Twitter & Coinbase Are Back, SOL At Your Own Risk | Roundup

Transcript

before we jump into the app quick reminder that nothing on bell curve is financial advice everything is just a meme hope you guys enjoy the biggest benefactor of this as Elon grows is Apple because every single subscription that he sells apple is going to take 30 just as we were talking about last week all right guys welcome back to another Roundup of bell curve you got Michael's one and two Yano and Vance fellas we got the quartet back together it's nice we're gonna miss each other for a couple weeks here yeah you know how was Morocco buddy I was gonna say it was were you guys I think you guys were all together I was

just kind of farting around in October yeah that's not the same without you yeah well I know I missed you guys I missed you guys I would I would have uh dialed in from Morocco but it doesn't seem like there's a usable Wi-Fi in Morocco as uh as Mike's Witness about a month ago need some helium hot spots out there man seriously I really do needs the people's Network even the people's Network yeah the people's network was not not working in Morocco that's for sure a lot of Supply not much demand yeah um all right we got a bunch we actually got a bunch of stories this week but I'd love to get your uh all your takes on the the topic because you're on Twitter is uh the the chief twit uh Elon Musk himself is gonna be charging eight

dollars for the blue check so um but but a lot of trolling uh on it what what people are very divided right there's the Elon is for free speech and this is taking away a status symbol and you know gonna eliminate the spam and then there's that this is just a you know billionaire Coast Elite enriching himself so where do you guys fall on the whole uh eight dollars for a blue check I love it people are trying to charge us like 10 20 grand for for checks so it's good to see the price come down pretty significantly um I like what elon's doing like you know I don't think ad Facebook models are that sustainable or really comport with the idea of freedom of speech being kind of the most important thing to a platform like this um he's Gonna Roll a Vine I love fine

when it was still alive I'm I think like maybe not having all of our children like being brainwashed by CCP propaganda on Tick Tock is is a good idea maybe we should go away from that I think Brian is is a great kind of counterbalance to that um I think kind of the the most unique perspective I have on the whole Twitter thing is like all of the all of the alt uh historically all of the alternative social networks have been these like conservative social networks so like uh truther from Trump you know you have like parlor like that was one and like it's kind of like you know you guys won't let us rabble Rouse on the Twitter platform so we're like you know we're gonna go create our own now it's the opposite all the lefties are like you know we're gonna go move to

Canada we're gonna like get off this platform like an an alternative social network that's left-leaning just like seems to me like it would be the lamest social platform you know that could really be like existent like the Republicans want to go talk about like guns and crazy [ __ ] and property rights and all that stuff what would like the left alternative version of like parlor or truther look like probably pretty lame so I don't really see these people anywhere going anywhere I see them paying eight dollars I think it's gonna be really funny when they do um so yeah really bullish on on everything elon's doing so so here's some interesting numbers there's there's about 350 000 blue check marks today I think there's a fair proportion of that that gets cannibalized so let's say you know like 300 actually you know

shell up and pay how many oh and then the other interesting stat is there are 37 million daily monthly act daily monetizable monthly active users so basically people who are using Twitter every day just in the United States so 37 million people who are in the United States using Twitter every day who have like monetization potential which you can kind of assume is a proxy for like not a bot right how many of those people just in the United States do you think we'll pay for this you know maybe over the next like six to 12 months I basically ran very similar numbers my guess is in the like yeah it's in the like single digit Millions but it but over three and probably less

than eight yeah that that's what I was kind of thinking is like about five million people or something like that I was looking at the overall Twitter because I I do think the one thing is like what Jason I would both just in Morocco and one stat that I took away from that was you people there make like 250 bucks 400 bucks a year American so I was like oh yeah well no one no more than Morocco was gonna be a blue check then like that that actually is not great but uh in America it's like the it's like the biggest no-brainer right like for the American audience well and he did say that it would be priced in local currency with proportional uh payment parity or payment um purchase parity per country there's gonna be a lot of stuff that has to be figured out with that I think but like

you could assume you know whatever eight dollars is in Morocco that would be the equivalent um the the really interesting point here uh and this is my kind of like hottest take on this I actually think Twitter is not the biggest benefactor of this uh ultimately let's say let's say eventually you get to like two to three billion dollars uh worth of uh you know basically just subscription Revenue that Twitter is now generating maybe it's even more than that eventually like I I I actually think Vine and all these new features all these new capabilities what elon's going to do is kind of the same Playbook as what Evan at snap is running or at least testing which is instead of having an Advertising based business model let's also try to just cram all of our best features products you know all into a bundle and sell it for a

subscription fee and have you know like the Snapchat I can't remember what it's called a snap but it's like 2.99 a month it's pretty cheap but that's going to be the Amazon Prime equivalent of what you know basically these Founders ultimately end up running because I agree with Vans I think the philosophical approach of having a social network or some media property you know whatever it may be without advertising is is the direction that I think the world is moving because and for a number of reasons but the best way to do that is to have a subscription service that you start bundling all these things into and so like when you release a new feature when you release a new capability when you have better targeting tracking better experience a better content consumption like that goes to the Twitter blue check March 1st but the biggest benefactor of

this as Elon grows is Apple because every single subscription that he sells apple is going to save 30 just as we were talking about last week wow that was another update in in the guidelines that Apple put out last week which is that any sort of boost or post or promotional element you know like you can pay to promote your Tweet you can pay to promote your post in tip talk all of those now have to fall through Apple IAP as well so it is going to be something that's super beneficial to Twitter but Apple's gonna take their 30 percent dude first of all I love that take I got Apple just they've been crushing it haven't they they like really remember there was a period of time where it's like oh is Facebook or meta right they

didn't want to flex too much it was the rising app and they were like who really has the power in this relationship that has been fully decided in Apple's favor they're very advantageous about when they you know chose to strike you know you know so to speak so kind of like that take on Twitter too you know you know it's funny if you think about uh Andreessen horowitz's original thesis on crypto if you think about like what Chris Dixon would espouse in 2017 is that uh blockchains are just new computers uh and and what's different about blockchains versus Old Computers is that with old computers Hardware was more powerful than software right you kind of unplug the computer and you know the software goes away but with new block with blockchains uh they're computers where software is now more powerful than Hardware where well you're

seeing in 2022 Hardware still rains Supreme I mean there's I I don't like to to promote other podcasts on our podcast but uh there's a great episode of all dots that just came out uh talking all about the Apple moves basically against Facebook or meta and Google um Google and apple are in an Anti-Trust lawsuit right now essentially which is a question as to whether or not Apple can continue to have and they pay 12 to 14 billion dollars a year for this but the default search be uh Chrome and default search be Google um is that something that you know Apple will still be able to have well Facebook is calling out very very vocally that there are other antitrust questions to

your point you know as to whether or not Apple can continue to exert its power by owning the hardware the reason why apple is able to say that this is you know potentially not true is because Google exists because Android has whatever 40 plus percent of the market share and and apple can say hey we're not a monopoly we we happen to have the best product Oh oh by the way every single one of those daily monetizable users or any sort of monetization of users in general from mobile devices comes from an iOS device versus Android it's like a 10x difference in terms of monetization but Apple Google exists and they're free in the marketplace to continue to grow their share and you know we're competitive with them in that respect so

it's an interesting like they're kind of like fighting each other at different angles but they're also collaborating at different angles and and it's just this weird you know different departments going to battle versus other departments who are into who's yeah I uh you know if I don't know like rough numbers for Twitter uh just in terms of like how big this blue check system could be depending on the level of assumption that you want to make and how conservative you want to be um you know uh Twitter did 5 billion in Revenue last year they lost uh their net income on that was like negative 220 million depending on like if you if you want which is which is wild yeah um I mean there are money losers since they ipo'd there's another rumor that was reported by Bloomberg that on Friday

tomorrow uh half of the staff will be let go so assume that about half of that cost structure uh goes away yep well all right that's pretty fair I've you know what's you know it's so funny we talked about this on the last show right him walking in with a kitchen sink he's like throw it all out with a kitchen sink or whatever that's just a different attitude and way to live man I don't even know how to interpret that uh action but he is certainly built different uh I love it here I need some of that in their lives just like the burn it down start over work from first principle yeah so I I have two thoughts on this one is I fully agree with Michael that um like I think social media will end up moving towards subscription-based uh or at least Twitter will end up moving more

towards the subscription base you start throwing really good stuff at it it's like yeah how many what percentage of of that I forget the numbers you guys were throwing out but like what percentage of the users will pay for a blue check I don't know two percent or something three percent great now what percentage of people will pay for like a much much better dming like the DMS in Twitter an absolute nightmare anytime I'm on DMS I'm like let's move it to Telegram if it was much better DMS you know maybe that gets another three percent boom if you get like a Vine like service that's another three percent no ads that's another three percent and now you've got 15 of the total Twitter base paying for you know five bucks a month or eight bucks a month then like that that's a really good business right there you get

some stuff think about think about what Amazon has done yeah at first it was free shipping then it was free shipping Plus movies now it's free shipping Plus movies plus NFL Thursday night which admittedly have been terrible games but you get my point yeah you know who originally did this business model uh and they don't get a lot of credit for it it's actually Costco and like they basically strive to like break even on their entire business and they just have that uh 50 a year membership and I kind of love their business model even more than Amazon because it's basically just like they have a huge Warehouse they just plonk a bunch of [ __ ] down on boxes and they're like here you go come pick it up it's so simple and easy like it was a fancy

business for you a lot of [ __ ] on the floor come get it and it's just like a phenomenal phenomenal business but yeah that and so if you start to back in and like let's say uh you know of those just just users right you want to take something relatively conservative and say you get like five percent I know you said two percent you know I would do this in a heartbeat you know I've heard all these people be like oh this is prohibitively expensive this is nothing for a blue check on Twitter like it's eight bucks a month it's one coffee in New York Well here here's what we'll end up here yeah I mean it's it's nothing I think a large amount of people do it I would do it in a heartbeat I think most of the people that I know

would do in a heartbeat but I don't think maybe that were the the majority here I think a lot of people might be skeptical what ends up happening that converts a lot of people is when they start changing the algorithm to promote the blue checks only right so like if you have a blue check you're going to show up in replies if you don't have a blue check you don't jump in replies if you don't have a blue check like you have to pay to get your Tweet promoted to get seen by more than one percent of your followers if you have a blue check maybe 10 of your followers to your tweets like that's what you'll end up having like two factions of Twitter you have like blue check faction where like their stuff gets seen and they're like it's almost like the anons and non-nons

doesn't that already sort of exist to some degree though like you're you're the one with the blue check here but right don't don't when you people reply to you there's a blue check and a non-blue check and people usually the blue checks really only check the blue check part of it so it's very rare to get response right didn't you say that people see my tweets because they're just better there is like a little on my notifications actually I have like normal notifications and then I have notifications for only verified people it's like the verified notifications Center which is pretty elitist um so lead us that it's classes yeah here's here's the last thing on Twitter and then we can move into crypto stuff is um I have a lot of friends I know you

guys I think Vance you worked at Netflix maybe and Michael you worked at Dropbox and snap like I have friends at Facebook and Instagram and things like that their lives are cushy like their lives are very very very cushy this is the end of that period in time of the last decade where like you could kind of be like late 20s early 30s mid 30s kind of getting a lot of money you're working at like a big tech company in San Francisco and like you're making bank and making way more than like your friends like an investment banking for like grinding their asses off and I think I think this is the stripe just laid off 14 big big layoffs across the board everywhere Twitter's obviously gonna do big layoffs and um yeah this is the end of that phase that's the Open Secret of Silicon

Valley these technology companies can be run with 30 40 of the staff they have today and just be absolute cash cows and yeah I mean you kind of look at a lot of them right now and they look like they're at the end of their own kind of like technological history like meta and the metaverse like we'll see if that's a growth Avenue like potentially probably not like Snap doesn't have anything around the corner that's gonna like blow people away it's probably more of the same more of the same as the prognosis for a lot of these tech companies and I don't think that lends to an environment where you can run these huge costs and expect nobody to not throw up on it so you know when risk appetites come back I think like the last point on this is like all the hedge fund managers all the guys

that we talk to a lot of them trading growth stocks and like you know what do you do when the economy is is going to be ripping or rates are going to be coming down or you think like the prognosis for a recession is strong and then you're going to get you know easing what do you do you just buy a bunch of growth stocks and you know you make a bunch of money and then you can go home if that lever is no longer available it's gonna have to be something else like they're probably going to go off and look more seriously at crypto if that wave is you know noticeably crested um and I you know it's even today like nasdaq's down a bunch s P's down a bunch cryptos up it's like you're starting to see these things that are like you know

indicative as to where the the next you know run goes anecdotally I feel like crypto I mean we're just at the you know the total uh you know the edge of risk assets I feel like our downturn kind of just happened faster than the broader market like some friends of mine like we cut like block where we kind of went through this like we realized that demand was slowing you know back in May and now like a bunch of my friends and companies and like you know consulting or banking or whatever they're like like things are starting to like slow down like Management's starting to talk and it's like it's just I think it just is trickling through and now everyone's feeling it big Tech included like we talked about it last week but meta got slammed Amazon got slammed yeah I mean everyone's feeling it I think

except for Berkshire Hathaway Buffett's coming out looking real good right now looking great pretty per huge looking guys look at he's flat on the air looking great I think he's literally still under before in the S P 500 over the past 30 years even with the performance this year like and I was charity I was looking at a chart of uh it was like meta Nvidia Netflix and Tesla everything's down like 45 to 75 in berkshire's like flat it's like porn [ __ ] it's looking pretty good yeah last thing I'll say on this I'm sure you guys have seen like the tip talk videos of like what's the day in the life of a product manager at Facebook or whatever I'm not even sure that that is accurate um from like uh that's what that is an actual person who works at that actual

company but I will be able I can absolutely attest that that is 100 accurate for for what the lifestyles are like for many of the people that work at these businesses lighting a fire under those companies I mean I I really your friend who works in private equity and and they focus on like you know not large cap um Tech but they have done some large cap stuff and every year they kind of go through this process within their investment Committee of like what if we like went off and you know did what Elon did and like bought Twitter and like cut half the staff and like got the average revenue per for uh employee back like equal par you know like what would that look like the problem is going back to this from last week governance and so

one of the really interesting things is the the companies that are going to outperform in this or did it I I think are gonna be the ones that have a really fair check and balance on the governance model of those businesses of those corporations because if you you have 21 or 10 to 1 or 0 to 1 or 1-0 voting uh how are you going to be able to go in and make structured changes if that's not in line with what the CEO founder wants to do and so it's going to be really interesting to look back in a year from now as we're seeing some of these positive change of Twitter talking about what we talked about last week with governance like I do think that we're going to see a marked difference between how Twitter performs and how something like meta performs I'd love to

um you know check in actually on just what's going on in in the private market so public uh public market like super super visible right um obviously like public market indices taking a dive crypto tokens have taken a dive uh over the last like six to nine months um you know I think we talked on the show a little bit about just how overheated Venture was in general um so maybe we could actually start just because we're talking about kind of big Tech right now if you want to talk about like Venture generally like what parts are still live and doing well and then what parts are struggling and then maybe we could move more specifically into private markets for crypto but would love to just get your take on like what's going on in the venture are seeing like what valuations are at there

so like what's happened the past few weeks is that the class of 2021 who raised in you know January February March of last year when the Bull Run was really and it's you know heavy part uh have come back to Market and are trying to raise it similar valuations and and people are just not there in terms of the demand and they're starting to re-rate everything downwards and so like you know we saw a project you know two days ago can't mention it was but they were trying to raise like a 400 million dollar full agility evaluation pre-product pre-launch pre-everything um and those are just the things that like are just no longer happening and the higher side of the like the that size of range kind of sets the tone for everything before it and so we're probably in the midst of you know a 60

70 80 percent correction in the private markets um and that is setting the tone for everything because you know when people ask you why you're not willing to pay you can just point to a lot of the public comps and be like listen this is the outcome if you execute on everything um so it's uh it's certainly changing a lot changing for the better um the different sub sectors are kind of Performing differently like there's still a lot of heat on things like Aptos um like you know FTX alamate is kind of like setting the floor for projects there but outside of that it's uh it's kind of a feast or famine Market depending on if you have traction and metrics and revenue or if you don't the the way I break it down is um you kind of have like a two by two

you've got like crypto or web3 and then you've got like early crypto and and uh you know web 2 uh and then you've got early stage lid stage and in yeah we're obviously not ones who um transact very frequently and things that are non-crypto but we have a lot of friends who do and we kind of keep our ear to the ground in terms of what's happening the late stage web 2 side of the world is is dead no deals are getting done and what I mean here is like B series B plus um and so usually at a multi 100 million dollar valuation and you're raising 50 to 200 million dollars um a lot of those deals stopped being done basically a year ago so to advance his other point you know on like the classes of different startups

um you're gonna have to see some of those businesses come back to Market pretty soon um and it's gonna be really interesting because usually the way that this stuff plays out is you don't start off you know coming back to Market and you say okay I've got uh you know I'm gonna just do a Down Round it usually starts off as we need to raise more Capital but what I'm going to add to it is like structure to this new round and what structure usually means it's it's usually like liquidation preferences downside protection um you know covenants in the actual agreement itself that protect the investor or give the investor some guaranteed return so that if the company doesn't make it to that valuation again or sells for something less like they get the money back in some cases they get their money back twice before

anybody else gets anything so like these can be pretty pretty restrictive um until you'll see structured rounds but you won't actually tell that they're structured ground because it'll say hey we raise another x amount at our same valuation the net late default will be actual down rounds and and that's where it's like we need capital and we're willing to take a 40 50 60 haircut on our valuation and we haven't really seen a lot of that yet um I would imagine that that probably happens in like the early half of the first half of next year as people really need capital and to survive um and they're willing to take the dilution um and so all of this is to say like this is what's happening kind of across the board but what happens on that later stage side is it eventually trickles

down to the to what I'm saying as well it's like you can point to these things and be like hey look like they did a structure ground they're like hey look they actually did a Down Round so when you're you know a series a company and you raise your seat at 50 and you're like well I at least need a 2X for my series A it's like sorry like you're gonna have to have like a bridge series a because this is actually worth 40 but like we'll do it at 50. you know it it's you know same valuation as last time or like there's a structured component to it or and so I think there's going to be there's still a lot of pain on the horizon I think um and and frankly a lot of this stuff hasn't trickled all the way down yet it

has started to trickle in the later stages but it hasn't gotten to the early stages yet um but there are still like pretty reasonable deals getting done at the early stages so it at least there is flow of business and transactions I mean we're like as busy as we've ever been frankly from The Venture side but we are only like seed in series a and from that respect it's just not it's not really like an underwriting process as you look at if you're you know writing a 50 million dollar check it's more like who's the team what's the product what's the market um so it's a very different evaluation process but later stage Venture right now is is getting crushed of Runway left how do you think about what's a better strategy so if you're a late Stage Company like let's say you're serious C

Series D you raised it a five billion valuation a year ago you now have the option to either cut I'm gonna go drastic give the you have the opportunity or the ability to cut like 80 of your team pull back drastically you cut 80 of your costs uh and you just kind of drag this out so that you don't have to raise it down around or you're like all right I'm maybe only going to lay off like 10 15 of people uh and just like keep growing market share keep kind of going to Market Building Product hiring devs uh but raise it like a big down round at like maybe 70 haircut what's a what's the better strategy there it's so dependent on what that business is like if you have a capital light business and

you can cut 50 and not like kill your growth 50 then that's obviously the thing to do you know there are a lot of these businesses as we're talking about that you know like the the Doodles of the world who have the same Affliction that are private five billion dollar companies who just like have a ton of people there like why do they have a ton of people there it doesn't really make a ton of sense I think that leaning out in those cases makes the most sense obviously but here and and here's another interesting tidbit I I think what's going to happen though no matter what whether you raise at a lower valuation or not is that the investors and the boards of these companies are going to push for lower valuations internally and and so what I mean by this is you've done a 409a

evaluation that's like your basic Bare Bones accounting valuation based on revenue and like growth and public multiples so that's one thing that's how you value like the strike price of options when you're giving options to employees what I think will also happen is you're going to start to see you know investors in these later rounds that sit on these boards push for internal lower valuations across the entire company so if you sold preferred shares at 5 billion they'll push for a re-rating of what those what that like internal valuation is to like two or three just be based on Market comps alone and one one piece of information I saw on Twitter which unsubstantiated anecdotal is uh and there's a secondary Marketplace for LP and interests in

these Venture funds what's happening right now is the the marketplace for these measure funds is clearing at on average a 40 discount to where the book value is relative to where these where these Investments are marked um and so what that suggests to me is that the LPS and these Venture funds already know that these things are going to take probably a 40 haircut at some point and that they're willing to buy them at that price because either they think that that's attractive or they want to you know be able to get access to those funds usually there's there's some sort of inflation there so like maybe you know it's actually a 50 discount but they're willing to buy them at 40 to get access to that fund but yeah I mean I I think there's going to be a lot of Carnage you know internal

external valuations like a lot of that's going to change the top part is it just it takes quarters and years because you either have to go through an internal valuation change or you have to go through a new fundraise some some of these Venture funds are just like done like the growth stage ones like you look at like the hot deals that close over the past two years like I was looking on uh Michael Dempsey who manages another fund sent me a sheet that's like like a name like Andrew you know like American dynamism very contemporary in terms of you know shipping uh Ukraine weapons 80 discount like how do you swear that with your LPS when you made this huge bet on them you know six or 12 months ago like I think some of like there's a web 2 VC is

really bloated there's like 100 times as many firms as there are in crypto you're gonna see the whole middle section of that market get cut and I think really the the dynamic moving forward is like the best web two funds the good web three funds because there's just not that many of them and that's the whole package but everyone else is going to be should have a luck in in my opinion what about um I'd be curious like within the specific uh stages of cryptos there's like seed series a series B whatever crypto I mean is there like like one thing I've just found kind of tricky or just I'm trying to figure out is like we all saw Andresen raise like four billion dollars right like right at the top um and I assume most of that is or a good

portion of that is undeployed I'm just like trying to do math on like how long you know you have to deploy that amount of money and you have to do pretty rapid deal making um and I'm wondering if there are a couple big funds like that with you know dry powder on the sidelines basically is the dry powder on the sideline thing is that actually going to be enough to like sustain valuation somewhat or do you guys just see yeah I mean is is it just going to be this slow unwind of valuations in the next six to eight months keep in mind with you know those funds that are crypto like Andreessen I don't have any information on them but like I can imagine that this is the case like they're also not just putting that into private deals you know they're probably buying liquid assets

um and how much of that goes into liquid how much does it I mean if liquid gets more attractive and valuations are still the same you would naturally think that it kind of shifts from a portfolio allocation perspective so like I don't think like four and a half is really like you know dry powder right um if it's sustaining private valuations the other thing too is like it if there aren't attractive deals it's also hard to justify there's two ways to get in trouble as a venture firm number one missing something so why weren't you in that deal that thing turned into a 100 billion dollar Facebook the second one is why did you put that much money into that one and really being able to justify that when you looked over the tear sheet and that's fundraise and it's like okay you are the board partner on

that you put 50 million into that like let's go back over why and like revisit your investment thesis so I think there is potential you know career risk in some of these situations for putting large amounts of capital as a multi-billion dollar fund does uh or has to into into some you know you know things that we're talking about now could potentially be overvalued to be clear like not all the startups are dead like you kind of see two types of charts one is like our Revenue was mostly a bull market phenomenon we're leveraged super leveraged the cycle of users kpi you know users adoptions you know people trading [ __ ] coins and nfts things like that like that's kind of

like one chart that you see I would say that's probably 80 of the charts that we see in terms of like people pitching us stuff the other 20 are like we're about to break our Bull Run all-time high monthly Revenue we have a clear path to 10x this um and like we're just going to keep executing those are the startups we're just telling them here's more money try to buy your competitors out of the marketplace in terms of just growing your market share hiring more people um the problem with those deals like the deals that are you know up and to the right in terms of Revenue those are like series a series B companies um that's not something quite yet that you can put 100 million into at a billion dollar valuation and buy 10 like that's going to take a few years and so

I think what you do is you know you have to do different things if you have a very large fund you have to do liquid you have to wait the market out to let these companies mature um but it's not going to be the same Playbook as as The Bull Run like I think we've kind of said goodbye to that for at least a couple years like like giving you know like giving uh openc you know 400 million dollars at a 13 and a half billion dollar valuation ditto Alchemy you know giving Moon bird 60 million you know like those are the things which are going to be your LPS are just gonna ask questions um around how this works and and how does it generate Revenue at scale um we got a couple more stories before we're gonna do uh so coinbase is going

to be releasing earnings in 10 minutes from now so we can take a look at those once they go live but we've got JP Morgan and their uh Ave fork and trade uh and we've also got nft uh leaning further into or sorry Jesus Instagram leading let's talk about FTX I want to talk about Alameda because I want to give advances all right uh that here uh because I feel like you guys might have something spicy but the the high level and I haven't looked into this too much is uh so coindesk had uh uh had some good reporting earlier today or yesterday I think it was Ian Allison over there uh per coined us Alameda research has 14 and a half billion dollars of assets um against eight billion of liabilities uh what's interesting is when you dig into the assets

three and a half billion is ftt that's unlocked I think two over two of that is ftt that's locked or that's like collateral in other D5 protocols which like some weird protocols actually too some weird pools then there's like another three and a half billion of crypto most of that is Solana or like over a billion of that is Solana and a lot of that Salon is La salana basically they've got this like huge bounce like 14.5 billions this huge number but when you actually dig into the assets uh a a large number a large amount of that is uh is is these assets that are like deeply connected to to FTX with ftt and with Solana too and furthermore a lot of the

where they've put that a lot of the like collateral that they have is uh again against these like ftt tokens which Alameda which is like kind of the quasi-trading arm of FTX or like linked to it obviously very directly um holds you know sometimes 99 of it so I don't know like Vance when you start digging into this kind of a balance sheet what what kind of flags go obviously there are probably some red flags like what what do you start thinking yeah so on an asset basis the first thing that stands out is that Alameda owns over 10 of Solana um which is like you know a token distribution that I've never seen in my entire life um and so you know it just gives you a sense of uh how much of the network they

own um and what their priority stack ranking is um and I think they have a lot of soul but the bigger one is the ftt right like that is clearly the strategically most important asset on their balance sheet it's the one where they're collateralizing the most with it on D5 and C5 borrowing Stables or whatever against it um but it's like the problem with these two assets and and you know really holding large assets that are semi-liquid at scale right now is that if you had to sell you know a billion of Solana the market just would not be able to digest that especially when the potential largest buyer of it is you like you know usually like when we trade coins we know who we're trading against

it's either jump or Alameda or like maybe winter mute if they're trading that day but like the participant set is not infinite and so I think the overall takeaway here is that uh alamed is probably in not as great a position as as we would have thought otherwise I don't think they're like financially insolvent or anything like that I think just think this is kind of like what happens in a bear Market when you have to manage your liquidity but it's certainly not a great look and having eight billion dollars of liabilities against a bunch of a liquid stuff you know if things really turn down that that's also a huge problem and it and it kind of leads into this illiquidity problem which I was talking about um so what do they do I think Alameda makes a lot of money you know they're

probably making a couple hundred to five hundred million dollars a year would be my guess off of this balance sheet um in this like current yield environment so they certainly have cash flow but um yeah I think just things are are less you know stable than I would have expected frankly and the balance sheet is much larger and much more liquid than I would have thought one position you know it is how many say they haven't unlocked ftt 3.6 billion I think I mean the the entire market cap of ftt which suggests the liquid amount of ftt is 3.3 billion right now so let's assume that these numbers are slightly off or that FTP has gone down I don't know

where it was trading on June 30th but like they own all of the ftt or at least all of the liquid trading ftt and I don't know exactly how the buyback and burn or the or the buyback works but do they actually burn the ftt or do you just get to buy it so so the way the buyback works and the rough numbers are they're burning about four or five million dollars a week um and like this kind of like really makes you think like if you're SPF like or you're Alameda like what are you thinking um what I'm thinking is I really need to defend the price of ftt and so it makes a lot of sense that they're putting this much money on a weekly basis into doing that like that's a lot of money they could just be you know putting into

element or FTX or whatever so like that makes sense the second thing I'm trying to do is get out of the Soul or or at least slowly you know manage my liquidity to a better position or like frankly like build up Solana D5 so that I can actually put in a couple billion dollars of soul and draw you know a few hundred million of stable coins against it so like there are a lot of kind of like strategic options which come out of just looking at this balance sheet um but I think most of them have to do with selling not not buying or or borrowing more you know getting more leverage sorry go ahead you know I'm just gonna say if you uh you should you guys should pull up the coin coin gecko charts for ftt and Salon I was gonna say this too

that's gonna they there's very there's there's interesting price action which is they both fell to 30 bucks they're kind of just going down they fell to 30 bucks they're just there's basically an infinite bid there's been an infinite bid at thirty dollars since kind of the exact same day which is like the first week of June so I don't know what's going on there but like I don't know there's just this infinite bit at 30 for both those assets since the first week of June and like they just don't budge from 30. yeah so like when I when like when I look at the salon every day like how I can tell if it's like a bad day or a good day generally or if it's over or above 30 or under or or below uh three dollars like that kind of broke last week and

and ftt is now at 24. like figuring out what the re-rating of these could be in the context of their balance sheet and what that forces them to do especially when you look at something like magic internet money uh which is a protocol which produces a stable coin and almost 40 percent 70 million dollars of their backing collateral is ftt you know you have like the potential for like a toxic asset spiral in the same way that you had um you know Luna and UST and and uh you know like the move if uh if you really um want to play this is probably um putting in ftt as to Collateral to a place that you think is semi-dangerous borrowing assets against that and you know leaving people with bad

debt that's unfortunately like isn't that what they think isn't that what this kind of just showed that they've been doing which is putting right yeah right yeah and then and then and then let me let me extend that further is this uh does it make does it seem like you know they came out in this bear Market they're like you know they're they're on the offensive like the you know the cover of magazine saying SPF is the White Knight doesn't make you think though that like a lot of the capital that they're using to for these Acquisitions of maybe a Voyager or block fire whoever it may be is them just putting an ftt into these pretty like dangerous pools like a MIM getting Stables out and then using that to capitalize Acquisitions it would make you it would make you think that the the

the the so you kind of touched on it but like what I was going to say is it this could be like the completely rational strategy uh and what happens if ftt like goes away goes to zero like gets you know however many billions of dollars of locked FDT is liquidated on market like what actually happens in that instance I I don't know like there really isn't anything that kind of really happened because of that because ftdx is just going to continue on in the same way that it is just won't have the burn or the burn will be burning a ton of ftt so like that's that's the thing that's holding it up um Alameda loses the balance sheet item but or about balance sheet liability but they gain the asset that they have

barred as collateral like which is you know a massive multi-billion dollar position like I could see a world where everything just kind of like blows up and it's still okay right or am I missing something honestly I'd forgotten about ftt until like it came up in this context like I didn't know that it was eight billion dollars fully diluted that it had you know this this type of profile or was this important to them strategically um I think other people realizing this is going to make the outcome where you know they really try to test the liquidity of ftt more likely um just like you know when people knew that the doe was potentially in a position of weakness like we saw a lot of people that we know try to basically

short it and take shots at him like that's kind of what happens um when people realize it I don't think it's like an all good you can just walk away style scenario I think you have the collapse of at least five or ten D5 protocols um and then you have the the cycle down of the Solana asset because people will know that that's the only other assets on their balance sheet if ftt spirals um so it's like there's this combinatorial effect which I don't think is just like it's all good I think this is like potentially very risky but it feels like SPF is Rich enough where he can just backstop it from FTX as well so I don't know how it works maybe this is why uh if they're raising more money right now I feel like if Alameda saw themselves in the market they would poach them you

know I mean like when when Alameda saw uh Celsius offside on the steth trade they like put they made them crumble I feel like if Alameda saw themselves they would take them out here because yeah they're very levered to the price of Seoul I've also maybe we should I don't know I I've heard rumors that uh like Alameda FTX SPF whatever however whatever entity he's working through is basically supporting the price of Seoul at 30 bucks but I believe these are unfounded rumor aside yeah I've heard around the water cooler we don't know the only thing I'll say about these scenarios is like I'm in this group chat with a bunch of fund managers uh like I think Sue and Kyle used to be in the chat and they've since been kind of you know kicked out

but like it went from everything good guys it went it went from ever being everybody being like buddy buddy to people being like where where's where's three Arrow strike price like where's where's the map like people trying to like basically hunt them while they were still in the telegram group it's like you know people it's vicious out there um and so you kind of need to carry like a big stick and and threaten people with it every once in a while um but in the dough Quan scenario that didn't really help that much you know so it's like you need a lot of capital to defend an eight billion dollar coin or a 12 billion dollar coin like you guys think of these interviews that he's doing have you seen any of these at like the Unchained interview or the

the coinage one or whatever have you watched the name of them yeah I kind of I I'm waiting for the couple interviews those are the ones which I'm the most interested in for the for the what the Sue and Kyle interviews they gave one in Bloomberg did you see this yeah I need I need to see the video you know them talking I want to see the just like the whole vibe but the doquan interviews are are strange um it doesn't seem possible that he's still out there just living his life and like also on Twitter um I don't know if I get much from it other than it didn't work and a lot of people got hurt

it's probably the only real take that matters honestly yeah uh it doesn't seem like the the end of the FTX story we can move past FTX but I feel like there's I think this FTX thing is going to be in the uh I think this is the start this is not the end yeah yeah for the record I am I am like on the team of like I think they're solvent I hope there's something I do too I'm running out for them yeah yeah yeah I just think where like usually where there's smoke there's fire people are gonna be looking at this it's a bear Market these are the things that happen in Bear markets they also just allocated a bunch of capital like if on block file fingers crossed like their deal still goes through you know like I'm I this is these are just the things

that happen in Bear markets so keep in mind like you guys are in this business like everyone is reading these articles for a reason somebody decided to leak this to the press for a reason like you know somebody didn't just stumble upon this um and so like I wonder what that is is kind of my other question 100 yeah um I I guess I mean maybe this is like even too simple of a take but if you had made me guess what does alameda's balance sheet look like this is just not what I would have thought it resembled I I thought it would be like Bitcoin said too you don't think it would it would resemble a retail Trader no yeah we got some soup we got some rock and pull but like I think think of

it too like if I told you that a VC that had a tendency to sell owned 10 of a coin that you thought was gonna go up like that doesn't seem to fit logically like you're going to have a serious headwind when Solana comes back in my opinion just because this liquidity situation looks like it needs to be managed and it feels like Alameda is going to be you know pretty on the ball when it comes to getting more cash from their balance sheet if this is really what it looks like yeah I wonder if they're just trying to wait it out I mean that that was my kind of very simple take because I kind of just think they're looking at this being like eventually in maybe it's one year two years or whatever bull market will return liquidity will come back to ftt and

Solana and all that stuff and they can exit you know at a pretty good position I would say but I I was just surprised that it wasn't I I thought it would have been like 50 cash is there portfolio I was just surprised that this is how it looked to be honest um it kind of just means those assets are going to be range bound like they can't let them drop below a certain threshold or else their liabilities some something probably happens maybe they get margin calls maybe they get reached out to you have to repay really but on the other side you know if it runs too high like that's a liquidity situation which you now need to manage and so like you kind of have this bounded outcome for at least the near term of of those coins just because of the liquidity

position they're in yeah so you're saying there's an SPF put on on Solana I very much I tweeted this I tweeted this when he was originally talking about buying Bitcoin I very much do think there is an SPF put you know around he said it was around 17 or 16k Bitcoin I don't know what that would be for Solana probably like 22 25 um but yeah when when like the richest person in crypto tells you there's a put you kind of got to believe them yeah fair enough um I would love to uh I think maybe we could talk about Instagram uh moving deeper into nfts uh in general I'm not sure if you guys um heard about this but basically they uh Instagram

announced yeah do you actually want to talk about this story I feel like you were you had some thoughts on it yeah I mean let's um let's do Ave First Ave and JP Morgan because I think that will segue because that was also on polygon that'll still go into Instagram in a second um and I've just been spending more time with the JP Morgan I was I've been talking to Tyrone Ty from JP Morgan all morning about the deals I know just a little bit more about it um basically Singapore is very into crypto Singapore has been very Pro crypto for a long time uh they have something called the monitorial monitor monetary authority of Singapore Mas um they have project guardian to basically get more into crypto they went to JP Morgan um to basically do a crypto experiment

and so what what they actually did here is uh JP Morgan built this essentially permissioned it's really a permission defy thing uh built on it was a fork of Ave Arc um and what they did is they tokenized they worked with Singapore's largest bank which is DBS um and then uh Tokyo bank which is SBI and they basically tokenized JPY at the end and they tokenized SGD um which is the Singapore dollar and they put it in they basically created like a pool essentially in in uh in this like forked version of Ave arc on polygon um and and they swapped assets on it so it was like super permissioned

like about his permission to defy as you can get um but it was I mean it was a live cross-currency transaction on a fork of Ave Arc which is pretty cool so yeah that's the that's that's the overview um they're they're actually there are hope first which I can talk about but yeah what do you guys think about this I hope this is the start of a longer term commitment to doing these things and bringing clients on chain it feels like a lot of these Bank Pilots end in like okay we're gonna go build our own permission blockchain thanks for trying it out live in the public or like they just don't have the follow-through but these are things that we need to be doing I'm glad that polygons BD team is like strong enough and also shows that

they're pretty dynamic they can do the gaming stuff they can do the big institutional stuff um TV how much value this actually brings to crypto it's usually not a huge problem getting them to come to crypto it's a problem getting them to stay um so yeah I mean bullet but we'll see yeah I mean JP Morgan's been working on blockchain stuff for a long time right you remember like Amber ball day if I don't know how long you guys have known the blockchain Amber yeah Clover now like Christine Moy uh yeah Christine Moy worked really hard on building the blockchain team over there um and they've been building you know they had Quorum if you guys remember that back in like 2015 and 16 the fork of ethereum then I think consensus took that over uh like York roads that Microsoft was managing it for a little

bit I think but so jpmorgan's been working on this for like a decade I don't think it does much for defy honestly but what I think it does is um if you read Tai so that guy Ty lobon is I think is his last name if you read his Thread about this that is a crypto Savvy person like he's talking about zero knowledge proofs he's talking about forking Ave Ark uh he he posted actually the transaction hashes to to on polygon scan like that is a crypto Savvy team over there and I think what it does is it makes other Banks realize like it makes other institutions realize oh oh crap like oh like people are taking this seriously oh okay people are doing this thing oh wow okay and and it also pushes

Regulators to say like oh like these like Ave pools these London borrow platforms like these oh like real people are using these like ah crap okay like I I need to figure out what's going on here so I I think it's not positive we need the narrative when it's a bit strange that it's on a POA train um like you know ostensibly you'd build this on eth but it's positive sorry this is a really dumb question what's a POA chain that's how their current chain works got it um I have a yeah I mean there are other I want to actually ask you guys a question

about polygon SEC after we talk about the Instagram story but um the other interesting thing here was the they said I I think they're on chain they built this like in-house on-chain verification thing um and and he said he's like look the design of this wasn't perfect um but he said that uh he's like there's no possible way we could have gotten into D5 without kyc going through like compliance and kyc and he's like in the future we at JP Morgan hope to actually use your knowledge proofs for this so I think like it's cool to see them pushing the edge of uh of innovation on the D5 side of things I mean this this just furthers the thesis that public permission defies how institutions will interact if they

want to interact you have to be permissioned it's just no there's no question yeah they also built their own in-house wallet which is cool like they built this institutional wallet where Traders couldn't access any company funds uh only approved D5 protocols could be used um and then VCS were like I think they I think they they had some sort of like uh there's some sort of process thing where um I don't know a lot like they built their own institutional wallet which was really cool so yeah um I think it's a cool development I'm uh I'm curious what you think of this mic like Ave Arc and permission D5 and we explored this in season one at velcro and talked to Ben Foreman about it on

the podcast I'm just curious to get your take on this um yeah I have like a pretty hard time getting I think it's like a great I think I basically agree with what we've said like it's a it's a positive development it's hard for me to feel like super excited about things because it's kind of like maybe it's a POC maybe it goes somewhere but like maybe it's just I don't know it hasn't gone anywhere in the past in any of these plcs that I've kind of watched um I I guess I I'm having trouble uh envisioning what the future for D5 might look like because on the one hand you know Michael I know we talked about on our panel back at Bass London right like it seems very bullish for actually permission D5 right where all the assets are institutions they simply cannot

interact with a financial system that doesn't do kyc all that kind of stuff but I think then you lose a lot of the core advantages of it um and then there's this other I could also see a future where like the Overton window shifts and for whatever reason geopolitically people say oh actually privacy is like a very good thing and maybe it's a government that gets out of control there's like a lot of uh you know abuses of um I don't know the you know weaponization of the financial system and people decide like I actually want privacy in a financial system in which case permissionless kind of defi ends up working I think the future ends up probably ending between being somewhere in between those two things and there's probably a permissioned uh defy and a permissionless D5 but um I guess for me and my own personal

interest I think that probably the permissionless one would be more interesting for for me not saying it not saying it will be larger or more impactful but like for me that's kind of where I want to spend my career you know so I think there will be big permission D5 but I I just don't see it as being as personally interesting to me um that's kind of my my thought unless unless the products that you can access are differentiated so like one thing that we were talking about is like where can you buy a 10-year treasury bond on chain right now you can't yeah okay you literally happen to go to a prime brokerage or a brokerage account and buy it if you you know signed up for a brokerage account and that gave you access to buy it on chain like I would totally do that yeah

so like if the product's differentiation is is there relative to the permission list uh public permission D5 versus permissionless I think that would drive more interest from a retail perspective but I agree with you what up yeah like the yields and D5 are so cyclical that they're levered you know super lever to the cycle having a counter-cyclical business like tradfi and all of the yields and all of the bonds and stocks that they have brought on chain like that helps make crypto more defensible which is really really good I think at the end of the day permissionless finance and like crypto Twitter and crypto culture and ethereum like that's part of like a movement you know like the hippies in the 60s you know like that was a movement I think roughly the

same is happening right now permission finance that can never really be a movement it can't be the core of it it can be something you staple onto the margins of it but it's never going to be the thing that pushes it Forward yeah I'd completely agree with that um I also you know part of me too like I do see something like the Innovation is good there's like not enormous amount of innovation and finance there are a lot of poor incentives I think that work that way but also sometimes you see also sometimes you see people doing these things in crypto that at least I don't agree with like let's take ftt there has been this idea that you can create a token out of nowhere which is basically very risky very volatile early stage equity and that's like good collateral to dump in a pool and get

usdc out of and uh like if maybe this is my own risk tolerance like you know I'm on the conservative side of things but like I kind of feel like that's a recipe for does that there's a lot of that that goes on basically and I think there is at least some benefit right to having maybe some guidelines uh to things so yeah it's like absolutely not you know nah rip it send it I don't know I mean one of one of the biggest things one of the biggest things that I think about a lot you know as investors is you know and one of the most important components of the SEC in terms of companies is whether or not insiders are selling don't you want to know whether or not someone who started

a protocol who owns five percent of it still has their five percent or every single time that they sell they have to register that sale like that's really important information that people should know before they invest in it um like that that type of stuff I think is is the rule set that we're talking about here and I think that we could actually do a lot of that type of stuff yeah yeah I have I've I've I can I can feel you guys more prediction actually on this about the whole uh the yields I think circle is going to start to print unreal revenue and I think there will be going to be a bunch of businesses that start to challenge them like they have a sweet business and their business is literally buy super short dated super liquid treasuries and earn billions of dollars

like that's straight up their business right now and I think a bunch of companies are gonna look at that and be like oh I'd actually like to compete like coinbase is starting to compete for some of those yields with circle they're trying to get in in a way because they have the center Consortium together and they have a a revenue split based on where the usdc is custody so that's I think the best way to understand like the PSM thing in maker and they'll probably go and hunt for usdc deposits so they can boost up that like there's a really important line item for them on their on their income statement which is they've got they're talking about their subscription like other Revenue right we're not a transaction based businesses where we have other um and an enormous part of that right now is uh interest actually that they

generate so yeah uh I mean so let's uh I mean great transition if you want to talk about it I messed up it's 5 30. it's 5 30. they're coming out so yeah we're gonna miss it by like an hour no no no earnings are out earnings are really the call is at 5 30. nice let's go um but so I I actually think coinbase is also one of the hugest benefactors of this as well because who would you trust more to trusted your assets Circle or coinbase and if you're custody in your usdc with coinbase they get they get that cut I mean it is I think what happens when like we're gonna go into the world and this is one of the things we were talking about with treasury is

on chain where like real risk pre-rate yield is going to be four plus percent at least probably for a little while whether or not that persists into like 2024 remains to be seen But at least for a while you're gonna have some pretty pretty reliable sources of yield and I think you know the the places like coinbase are are gonna uh benefit from it once again one of the things that you see in this Q3 breakdown which I've been looking at in the background for the last five minutes big Miss though big Miss on coinbase earnings huh they'd Miss but look at the stock yeah because they missed less than people thought they would miss no no so what are the results can you read I'm like my guess here

yeah so they had net revenue 576 million 366 of which was transaction Revenue 211 of which was subscription and services Revenue uh so the shift from transaction to Services is happening faster than people expected it seems um they had Q2 so these are the numbers Q2 to Q3 uh trading it doesn't have trading Revenue but volume of Q2 was 217 billion volume for Q3 was 159 billion whereas subscription and services Revenue went from 147 to 211 Q2 to Q3 respectively so it it is increasing in a

faster rate than people expected and that's why I think you see the stock trading flat right now yeah did you see even even though they missed you know estimates by 50s what's their event uh does it say what you're looking at because the reason I'm asking is coinbase is basically guided investors towards uh negative 500 million in ebitda on the year so basically they can lose like as long as they're losing only losing any but like 220 million or something like that this quarter to 210 to 230 something like that if they basically keep that loss relatively steady volumes don't completely collapse and they grow their subscription this uh the stock was always going to go up because the street has basically priced in declining uh transaction revenue and

they're totally fine with that exactly it was 116 million uh net adjusted even I lost that's like way above that's way above expert they were projected to lose much better so that that so that's the other thing what they guided what the outlet was for Q3 was approximately a billion in r d spend with 400 million in stock based comp um for sales and marketing they were 25 lower than their expectations and for r d they were about 10 percent lower than their expectations so costs were actually lower than expectations in transaction Revenue up or sorry uh subscription Revenue up they're they're probably you know they

they fired the CPO or you know he left you know this week like you know you you read that article at that period of time for a specific reason and you know they knew what the financials were and so they couched that with with like really something really important generally with news and everything that comes up is like every picture that you see in every story every headline every like it's all there for a reason it's all very pro forma pre-scripted you know whatever you want to call it like this feels like they're trying to you know this is like the turn we fired the CPO who you know baggled a bunch of stuff you know the transaction you know it's coming down services are going up like I would not be surprised if this is the start of of a more sustainable run for

coinbase this is the rip rip the Band-Aid period this is the rip the Band-Aid period right the guy who everyone made fun of that you paid way too much would like uh we're gonna find a new CPO yeah yeah still still burning 500 million a quarter not they also have like six billion in cash uh they're like they've got such a big cushion they honestly honestly they have six but I thought I'm kind of a bullet I mean they've done everything right they had the criticism of coinbase was they're trying to do way too many things they've grown head count way too much they're super lever to transactions like they had to reduce their head count right they had to get their expenses in line they had to grow their subscription line item which basically seemed impossible and they're kind of doing it

um and they they actually might be a monster in I mean I wonder how that 200 million or whatever breaks out but uh I I wonder how much of that is staking I think I think they might they they might have like a monster staking business on their hands frankly they do they do they have a million CBE they probably got you know I think like four or five or six million staked centralized teeth like they are by far the biggest youth Staker that we know of um yeah and that is blockchain in so so Mike here we go uh if blockchain rewards staking um basically in line from last quarter custodial fee Revenue slightly down from last quarter

um other subscription services and services Revenue which is I would imagine that's up and exactly the biggest one uh last quarter it was 32 and a half Bill 32 and a half million from interest income this quarter is 102 million look at that so it's up three that's wild and they whatever that and they just got their whole PSM thing that's 1.6 billion going in and they they like basically assume uh 50 of I mean that that sorry let's let's assume you they have to pay 1.5 of that to maker and then they probably get another like but they're making at least four yeah four four percent yeah at least that's what

that's a three-month treasury bills that's like the most liquid thing you can you know short-term short duration thing you can buy um and they got to pay some of that to Circle but that's gonna be like tens of millions uh in additional income there and they'll probably run that back with multiple D5 protocols I bet you're gonna see that coinbase institutional team slide into the DMS or onto the forms of a whole bunch of different uh big D5 protocols because this was pretty successful for him yeah it's not just the project though if you look at if you look at the earnings from 12 months ago 10 of like so they have this like top 100 hedge fund list uh coinbase in LA in 12 months ago earnings said 10 of those 100 are uh custodying and like trading crypto with coinbase today's earnings

announcement said 25 so it's like at the end of the day if you're a big hedge fund and you want to get into trading crypto like you go to coinbase and to have 25 percent of the world's 100 largest hedge funds custody with you is a they're going to be fine the top like the tough part though is institutional uh year over year uh obviously is uh transaction Revenue versus retail yeah is down about 3x uh and it's just been bleeding out basically just the institutional side has been bleeding out in addition to retail over the last four quarters custodian Revenue which you would assume is going up if that what you're saying you know is true uh is is

going down which I think also represents a compression of custodian fees but it's it's sort of like where do you want to store your assets while working stored at whatever the cheapest place is it takes you know six minutes for us to transact one custodian to the other um so I think custodian revenue is really going to take a hit but it is going to be interest income from usdc as well as uh staking rewards those are gonna be the two things that persist 100 they all I I actually actually agree with that I don't think the the treasury you know whatever business is going to persist at all like I think you're kind of of it an abnormally High you know rate for all interest rates this is kind of like when last year everyone thought the defy yields were going to continue forever I think the same thing is

happening here um I don't think this is going to be a sustainable business for them I think it's going to be something they did then when we look back on it in a couple of years looks like just a moment in time thing um I'm not sure I agree I no you don't you don't have to believe that interest rates stay up what you have to believe is that more assets come on the platform than interest rates go down yeah uh also we we've just reverted to like historically normal interest rates like these these are not crazy rates uh this is like we were in an aberration before where they were that low I think um but if you assume rates stick around at like let's say two three percent I I would imagine they were able to increase the amount of assets on platform well over

two to three x two two three percent sure but like here or higher I just I fundamentally don't I will say the what what one thing that's a funky situation is that we've got an inverted yield curve so usually the short-term rates are lower than the the long term rates and it's weird that's not the case so probably there is room to fall for short-term rates but last thing because I know we're gonna wrap up soon is that the the derivatives market like this will probably come up on the so they acquired fairx uh coinbase and uh you've heard SPF like lightly talk about this um I think I think it's a big regulatory battle but like the market for U.S derivatives in crypto is still very much anyone's game I would say um CME obviously very storied institution kind

of a head start I they they will they will struggle uh based on their uh they probably won't move as fast as some of the crypto natives like FTX and coinbase and I I think they will run into challenges I would if I'd guess I'd say coinbase or FTX split that market um but that and that's a huge opportunity it's like a 50 billion dollar market or something like that's large I have one last thing because I know we need to wrap this up but I do want to talk and so Instagram I want to get back to Mike's thing about Instagram and polygon for a second because that'll tie into my last question I want to ask here which is um Instagram has just rolled out the ability to basically mint using uh Min nfts inside of Instagram using polygon you can also like view or sell or

something like that with some other things like flow and Solana um big news obviously polygons team is totally crushing it um they did that with Reddit as well I'm curious what do you guys think that polygon ends up declaring independence from ethereum one day and like becoming their own L1 to try to drive more value back to Matic holders because they're working on their own data availability availability layer and I'm just like what it feels here let me I'll the the premise of that question it feels like Matic it feels like polygon has basically like their marketing right now is really smart because that they the the eth crowd likes them because they're

not in the camp of like Avalanche or Solana or like the youth crowd's like oh I don't like the alt L ones so they're like oh no everything that we do on polygon is good for eat but really if you look at what they're building like they're building their whole data available data availability layer like they're kind of building the full stack of an L1 blockchain do they end up like just moving away from E so that Matic ends up getting more valuable so data availability doesn't mean yeah data availability doesn't mean that they move away from each it just means that what they put on to eth is is smaller uh arbitrum is also building its own data availability data sampling uh component which I I can't remember what they're

called but like they're any they're like any trust or something like anyways the the like L3 basically supernet equivalent for arbitrom is with a known set of validators who are going to be performing data availability data sampling and then one or two of those validators will put that call data on chain I think that that will be kind of the Playbook that polygon runs as well um because you're still going to need some trusted settlement layer it's just a question of like what you're putting on chain that uh you know is kind of the core question here I still think that that's Eve yep yeah and you know eth is going to be the payment token for uh their ZK uh solution for the POA chain as well like like they're doing the work to align

themselves with Heath I think in good faith um and yeah like I think if they were to break from youth right now or in the next three or four years they wouldn't be strong enough to basically fend off competition from people who run the polygon Playbook but like three years back in time just kidding we're the real you know l2s and we have the best it's like you know hot ball of money hop all of users it all is kind of the same thing let me just ask this question to close it like Instagram rolling out NF I I have a real I don't feel like I've got a good smart take or thought on like the interaction between Instagram rolling out nfts like do people buy nfts or use them through Instagram or how do those two things Collide I just don't understand it I'll be honest I don't

have a good thought this is this is the classic mistake of like if I just get one percent of this huge Market I'm gonna be gigantic yeah you know the better idea is I want to get 100 of the weird crypto Degen activity that's happening on Ethan the weird people who use it and maybe that'll be a big Market someday but we're doing the thing because it's small we like it feels like a movement um I hope it plays out like the Reddit nft stuff it's just it's hard to get people to use stuff that they're not familiar with um and I think that's the core problem that they're gonna have the Counterpoint to that and and once again to go back to what we talked about last week with nfts and IAP I think Instagram just sees this as an opportunity now that Apple has blessed

us to be able to actually sell nfts in app and not have it be that much of a infrastructure overhead lift for them to enable this if people really want to like think about it we just talked about how many people work at Instagram who work at meta you know they're probably like 5 p.m sitting around one day and like a team of 25 Engineers who are like twiddling their thumbs waiting for some work to do and they see Apple come out with new guidelines and now it's like okay great let's go off and build that and see if it works like no standoff our backs and that's exactly like the process I think I don't think this is like a structured strategic move I think this is more just like cool guidelines say this let's go do that wouldn't I mean just hearing you say

that actually wouldn't that be kind of interesting I mean that's like the one of the bigger Monopoly I know they've got better PR and everything but Apple their app store business is the definition of a monopoly in my in my opinion right like and their take rate is enormous right 30 or 15 or whatever it is uh it would be interesting if that was one of the developments that actually pushed people towards web3 because they don't want to pay that arduous take rate um that but once again as you know said what what phone are you going to use that's not an iOS device you have to pay I don't want a green text because yeah I do not want a green text yeah I I don't want you bringing green text serious I do too it feels dirty I hate it you wanna hear a true story you want to hear

a true story I have I have a brother and a sister and uh we my brother's not in my group chat with my family because he has a he doesn't fun one guys this week I will uh we'll see y'all next time [Music]