VanEck PM: Tokenized Equities Are The Next Huge Opportunity

Transcript

And I think maybe the answer is like let's not look at these things based on like last month or last week and cuz a lot of people like to just take like last month and annualize it and then say expensive or cheap you know what is institutions are coming mean like how does that process actually play out you know in the time frame for allocating to these new asset classes. So you can still have these crazy moonshot worldchanging ideas take place but it all kind of tethers back to like capital coming back to the original person investing in the thing. Welcome back to the Rowup. We are your hosts. I'm Andy. I'm Robbie. And this is your home to learn from the biggest guests, the brightest minds at the tip of innovation. Our goal is to help spread the collective knowledge of

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[Music] We're here in New York City. um couple weeks before permissionless. A lot of movements recently in NYC with Salana Accelerate NFT NYC coming up. How you feeling, man? Feeling great. Um I was telling my team this. I feel like sometimes crypto has more conferences than actual products to show for. So I would love for that to change at some point. Wow. Starting off hot. Like every two weeks there's like some conference and people just it's like the same people showing up these things. I'm like, when are we building some real stuff? Yeah. I mean, the city especially feels like a consistent weekly conference. Yeah. It's been a bit of a change, right? I was telling you that

I've been doing a lot of the digital nomad stuff for a while and I'm always just, you know, calling in virtual, but this is like every week there's happy hour, dinner, etc. Yeah. Which is good. You know, it feels like the onshoring of the industry in a bit. Yeah. No, that that's definitely a good thing. Um the last few years I've had to kind of travel around the world to see folks and now I get to kind of see them all around here which is which is really neat. Um man I guess I'm curious what do you what do you generally get out of conferences? I mean it used to be so we first started like four or five years ago and for us it was all just a game of connections like purely within like Ethereum and kind of like this this community. So we

would go and my partner and I would get as many telegrams as we could to try to get podcast guests, try to get sponsorships. Then now it started to to shift towards uh being more strategic for like meetings, private dinners for you know longer sales cycles for uh meeting founders that that we want to in in invest in in our fund. Y um or just kind of doing now it's kind of just like fun. Yeah. Now you just go and you have fun do some panels stuff like that. Yeah. I'm starting to lean towards uh liking founders and teams that don't show up to conferences. Really? Yeah.

Because that tells me they're more focused on just building. But yeah, you know what's funny is I used to say no to a lot of the institutional like more suited up conferences. I was just at stable con last week and it actually felt much more of a compelling reason to be at these types of events because it's just completely new new people. Yeah. And they have there's a completely new way of thinking. Um, you know, I I spoke to like three private banks that wanted to launch stable coins. Yeah. And I was like, "Wow." Okay, so we're going to get a lot of stable coins. Yeah. Um, do we Why do we need all those stable coins? I don't know. I saw this this tweet that was like, "There's going to be a million stable coins." And then it was like, "Bam, here's my DeFi product that is

going to bring all of them into one." Um, so anyhow, I brought you in today because I wanted to really get your perspective from your uh institutional lens, per se. I think a lot of people hear the term institutional uh and have different meanings from it. I I've came to kind of understand that it's mostly just funds, right? It's people trying to allocate capital uh in the space in some capacity. Um and you know, I I got in the space in 2017. We had this meme like the institutions were coming. You know, we're going to we're going to dump on them, right? We're early like they're coming. And so, but I think people have a bit of a misnomer as to understanding how institutions actually move and operate in this space. So I would love to just get a bit of a baseline understanding as to you know where are

institutions like Van and others at as far as uh deploying capital into venture into liquid into stable coins stuff like this and then what is like you know what does institutions are coming mean like how does that process actually play out you know in the time frame for allocating to these new asset classes. Yeah. Um so there's many different directions we can go with that question. Maybe you could start with the premise of like quote the institutions are coming. Um and I guess like yourself I've been generally involved in the space since 17 and been running our liquid token fund since 2022. So we're about the lap kind of three years. Um and so so when I hear the term institutions are coming it's either two things. Uh one is like capital is coming in to buy our bags as you put it. Uh the

other one could be institutions are going to build products that are going to be quote unquote onchain i.e the tokenization of something something so that someone else can maybe use these things. Um so and those are potentially two separate pools of um institutions. So the folks that are building products essentially tokenizing recently were essentially a whole bunch of T- billill products like treasury funds but you'll see other things get tokenized over time. you know, we obviously think uh equities will get tokenized and we can talk about why the folks that are doing that are a very different group of people than the folks that you ultimately want quote unquote buying your bags. Um because the buying of the bags thing is really a downstream effect

of allocators. So the way I think capital generally moves in the world is you have a whole bunch of people with capital whether that's family offices, high net worth, um endowments, foundations, pensions, sovereigns. So you can bucket capital people who have capital into just these categories. And ultimately most of them don't make direct investment decisions. They either allocate to a passive strategy i.e. an ETF like product or they allocate to an active strategy which could be someone like us. they give us money to manage for them because they think we are experts in some area and then kind of go ahead and invest that capital. Um and in general those folks let's just say every one of those c verticals of uh pensions

sovereigns foundations endowments um raas which are just essentially ultra high net worth people and family offices um have kind of dipped their toes in a variety of different ways but they haven't really arrived. Um I think the family offices came in probably early cuz they saw the return potential from um this asset class especially on the liquid side. But a lot of these people have kind of dipped their toes into this asset class maybe in two different ways. One is last year they all kind of started buying some Bitcoin ETF because that was an easy way to get exposure. Um the other way is through ventures. They found you know your large blue chip managers to then allocate to. But a lot

of them have not come into liquids or proxies of liquids which are folks like us or whoever else. Talk about why and everything which I think is where the edge is now actually more than more than before. Yeah. So we've been saying for the longest time that uh in 2022 since I guess since 22 till now there's about $60 billion of capital has gone into preced seed venture backed a whole bunch of founders. Many of these founders will likely want to exit in token form. Yes. Or maybe some of them will try to go public and so on. But going public is like a longer route than exiting in token form, right? Most companies go from seed round to public in eight years, six to eight years. Things go from seed round to uh a token in by 18 months. Yeah. So, and then there are

certain businesses where a token makes more sense than a public equity. Um anyways, what folks are now realizing these again these pools of capital that have been kind of dipping their toes is maybe they've overallocated to venture because a lot of the investments they made through managers are ultimately launching tokens and those tokens might have launched in the last 12 months, 24 months and they all have one thing in common which is their charts are generally down only because there is no like captive market to really take this off your hands right. Um, in the traditional markets, when a ventureback company is about to go public, there's a deep public equity market of different types of strategies and allocators that are willing to buy those at the market

clearing price. And that necessarily doesn't exist in the liquid token markets. And anyway, so I think point is like these people that have invested in venture are starting to realize that and they're looking at liquids, but there's still structural issues with them ultimately pulling the trigger and coming into liquids. Yeah. So, uh, my partner and I, Robbie, we run a a fund that's just our prop cap. We we probably did like 40 or 50 deals in the last like 18 months, two years, starting with like I think the end of 22, we started really allocating through 23 and then through like the first half of 24 a lot and then this year we've only done like one or two. We got a couple in front of us right now, but then I'm looking at at the charts of Bitcoin or Hyperlquid or ETH and I'm just like, Rob, like why why

are we going to put, you know, 25K away for four years and pray for a moonshot when there's a very clear liquid, you know, gain in front of us for what I think is even this year. Yeah. Or even into early next. And so our headsp space has been around I think what you're kind of describing which is like this broader shift from okay allocating to preede seed because it was easy if you will in like if you got the L1 trade in 21 and 20 Avalanche Phantom near etc. you know, those gains were unparalleled and there's still a lot of large winners in venture, but but it's gotten more crowded and more I mean, there's just been a bifurcation of teams that are

doing well and will drive returns and those who who won't and those who won't that pie is getting bigger. Y and so anyways, coming back to kind of my framework now, I'm kind of like, okay, I don't really see the need to do that many uh deals unless it's a very select deal. And so I think as you said these early stage allocators are seeing the same thing but there's kind of this friction for them to actually get in. So it sounds like that friction for them is opportunity for those who are in or or who have the ability to be in. um are are you seeing this this kind of like transition broadly with with early stage capital allocators as well similar to how I'm describing or even better like can you can you justify my thought process here like am I thinking about

this correctly like okay we're kind of midway through the cycle or like you know I think it's better to be in in venture or in liquid venture was good in the bear yeah I mean am I right am I wrong so I think I think um there are many aspects where you're saying makes makes a ton of sense right where like what I would say is like um the space where um there's a clear supply demand imbalance is on the liquid side because there's not enough um supply of capital and there's a lot of demand is i.e. a lot of tokens a lot of projects to kind of look through and say which one of these are kind of like diamonds in the rough like reality is like 99.9% of tokens on coin market cap are complete garbage and like they shouldn't be like anywhere worth anywhere near what

they're worth in the market. Yeah. But um you know there are very very small subset of opportunities where you can underwrite them. There's clear product market fit and there's fees and those fees are making their way to the token where you could just very simply say if um let's just say for a lack of a better word altcoin market cap which is everything X bitcoin ethan stable coins which is 750 billion today it's going to be multiples in the future. this project is going to be a direct beneficiary of that growth and a lot of that value will go to the token and this is a very easy bet to make and this bet here is potentially superior to most things you'll see kind of in the pre-token

market um based on time frame or just like risk parameter essentially it's risk adjusted right and you retain liquidity which is a big interest like valuable thing uh because you can change your mind you can have a venture- like return profile with these assets and still have liquidity to kind of tell yourself oh I've been wrong on this thesis I should be able to get out of this. Yeah. Um now that said the the counter to kind of what you laid out which is again a counter to what I do for a living which is I focus on liquids. It's more in favor of what Wyatt does who you I think head on. Yeah. um is is that um since 2022, since like the last administration has been so hostile towards the crypto space, one thing I noticed, and this is the thing that used to scare me pre-election, is

the caliber of talent coming in to build applications on blockchains was like pretty weak. Like most great founders coming out of universities or whatever were just not coming into crypto. They were, you know, building some AI app because it was easier to raise money for that, right? Um and and since the elections, I think um a lot of interesting, talented founders are coming back in to build stuff. So, I think if if I'm just hypothesizing here, but if you were a uh a VC that deployed all your capital in 22 to 24 and you were fully invested in a whole bunch of deals, um versus if you're a VC that is starting kind of now and you're going to deploy capital over the next 24 months,

my hypo hypothesis would be that this cohort will likely have better returns than the last cohort because you're just attracting better talent. Yeah. Um and so I think especially on the application side right uh or application layer um because I think in general I've observed that um application layer projects even now even with some really interesting talented founders are pricing lower than like let's just say the next me copycat you know L1 whatever. Yeah. U so I think a lot of the VCs are still kind of stuck in the past of like what's worked rather than kind of looking forward. So there is like I think a pretty great opportunity there. Yeah. Actually, I was speaking to Wyatt about that with Wyatt, for those of you who don't know, is he's the GP of the Vanic Ventures Arm and uh

he was he was telling me about some of the deals that they've done and and also that there's been this uh A16Z crypto event here this week and yeah, just people with backgrounds from Stripe, from Visa, from PayPal, etc. coming in uh with that type of experience versus uh versus what I would say is more like homegrown like developer experience more like fintech financial services practical application kind of thought processes because we often get bugged down with like you know being in the space for eight years or whatever you get bugged down with tribalism or of like the the trade-offs of like the blockchain design or like you know how many validators you have but like it does seem like this next cohort of founders doesn't really care that much about these is just more about like

product market fit or revenue or whatever it is. Which actually gets me to a a funny point. I put out a tweet that was like how long is the revenue meta going to last? It's kind of good good bait, right? Did I put less than 3 months, less than six, less than 12, less than two years? Yeah, it's funny. The results were very much like barbell. It was like, okay, it's going to last less than 3 months or people put less than two years, which I assume is probably like no, like longer or forever. And I got quite a few comments saying that uh this is something that's going to go on forever. Now to your point about the elections, I think that that actually was the first kind of domino which is like okay you guys can make you guys can build things now that

make money that acrew value back to your shareholders. Y kind of like how we do in the whole world but like you guys can't because we've had these weird rules. Yeah. And then also Hyperlid came about was like all right well yeah screw screw VCs we're just going to do it our way and then we're just going to buy back the token in a huge way. So like these two things have really I think pushed that idea forward more than ever. So I'll just pose that question to you like is this a fleeting thing or is this the endgame? Is cash flow all that matters? Like what is your your view of perhaps even like the timeline of like this revenue meta? Um and like is this a a forever meta? Um so I think it's binary. I think um it's either or which is crypto will just be a sideshow of the

internet if the revenue meta is not the meta. Right. So like I think most large pools of capital in the world wants to either allocate to let's just say what is a store of value you know and then there's a small subset of things in the world that could be store value let's say gold bitcoin real estate whatever yeah bitcoin kind of has made it in there now um and not everything can be that like I think it's very hard to be that and I mean it's a miracle that bitcoin became that and that's cool but um everything else outside of that um is ultimately going to be looked at as essentially a return of capital asset which is I invest a dollar in this today. Uh how much money could it give back to me in 25 years? What take the most like you know nobody's asking um

you know SpaceX like when they'll start to return capital to their shareholders, right? But people are thinking SpaceX is worth X today because in 20 years from now and we're when we're colonizing Mars like here's how much money they can make and here's how much money will come back to us when that happens. So you can still have these crazy moonshot worldchanging ideas take place, but it all kind of tethers back to like capital coming back to the original person investing in the thing. And that's like a bulk of like what the world likes to invest in or allocate to. It's like this framework of um show me how I'll get a return on this money, right? Um and I think for some reason crypto has has as an industry has really tried to like not focus on that. Now part of that is

regulatory, right? everyone's trying to like jump hoops to figure out how not to be called a security. So, so then you kind of navigate yourself into like, you know, ultrasound money or whatever. So, like or store of value. You because you always community money, right? But I think yeah, if we're just being truthful with ourselves, I think um it's either the industry focuses on like the things that uh matter which are essentially product market fit and and why is this worth why is this asset valuable? And and I think you know and just again going back downstream when I tell um people looking at our fund and asking what do you what do you do for a business or whatever and I I describe what good token businesses are. Um the

the most often question I get before they even go in is like why is this thing valuable? like you know because they're all used to the mental framework of stocks and bonds and and yeah so so for that money needs to come in and that money will come in when the question or the answer becomes obvious. Yeah. Yeah. And then then this asset class gets a lot bigger. Um so or it doesn't get bigger and we're all kind of like trading memecoins or whatever which Yeah. So not great. So the the also the projection of future cash flows is valuable because I mean if we're looking at the again if we're looking at the revenue producing companies in the space today at scale that would narrow down your focus with regards to assets that you would potentially want to hold. But

then but then if you actually incorporate future projected cash flows which is again how a lot of stocks and you know assets are valued in the real world per se um then that kind of opens up a bit more possibility for you. Yeah. And what I tell people in general so so just to take a step back our strategy could do both tokens as well as public equities and so we can go where the best opportunities are. I don't have to you know own alts if I don't want to own alts. Yeah. And in today's world, there's very few alts that we find interesting. Um, but that said, I'm very happy to find a project that has a great product. Yeah. where the token might not have any like properties of value acrruel today. But that's fine because these things are programmable and you

can figure out value cruel later as long as you have a good team that um you know is a good steward of of sort of what they're building and they don't have this. You know there are teams out there that have built a great product where a lot of the value might just end up going to the equity and the token might just be like an irrelevant thing over the long term and you obviously have to avoid that. But if there are teams that has built a great product and and the token value curl is not clear or the monetization of the product's not clear, but you can kind of use your imagination into the future and see how those things could work. That's totally fine. But that is that is an opportunity, right?

Because um you know if this product now gets monetized and that value goes to the token, then that token can go from being irrelevant to like hopefully a top 30 and that drives like the entire kind of fund's returns. And I think that idea has been a bit um it it it was done in such a way in the past in venture that was like okay we are going to build this product because it has a better it's a better infrastructure product than something else and then we're going to figure out the token later. Y but that's not what you're saying. It's it's like no no this is actually something that's working consistently and is like live in the market today not you know in a preede round and then obviously we can figure out a way to drive value back to that token. And so coming back to your

binary kind of lens of the space, when you're looking at at this these these revenue uh oriented companies, how do you think about um the right time to actually charge fees and to actually try to make a business of your protocol? Like obviously you're coming at this from the investor's perspective, not not necessarily from the founders's perspective, but every protocol has the the competitive itch of knowing that there's going to be somebody that can undercut them, charge less because they don't want to charge rent and they want to get adoption. Yeah. So, how do you think about like the timing or the the actual the the adoption curve to let's just say like launch revenue, right?

Like it sounds silly, but it's like it's it's a real thing that you don't want to like bog down your network effects. Yeah. So that's like a super interesting question. Um cuz one of the things we look for in projects we invest in is does this thing have a moat? And in most things in crypto, the answer is probably no. Cuz if you're asking the question if like if I start charging for my product, uh will I immediately lose customers because someone will just charge less? that by design tells you you don't have a moat on your product and like it's easily sort of um replaceable. So, we try to stay away from those projects in general as much as we might use them as consumers because most like I think one of the things you know we all know is like there are definitely great products

out there but that doesn't mean doesn't mean they're great businesses to invest in right and that's very much true in crypto too. There's a lot of great products out there but doesn't necessarily mean they're great things to invest in. So um so number one I say um if if the fear is like yeah fee switch equals loss of customers then it's probably not something investable but more importantly um there's a difference between charging fees and then returning those fees to the token holder right right um and I generally believe that those things are independent decisions um you know right now we live in this construct where if a fee switch for something is turned on and it's driven by a foundation And the team that's actually doing the work to build the product is some

somewhere else in the labs entity. And what what I would like to see in an ideal world is is a product with a moat. It's capturing fees and those fees are making its way back to the original team that built the product so that they can continue to build better products or different products that you know go down sort of like it's kind of like how you would see a regular business, right? which is like you know uh like like take like Amazon you know they built a great e-commerce platform and they were able to use some of the cash flows or profits of that to build AWS and scale AWS which then helps like they take the now the profits of AWS and build Amazon ad services. So like the idea there is that um you know the management team of

Amazon is a better uh allocator of capital than giving it back to the shareholder who can then has to find the next investment opportunity right so if like the ROI of that R&D is greater than just giving it back to the shareholder it's like a good thing to do I hope that the best crypto projects do that which is you know if you find if you find a founder who's built a phenomenal product with PMF and is able to charge for it and earn a lot fees rather than giving back to the token holder. I I would say you're a great capital allocator. You built this great product. What's the next product you want to build for?

Right. Yeah. Yeah. Yeah. And I think people uh misinterpret that when it comes to uh buybacks, right? They think that that's like a very or at least as a token holder of a given protocol, you think that that is an efficient form of or usage of capital, but it's actually quite inefficient. Yeah. um in terms of actually using companies profits to to ex accelerate or to grow. Yeah. Um but again token holders want to see that though in this current moment. Yes. But that's why it's a meta man. I'm telling you like no I guess where I'm disagreeing with maybe some some of what you're saying is like I'm not saying revenue generation is a meta. I think the like return of capital I think this like this whole focus on like a Yes.

Like exactly. Yes. Yeah. The buyback thing is like we've seen it before. It's nothing new. Right. Yeah. But I think we're so so again, let's separate those two things. I think I think every project should know how to monetize the product they've built. Correct. But needing to then give it to the token is just I think a moment in time thing cuz we're currently living in a scarcity market in token land. Okay. Um like this pool of capital that again like the trady like you said you know pensions, endowments that that type of capital is not coming into the token market. No, it's primarily focused on Bitcoin and maybe some public equities that are, you know, crypto businesses, right? Um, and in that world where you have a lot of tokens and token supply growing and and a essentially a fixed market, yeah, you

know, the thing I tell people is like again, take Bitcoin, Ethan, stable coins out, market cap for alts was like basically a trillion at the top of last cycle. Yeah. We're sitting in like 700 billion in change range. We got up to like 900 billion post election, but like the market hasn't grown, right? So limited supply or limited demand and like substantially growing supply. And so we're living in essentially a scarcity world. In that scarcity world, everyone's trying to figure out what do I need to do to be the outlier, right? And and you know, right now it's like return of capital like buybacks and whatever. But um you know I think there's definitely a world in the next 24 36 months where the regulators will allow let's just say multi-token ETFs where it's like let's just say an S&P

500 equivalent like product. Yeah. Where someone like this pool of capital that needs to come through me at this point or whatever might be able to just buy a passive product similar to the way they buy the Bitcoin ETF that gets them broad exposure to the crypto space and that creates a funnel into the market and this scarcity thing will shift. Yeah. I think that combined with just macro as a whole, right? Um, stuff like that as well. People want to go out the risk curve and they'll come find their way to this. Yeah, that could be it too. Innovating finance global institutional and onchain. Deep liquidity to drive capital efficiency. Now maximize yields on institutional grade liquid staking with M.

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the Omni Foundation is offering $10 million in rewards for solver powered apps. Start earning today at omni.network. So, uh this this may be a silly question, but uh there's a fabled secular alt bull run, right? Alt season, right? that people have uh been used to in the past. I personally think that pumpf fun and the reduction in the barrier to entry has completely eradicated attention and capital allocation in terms of the attention span in terms of the the like the form of capital allocation. We used to be in a world and perhaps where we're still there but we used to very much be in a world where you would do due diligence, you would do research, you would find

some undervalued asset based on some some core printer that other people didn't know about. you would allocate and you'd wait. The the dynamic has shifted so much to be whoever can be first and how quickly you can be to buy the first token or or be in the you know snipe the snipe the liquidity etc. Right. So like that dynamic of like fundamental research per se has shifted towards just speed. Yeah. Um and I think that's caused a a huge dislocation in the way that that the market works. Yeah. But that being said, Bitcoin has also had this completely different structural regime than in in the past, right? It's not it's not the typical Bitcoin to ETH to alts that we've seen.

It's just Bitcoin Bitcoin Bitcoin. Yeah. That being said though, ETH kind of looks like it could turn around. We could get some alt movements. Like what what is going to trigger a larger secular uh let's call it alt run like the the summer to the fall of 2017 where you'd go on coin market cap and like a different token would just be up 100%. It's just down the list. Yeah. But even like what's going to stop the bleeding like like it's just been complete destruction and and and I think a lot of people watching are investors and what what would it they would consider to be like fundamentally strong projects also I'm sure memes and such. Yeah. And are wondering like if this tide is going to shift like is is Bitcoin dominance is it just up only like like like what is going to cause a structural shift in the

market away from just like this Bitcoin and then like these like weird kind of pumps? Yeah. I wanted to just unpack one thing you kind of said there about pump fund and like people doing analysis to find an undervalued project that whole thing. Yeah. I think so I I come from tradi and you know I used to live in the stocks and bonds world. One of the things when we would invest in any any stock or bond the question we would always ask is who's going to buy this asset from me at a higher price in the at a future date and how do they think right? So essentially um like like always asking who's the next marginal buyer and how they approach it. In crypto, it's become that the next marginal buyer is just a speculator, casino, gambler kind of guy. Yeah. Or woman out of either. Um, and so if

you're putting on this like value mindset of like, I'm going to find this undervalued token project and and and sort of, um, you know, buy that, then you might be right on every sort of anal analytical metric, but um, the reality is like the marginal buyer is not looking for that. They're looking for like some other, you know, fartcoin things. like um so I think again it's just a moment in time and that could change as well, right? So um but but to your other kind of point on like how this market evolves. I think it's again I always think there's I never have a certain answer but I think there's probably two scenarios here.

Yeah. Um, one scenario here is like um, altcoin market cap again goes from the $700 billion number to like a much much bigger number in the future and that's because of u tokenized equities and I use that word tokenized equities in a very very broad term. Um, I'm not saying like it could be sort of things that trade on the NASDAQ that come on chain and you're essentially giving access to that to like people in the world that they can't access today. That could be one way that happens. But what I'd love to see are more businesses like regular businesses like VC backed businesses um choose to exit in token form than an equity form. So let the token have all the properties of what it would have if it was an equity but then with this additional feature that is programmable

and like it can do other things, right? Um like I don't know if you saw like there was some headlines a few weeks ago that only fans was for sale. Yeah. Um, I mean I think it would be interesting if only fans had a token where that token was actually the equity of the business. But then that equity would essentially that tokenized equity is then used to reward creators that ultimately brought brought more viewers or whatever, right? You can imagine like how they could leverage a valuable asset that way. Um, so so this market of 750 billion can grow into something much bigger because real businesses exit in tokens than um traditional way. So, let's just say more uh onchain IPOs than NASDAQ IPOs. Y um and the other way is back to your your

kind of other hypothetical of like previous alt seasons where the existing set of assets actually just go up. Yeah. Uh that that one I could see if like we go back to giving people stim checks. Yeah. Like if you give everyone free money then they just want to gamble and like at some point they'll gamble in whatever that hasn't gone up in price. Yeah. Yeah. Yeah, which is a lot of the existing alts, right? If like once you kind of go out the risk and everything kind of goes like if you remember postco, you know, we gave everyone stim checks, we put a lot of liquidity into the system. Um like central banks were doing it and like we had this fiscal stimulus.

Uh the first things that went up were like credit stuff like investment grade debt, high yield debt. Then the next things that went up a lot were essentially like the big tech stocks. The one after that were like these unprofitable tech stocks like the ones you'd find in like ARCs ETFs. Yeah. Um and then those things did really well. And then once those things did really well, people were like, "What else can I do? What's where's the risk like go out the risk?" And then it was like the spaxs. Yeah. And then and then while the spaxs were doing well and they were all kind of like the party was kind of starting to run out. Then it was Bitcoin and then it was like all season, right?

So it was kind of like what like so when everything goes up the thing that hasn't gone up will have to go up because people's desire to go out the risk curve is that crazy right but I think that only happens if like rates go back down and then you know we start giving stimmy checks to people. Yeah. So the stronger thesis is actually not one of of you know your your current positions in the market may do well right you know in some more stimulated general economy but it's actually rather that the the non Bitcoin market is going to grow significantly as a result of more assets coming onchain and and and basically becoming a large you know it could be a ton of different things only fans right it could be actual equities and stocks.

Yeah. But it's it's Tik Tok. I would love for Tik Tok to be an onchain IPO one day, right? Like good assets coming on chain that brings people. Yeah. Yeah. So it's really an expansion via an a a new mechanism via and an and onboarding. Yeah. So then how does that support your current liquid positions and thesis, right? Uh obviously in investing in in crypto and equities as as well. Where? Where do you see uh upside or opportunity from a sector perspective uh going into Q3, Q4? We we had Jordy from Selen on uh a couple weeks back, great guy. He was saying that he thinks it's going to be a slow summer. He was like, it's going to be a slow summer because uh we we don't have enough pain to

actually get real stimulus from the Fed. Um you know, the markets have already kind of rebounded from all of the all the recent tariff stuff. Um, and so just expect a slow a slow summer. Does that kind of agree with your current positions or outlook? And then how do you position for what you're saying with these two outcomes? Yeah. Um, I listened to your podcast with Jordy. That was actually great. Um Um, so I'm not going to make any macro predictions because like I I've followed macro long enough to know that I have no edge in any of that stuff. That's Yeah.

cuz like every month I you know I see every headline about uh recession and like the economy is about to collapse and then like the economy seems to be doing fine. Yeah. U so I'm not going to make any predictions around that. But um so so my general view is all the assets that make up that 700 plus billion dollar altcoin market. Yeah. Most most of those assets are not good assets. They're bad assets that shouldn't be that valuable. Okay. Um like if you make a list of L1's uh once you get past let's just say I mean you you can even just do it very simply right make a list of all the L1's on the market and then map how much um fees each one generates and you'll see that

probably three or four chains generate a decent amount of fees and then like the next six to 10 do no fees yet they have like very large market caps and they're all trading with this optionality that they can be eventually one of those that takes market share from the top three or top four, but probability would suggest like it's, you know, generally low because that's not how these things work. So, um, anyways, I think most of the things that make up the altcoin market are bad assets that aren't really valuable. So, in our opinion, I mean, we're just trying to be disciplined and not have exposure to any of that stuff.

Okay? I think we have to just wait until better assets come on chain. M so the question then is like okay in this period you're waiting for better assets to come outside of just like sitting in cash what do you do so where's the best opportunity returns yeah um just just own Bitcoin so so I I so here's where I think an interesting um opportunity set is so I think obviously stablecoin legislation is about to pass and um on the other side of that legislation we think they're going to a whole slew of companies that will adopt stables to just improve the cost structure of their businesses. Okay. Um and so we started the year especially post-election making

a very very long list of public companies that um you know internet stocks, e-commerce players, you know gig economy players, all these types of companies, sports betting players, all these companies and then examining how much of their cost base is fees they pay to the banking system and then asking can this business leverage stables to improve their cost structure? If yes, how much could they save it by? How would they do how could they theoretically do it? And then lastly, like did they have a founder CEO management team that that is actually motivated to do it or is this just a management team that's kind of like coming in to clip a check and then you know move on to the next year kind of thing. So then that very long list turned into a much smaller list but I

think we've made some interesting bets there. Uh I can't get into it in a podcast. Yeah, but I think that's an area of the market where crypto investors aren't focused on that. Yeah, you know, crypto investors are more focused on the obvious opportunities in the public equity markets and then the public equity investor universe is also not focused on that because this whole stable coin thing is not anywhere near what public equity investors are focused on. So, right. Yeah. And they're not even thinking about it either. So, I just think of it as a pure call option. Right. If a business I'm looking at a public stock can grow from let's just making up a number 40% at gross 40% gross margins to 60 70 over the next several years because they leverage stables then um the money they're going to make so much more money and the

multiple they'll get in the market is much greater. So so that's where we're focused. We think that's where the kind of the asymmetric opportunity is today. But if we start to see really interesting token assets pop up that are valuable kind of the thesis we're describing, we can qu pretty quickly pivot back if the return opportunity there is better. Yeah, makes sense. So kind of dialing into this this like L1 conversation here. Um there's been metrics thrown around about rev r so realize uh store of value realize economic value just like a lot of stuff going on. Yeah. um when you're looking at at the actual landscape of of you know outside of Bitcoin you know has is there a way that you're able to think

about let's just say the the top assets which are will survive in some capacity outside of the ones that are are you know mostly overvalued like I guess a better way to ask is like is Ethereum Salana and like a chain link or B&B are these all also just completely overvalued because we're basing them on feed or like do they get to have a little bit of that Bitcoin um you know monetary premiumesque uh ability? Um I'll I'll sort of take the no on the monetary premium thing. I think um you know it's hard to like get that like I guess I could be wrong here. I mean there there I guess they're people that own certain assets in the top 10 that really serve no purpose other than has

like a crazy army and they they own those assets because it's they view it as a store of value I guess. So there's irrational things in the market but like um but but I think most of the rest of the world will look at all these L1 tokens as pure kind of like multiple on cash flows type thing. Um and and when you put that lens on there are some that will look undervalued, some that will look overvalued. Um, and some that will look fairly valued, I think. And and I think maybe the answer is like let's not look at these things based on like last month or last week. And because a lot of people like to just take like last month and annualize it and then say expensive or cheap. I think the better question is like what do each of these things look

like in two three five years. Yeah. And so like each of these chains have let's just say consumers of block space. Um you know for ETH it's all the L2s. Um you know for for Salana it's let's just say a bunch of consumerf facing applications. Um then the question is like the people that are building today on these chains if they got a lot bigger in the future how much demand will there be for this block space and obviously these chains are also scaling their supply side as well. So you know let's just say um you know both that scales what is the rev number at that point and how does this asset look relative to that? Yeah. Well, I mean it's just scary because if you think about if you try to apply any of these mechanisms,

they they appear way overvalued on like on the DCFs or like stuff like that. Yeah. So I traditional cash flow mechanis. I think it's it's been questions like how do you um how do you look at them? Um well I just don't think we can use these older valuation methodologies to value. Are you are you looking at it based on like what this thing has done last month or are you looking at it based on what it could do in 3 years? Well, that's the question, right? Yeah. I think I think the art is in looking at what it could do in three years cuz like right now is like I mean my best guess is like there's 50 million um crypto holders in the United States. Yeah. Probably multiple times that globally. So let's just say 400 million crypto owners

around the world. Yeah. Um I don't know how many active onchain users do we have 10 20 million 30 million something like that if you're generous. Yeah. Um so if you believe that let's just say it's 30 million that's growing at some cadence yearon year. If you think it's like a it's going to grow at you know 5% a year type thing then yeah like this is the entire industry is overvalued. But if you think the onchain user base can have essentially like what looks like a chat GPT moment where chat GPT went from like no users to like this hockey stick and you know hundreds of millions of users.

If you think the onchain world can have that and in 3 years we have half a billion users that are directly using apps onchain or or you know not even directly or just using something but it's really creating an onchain action. Um then I could make the case that certain of these chains are kind of undervalued. Yeah. Yeah. Yeah. And what's what's funny is that we focus so much on infra in these conversations about the the top chains, but like the the populist uh polls now are very much in line with apps. Yes. It's it's very much gone from uh no revenue to revenue and infert apps very quickly. Yeah. um to the point where where people are kind of putting together these, you know, fat

app thesis, per se, you know, formerly known as fat protocol thesis all the way to the fat wallet thesis. Yeah. I'm just curious how much you think um how important it is to actually own the user relationship from a infrastructure perspective. So like if you're looking at a a Salana or an Ethereum, right, they've got a ton of uh developers that are building on them their own applications. Phantom wallet for Salana, MetaMask, right? But but these are not necessarily owned by the infrastructure stack themselves. They're they're thirdparty companies building that out themselves. When you're looking at at at at this kind of infroto app shift and and this user relationship uh you know even if you want to call it chat GB chat

GBT moment where it's owning that like how important do you think that is for infrastructure based teams now? um a and like is that where you think there's a lot of room for growth in the space if we want to get to that chache moment? Yeah. So, um I I think I think of that question a little differently and I think I'm going to give you like a non-answer answer, I guess, but um we haven't seen like a true killer app on any of these chains um decide to quote unquote leave whatever chain they're on and start their own chain and and own the full stack, right? Because if they were to do that, they're essentially saying, "I own the user, so everything below me is kind of just a commodity and I can just rip

and replace all that and own the entire profit stream of that and have no impact to my user relationship." We haven't seen that. Yeah. But if and when we see that and you know how that plays out, right? Does the app then all of a sudden lose a bunch of users for whatever set of reasons or does it just enhance the experience for the user and all of a sudden that application is now making more money because they're not leaking value to all the info that we're using? When we know the answer to that, it's going to tell that's going to tell you like directionally where you want to go with this. I don't think we have a great answer yet. Yeah. Um my hunch is that if you own the user, you own the experience and everything else is a commodity. That's kind of like

my general view um because that's what we've seen um in in other industries. But then again, you have things like you know the cloud cloud uh the hyperscalers where like essentially Amazon, Google and Microsoft essentially having over twothirds of that market. Um, and and and you could have like these, let's say, infra L1's play out the same way where it's like a three-player market and maybe you switch back and forth between the three players, but it would never make sense from an economies of scale perspective to do your own thing. So, it could be one of those. Um, I don't I don't think we know. And that's part of the value proposition of being liquid is like we're asking this question, we're monitoring for answers

and I think we would be able to react quickly when we have an answer in terms of how we tilt our book, right? So if it turns out that like killer apps eventually can just rip and replace all that info and just be their own thing. Uh then maybe the answer is owning L1's is not the right thing to own and you can make that decision within I can you know we can make that decision within hours. Yeah. Exactly. Yeah. Yeah. Yeah. I think there is a lot of power in being liquid today and I generally agree with that viewpoint about the use relationship the data and the brand recognition but but it's just been so opposite in in in the space where like the underlying infrastructure has acred all of the brand. Yeah. Right. It's like um you know Ethereum is the brand but

like you don't use Ethereum like yeah you use Ethereum but like you use something else. Yeah. Right. And so that's just been kind of well I think what's interesting is um I I think maybe there's a different question there which is do you think crypto goes mainstream from a consumer perspective um because existing web two players decide to build on these things or leverage these things or do you believe crypto goes mainstream because some VC backed seed company creates killer apps because if it's that if it's like you know, the projects you're looking at and backing, the projects that W's looking at backing, those are the projects that ultimately yield killer apps, then their decision tree is essentially, at least

from what I see is which chain should I build on to show traction the earliest so I can then raise my next funding round so that I can continue to build. So it's basically, you know, two years ago, I remember in 22 and 23, everyone wanted to build on Ethereum or an L or an L2 because it was easiest to show traction there to then raise your next round. And that has now kind of in my opinion flipped. Yeah. It's easier to show traction on Salana. So that's where it is. Yeah. So now, but that said, I don't think there's a killer app outside of Bitcoin and stables yet. M so we don't know if like a lot of the apps that have been backed like you know are they the right lipmus test to answer that question. Now if it turns out that like

you know I don't know WhatsApp having a stable coin experience is like the next interesting thing. I thought I saw some headlines around that a few weeks ago. Um then then yeah I then then you know do do why why would they do would they leverage any of these blockchains or exactly or build their own or whatever it is. Yeah, you had an interesting interesting conversation with Kenny from um Manta Network that they're they're kind of in a place of like, okay, we've got this L2 and like what is our app, you know, like what is our what is our reason for existence almost, right? and thinking deeply about like how to create something that that is uh compelling and I think that that it goes towards what

you're saying is like okay if they could just build something that is removed from blockchain almost in of itself like a typical application on the app store or a typical web app and then just link it link it down to to these chains at a later date or figure out some way to kind of reintegrate like it it I'm just I'm I'm just not sure how we go from like the current experience and the current application builders to like these next killer apps without kind of like maybe walking some steps back as to how we how we think about building products in the space as a whole. And so I think a lot of like L2 builders are are having this like kind of like moment of of uh of reality per se. Yeah. Um you know you you look at the TPS and some of

the L2s on Ethereum and it's pretty sad. Yeah. Um so not sure exactly where we go from here. Yeah. And I mean, look, everyone has a different reason they're in crypto. Um, my rationale when I left Trafi to come do this was because I thought, um, well-designed tokens can be an incremental capital structure instrument for companies and tokens in their right form are better than stocks and bonds. Like that was my simple thesis. So like if Amazon stock was just a tokenized Amazon stock, uh Amazon could have grown Prime way faster than the whatever 14 years it took them to build Prime because they could have used it as

rewards to grow the thing, right? Um so I I'm here because I think tokenized equities are a thing. And then the question is like what are the things you need for that to manifest itself? Like do you need the most decentralized blockchain? I don't know, right? I think what you probably need is something that can create a great user experience. Yeah. I mean that's at least where the market has certainly shifted towards. Yeah. I think I think the customer in that um example I gave you of tokenized equities is the issuer. I.e. you know my hypothetical example it's Amazon, right? Yeah. Um and so the question is what do they want? Um and then kind of work backwards from there. Well, we're going to figure it out one one day, one week, one month at a time. Um spaces is

honestly in the best place that it's been since joining. but also it feels like a like the sentiment is feels very weird as well. So, um I know I'm glad to be here. I appreciate your time today and uh thanks for joining. Thanks, man. It was fun. It was fun. Cheers.