated with those pools this also creates a flywheel

effect in which obviously the highest volume pools are going to attract the most liquidity because right any rational LP is going to want to maximize uh their fees and so um they pick the highest uh volume pools and so what's unique about this is is it allows new projects launching on the chain to see liquidity for their tokens and so not every project is going to be backed by um you know top tier VCS and and have access to um you know topof the-line Market maker deals or you know centralized exchange listings day one so they might need a launch on a DEX to you know like Aerodrome to see liquidity for their token um before they grow large enough uh to eventually get listed on

centralized exchanges um and so what's interesting is due to the regulatory environment and Bas not having a token in the absence of a base token um currently I'd say Arrow at least my thesis is kind of like the the gas token of Bas right like if you think about all the users of Bas you have like the kind of retail consumer users they're just using interacting with the chain you have um protocols that are launching and might have you know a treasury to deploy and then you have Farmers or you know LPS that want to come to that chain and you know Supply the the you know the picks and shovels right um you know someone that wants to come and provide liquidity on a decks right and and get

fees so other than just like the base consumer users the other two categories of major users of the chain will need to buy Arrow tokens um and whether that's to seed liquidity for their token which is a necessary precursor for adoption or that's maybe to buy aot tokens to um you know deploy some of your treasury Reserve to actually make money um off of your you know the the tokens that you already have and so it it's a really interesting um way to kind of bet on the base eco system in Aggregate and the aot token should theoretically um do well so long as the ecosystem go uh does well and I think

what's interesting about it too is for funds that might have a mandate uh where they are not allowed to invest in memecoins um arrow is a is a way to actually kind of get memec coin beta exposure because a lot of the largest pools on base are mcoin pools that were launched on aerod Drone and so um you know if re if base does onboard a lot of retail and that retail likes to speculate on mem coins and there was some indication of this in late February and March um in terms of Base uh Trend you know decks statistics just growth in general exploding around that mem coin craze um arrow is is a

token that could capture some of that value um and they have a very strong team the uh the team um their initial distribution of 14 15% they Max locked their entire distribution um so they can't sell any of their tokens um the pro the team does get 5% of protocol emissions but they have Max locked more than 90% of those and so um in the report you know we we show the team wallet and um do an analysis there so you know the team the team's all in right they um they can't sell anything so um there the the in in a few weeks at Epoch

67 um the overall you know all Arrow hold governance um token holders ve uh Arrow voters will vote on the future monetary policy of the chain and you know they can adjust the the annualized emission rate by like 0.25% each Epoch so um you know know it it can the the emission rate could theoretically change but in general the the the team is is committed um and there's no like immediately or like immediate Supply overhang that could come onto the market so um it's it's an interesting token and and an interesting way to get exposure to the Bas ecosystem in aggregate yeah I think

that the most interesting thing is just like the best thing of I mean a lot of that's super interesting and and one of the most I should say interesting but compelling things is that it's it's really besting Unis swap right now um to outperform such a name brand is is not um an easy task yeah I um we had them on the podt so if any of our listeners want to also listen to the team coming on and explaining how it works you can also we'll put a link somewhere um but that's one thing they've done really well is integrating other the way that you said like it might become the gas token of Base I um they've done really really well just

working with other people on the ecosystem and like other protocols and helping them out kind of I guess not incorp incorporating them I don't like the word partner um because they're not partnering with them they're just like trying to build an ecosystem alt together because they they want to kind of become the liquidity Hub of there and I think um Unis swap obviously doesn't have to do do that and they're not doing that versus Val is aerody is very like actively doing that so I think that's that's one thing that they've done really well um and I really like the idea that it's exposure to base I agree with you I don't think I know a few funds that I've

tried to gain exposure to meme coins um especially since that's what's mostly happening on base it's it's always tough versus Aerodrome is like direct exposure to base and the base ecosystem as well as you know whatever D5 we're at now D5 4.0 um 3.0 4.0 like it's it is a new like ve3 FreeX is um based on Andre's solidly model Andre CR solidly model like it's a new primitive and it I don't know like exactly how well it works to be honest with you I know it had some issues with this with solidly and it has had issues since then but I

know that the AR team like they've built it out and it's it's working well especially on base yeah I think it great points on it being an opportunity to sort of make a bet on base the ecosystem because I think you know many Market participants like Bo said like meme coins have been one area but it's it's obviously a bit different right you're not really you know when it comes to a mean coin you're either going to hit a massive multip M or or lose it all in many cases and you're not you know the linear growth of the ecosystem might not be really reflected in how that Meme coin trades but um the other option has really just been like coinbase stock for example yeah um but I think in that case you know that's not really a direct trade on

base itself the chain um because there's obviously lots of verticals that that that coinbase is going after and you know base is not the only thing that um you know that they're making money on so um it it's definitely it's an in very comp argument I think for um in the absence of a of a gas token for themselves you know like we saw in 2021 when people went to the alt L1 chains they bought the gas token and they bought the the you know primary native Dex token so in this case when there's a lack of uh of a base token um and there is a kind of what we're seeing is sort of this primary native Dex um that you can trade it's it's an interesting opportunity yeah and it has nearly twice the tvl well more than twice the tvl

Unix swap at this point I um I wonder when this is going to happen again but I I remember like throughout the bear I was really focused on I guess building like a mind map of native apps on chains um and I think first of all it's gone increasingly hard because there aren't that many apps launching but also because you see like Unis swap Dominate and a Dominate and like let's say Moro in this case as well like especially on newer chains so I'm I guess I'm also just interested in aerody Drome because it's a native app and it's like only for base and I like that idea a lot more than I guess Unis swap dominance all across because I I want to try on this stuff like it might not even

be particularly efficient this is not a jabat aerod Drome but like in general I know like sometimes we like to launch apps that aren't even particularly efficient like you could have just used a Unis swap V3 Fork but I like trying out new stuff and it's even better if it's native to the ecosystem yeah and it's positive for the thesis as well right like if it was just Unis swap again you know I don't think it would make sense to want to buy uni as a proxy for bidding base right like it doesn't make sense because of its existence and and you know value elsewhere um but in this case it's a bit different right you know it's Unique and native to base there's no specific Bas token to bid other than the stock or to gamble on

memes so um very compelling yeah and when you have a native app um they actually have to work with one another to make sure that ecosystem does semi well like I mentioned before Unis swap has no like skin in the game for base technically they they'll be fine either way they're they're established um yeah like I think it's important to look at incentive alignment um a lot and this is another reason why you know newer tokens typically outperform old tokens because because the team has an incentive to reach that you know big liquidity event right and so incentives really matter

and um Arrow gave I believe let's see 25% of um the yeah 25% of the initial voting power was reserved for a base ecosystem Goods fund so they are um you know they also launched with 20 other base um Partners where they immediately established liquidity pools so they're they're very locked in into the ecosystem they wanted to succeed um also you know coinbase Ventures made an investment in their team so coinbase wants them to succeed um so there's there's a lot of there's a lot of incentive you know the team Max locked their tokens and any new tokens that

come in they Max lock essentially all of them their stable coin Supply was uh generated from actually blocking tokens and getting rewards you know as a user so um You' like to see that and if you're going to make a bet on a project um you know I think it's a good project to bet on it's it's you know I I think it it still has some emissions to um to distribute right potentially making it reflexive which we saw right it's going to go up a lot it's going to drop a lot um in ter you know with respect to the price but it's still you know terms of circul sub billion dollar market cap um which means it has some real upside um

especially if Bas takes off so just from kind of these other points that might be a little less discussed um there's a lot of positive signs around around the project my producer is gonna love this man he's big big I wish I could pull up the coinbase uh Brian Armstrong bald the bike picture I don't know if you guys have seen it um pull it up if so people aren't looking at or listening to this and thinking it's weird Mark when you if you can um do we have anything else we want to mention or do you want to end it on my awkward explanation of Brian Armstrong's

picture well you know people that went to base early might have gotten rugged on the bald token but maybe aerod drum is a new opportunity not Financial advice guys not Financial advice this not Financial advice nothing is financial advice um okay Ryan Danny Daniel Shapiro thank you for coming on and talking thanks for having me first pod thanks for having me on that was fun I always love the the thank you at the end multiple responses and then a smile from Ryan it's great

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