What Liquid Funds Are Buying

Transcript

The core premise of why why I'm investing in altcoins um is because I think these are secular growth opportunities with massive and expanding addressable markets, really sharp developers uh and entrepreneurs coming in to lead these businesses. And those should, if you're coming into a a seed or series A stage startup and and you pick the right ones, those should massively outperform a fantastic asset in Bitcoin. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. Explore the gas-free ecosystem at scale.space/ecosystem and follow their journey on X atcale

network. Thanks to Scale for making today's episode possible. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests, and the Blockworks team may hold positions in the company's funds or projects discussed. All right, everyone. Welcome back to Empire. Uh I I always look forward to a conversation uh with Seth and now I also look forward to conversations with Cosmo, two of my favorite people um in the space. Uh they both run the liquid fund respectively at uh Cosmo runs the

liquid fund at Panta and Seth runs the liquid fund at Coin Fund. So Seth, welcome back. Cosmo, I think first time on Empire, right? Yeah, thanks for having me. Yeah, good for me. Yeah thanks. Um yeah, yeah, yeah. Uh Seth, a lot of books in the background. Have you have you read all those? Is that uh is that is that for show? Is that for show or No. No. I I listen to a lot of books now, but but when I mostly on uh Audible, when I like the book, I buy the hard copy and put it up there. So So the percentage that I've actually read going up a lot, but it's more listening than than reading them.

Nice, nice, nice. Um saw you guys just had 10 year anniversary and Cosmo, you guys just had a nice little feature. I didn't realize. So Panta has been around since 2013. So hats hats off to both you guys and Seth. Congrats on on 10 years. Oh, thank you. Thank you. Exciting time. Exciting time. Yeah. Like uh Panta the OG Panta actually has been around since 2003. Um and like as a as a global macro fund and the the current iteration that's blockchain focused when you we went all in or not we when that Penta went all in on blockchain was 2013. So yeah, it's been a long time.

Yeah. Well, hats off to both of you guys. Um, so I actually there's a wide-ranging conversation we can have. Um, but I actually wanted to just start with the this idea of a liquid fund. Um, I think that uh liquid funds are generally pretty misunderstood. And it makes sense, right? The industry has been run by venture firms. I' I'd say probably 98% of the capital that's flowed into the industry. Historically, uh, from institutions and institutional LPs has been into the venture firms. And now that is that is changing. And it's been changing for a couple of years, but now it's really drastically changing. Um, can you guys walk me through just a like what is what is a liquid fund? What is the strategy of a liquid fund? Even I you know there there questions I'm curious about like how many tokens are you holding? What is your strategy? Do

you are you trading actively? Are you holding these things for six months, nine months? So Seth, maybe I'd start with you and then Cosmo can go to you as well. Yeah. So, I I think one of the one of the really interesting dynamics about crypto is that private companies have a liquid investable vehicle that anyone can invest in relatively early in their life cycle and that that's a token and um you know they they say like to to a hammer everything's a nail. So, I grew up in the public equities world. Cosmo grew up in the public equities world as well and and my view was look if if we ever start to see the institutional infrastructure coming together to be able to to put together a real

institutional quality fund for liquid crypto for this universe of tokens that has been steadily expanding uh slowly but then like having this explosion at the ICO boom in 2017. I was like, you know what, if we get the infrastructure, I'd want to do it. And saw that coming together toward the end of last decade. Joined Jake and Alex at Coinfund beginning of 20 and and we launched this fund to really mirror what I was doing in the equities world. So, it's underwriting investments on a fundamental basis. And there were a lot fewer tokens that had revenue that had value capture in the token. I think Blockworks has done a great job of

recently laying out kind of the the checklist of what makes for a great transparent investable liquid token. Um, but they're starting to look more like equities where you can model out revenue, you can come up with a price target and you can construct a fundamentally focused portfolio. Um and and look, now that we have an administration that's driving pro crypto policy, this is actually going to be equities in the future. You're going to see a convergence. We're going to have tokenized equities. Tokens will start to move into that realm as well. So, there's this convergence and expansion of that part of the cap table, of that part of the cap stack that that's

playing out right now in uh in the crypto world. What is what is your mandate, Seth? So, our our mandate is um as an investment firm to to find the best fundamentally driven opportunities on the venture and liquid side. And then on the liquid side, we uh we we drive absolute return strategies. So um we're we're investing in secular growth opportunities where where we think the addressable market is very large. The team is fantastic and um there there's the opportunity to have a uh large return based on a fundamental underwrite

over um a multi-year period. So, it's really what you do in a fundamental hedge fund mapped over to crypto investing on the liquid side with the ability to risk manage because these tokens are liquid. Yeah. Cosmo, how much um overlap is there in terms of running a a fund on the public equity side and running a liquid token fund? Yeah. Well, I think the uh I think from my perspective, it's it's one and the same because that's like also all I've ever known. uh you know I think maybe it's helpful to first talk about the taxonomy of liquid funds and then help understand where you know myself and Seth who were cut from a very similar cloth come from

uh I think people like under realize that there are very different mandates for different types of funds right I think at the very highest level there's your market neutral funds uh whose goal is to generate you know whose goal is to generate returns without any market directional risk um so no beta uh and then There are more absolute return funds where their mandate can be to take some directional risk and then those that are just you know directionally fundamentally long who are whose mandate is to take a lot of directional risk and hopefully add meaningful alpha on top of that. And so that's what you know that's what I do that's what Seth does. It's sort of in that very classic stock picker mentality of pick good stocks or in this case tokens and you should be

out outperform the broader market on on on average and over time. Um I think the the confusion nowadays is is largely around well directional funds have obviously have very volatile performance when it comes to a very volatile market like crypto. Um market neutral has been is extremely attractive to do in crypto because things are very volatile which increases the amount of return and spread that's available in market neutral type funds and so the differentiation is less clear when market neutral funds are doing these massive returns anyway. Um, and then there's been this huge title wave that that everyone's been fighting for the last three years now, which is the Bitcoin dominance run. And um, and like you know, in a world where Bitcoin is one of the top desile top, you know, top

5% best performing assets on all of crypto uh, and it's by the way also the most wellknown, the easiest to access, the um, and the one that people associate most with crypto as an industry. all of a sudden that becomes the benchmark uh or that becomes a thing that you're testing against even though that's not really uh you know the purpose of the fund to begin with. So there are a lot of different types of funds. Um and you know where we sit is in that very exactly what Seth said which is fundamental directional along. And so as a result like I the reason I came into digital assets is very similar to Seth which is I just saw a real opportunity to bring in everything that I'd done over over a decade plus covering consumer equities into crypto in a world where there's maybe five at

the time maybe only five people in the world one of which was Seth that really knew how to build a model or knew how to do fundamental analysis knowing that that's clearly where the world is going. Yeah, talk to me about this idea of like a mandate and how you have to manage LPs in relationship to Bitcoin dominance. And where this question is coming from is maybe uh you know nine months ago you said Bitcoin's going to be the the dominant asset, but if I'm just holding Bitcoin, I'm not our LPs aren't paying me to just go buy buy Bitcoin in the open market. Um talk to me about that dynamic.

Yeah, it's definitely uh it's definitely a dilemma. you have you go through the uh you know our our goal is to our goal at the end of the day is to generate the best returns we can and so to some extent like if you look back and and you would have known that Bitcoin was going to be best best performing asset you were supposed to be long Bitcoin but as a you know as a risk manager that's trying to build a process that's repeatable over a multi-year time period like that also like it's very unlikely that that mean that process incorporates you being allowed to do 100% Bitcoin right chances are you have risk management thresholds I've stuck to over time that work in quoteunquote run rate regular environments which maybe means your max concentration on any token is 25 30 maybe 40%. Um and and so in that

world like if you're only 25% Bitcoin and Bitcoin is the best performing asset of course you're going to underperform Bitcoin. Uh like you just can't by mandate not not underperform. And so it becomes a becomes a it be in a and especially as bitcoins become easier access and again the most recognized asset. It it certainly becomes a different conversation which is why to a large extent the success of liquid funds is all about uh people often say this but it's about choosing you know LPs choose the right fund for them and hopefully as a manager you choose the you choose the right LPs who understand what you're trying to achieve otherwise you fall into these you know these very hard to navigate conflicts. I I think there's a really interesting dynamic with that as well, which is um Bitcoin

is kind of the it's like on the cover of CNBC, right? Like when they're talking about uh crypto, it's on the cover of the Wall Street Journal or the FT. And it it's kind of like for mainstream media, like what gets them sucked in. So they start reading Blockworks uh all the time or listening to Blockworks podcasts. It starts with Bitcoin in mainstream media and then they they get pulled over and when you're going through a period of time where Bitcoin is outperforming a lot of the fundamentally driven tokens and a lot of the reason why it was outperforming was because you had the Biden administration constantly attacking crypto. I mean it it's interesting there there was a lot of positive fundamental momentum across

DeFi across the stable coin like really innovative base layers really innovative companies that were coming out but like every time you would get a bid then you would have the Biden administration come down on the the space again and it was like okay that's going to come out of altcoins and go into Bitcoin again. So, I think having that focus on Bitcoin was a a dynamic where it was like the first thing that people were looking at. Now, we're actually coming into a period of time where you have an administration that's driven more positive dynamics for crypto, more quickly than than I think just about anyone around the table was expecting. and and you had obviously broad market concerns around tariffs

into into the end of Q1, but as those concerns started to go away, as those clouds parted, you're now starting to see the market get excited about stable coins, get excited about access to other parts of the market, understanding that, you know, when when you have an administration go from executive orders to actually pushing a legislative agenda and using political capital for for crypto advancement and then not only like being comfortable stopping with the stable coin bill with genius act but but saying like no no no we're not done now we're going to focus on market structure bills I think it's started to become clear to the market more broadly like th

this is crypto's real breakout secular growth moment with some very nice cyclical tailwinds as well and and that's starting to take a little bit of the conversation away from uh just a maniacal focus on Bitcoin. But but certainly when you have an environment with the administration attacking and Bitcoin's what's working, it really becomes a a conversation around why do I care about these these other coins. Again, I think more recently we've had fewer of those conversations.

Yeah. Yeah. What what I tend to describe uh is how I tend to describe the world is I view digital assets as there's Bitcoin and then there's everything else which is blockchain the technology and Bitcoin can survive, thrive, you know, succeed independently of whether blockchain the technology ever takes off. Bitcoin basically has nothing to do with blockchain anymore as a technology, right? Um other than it runs on it and then but there is a world where and then there's also a world where blockchain technology takes off without Bitcoin ever, you know, succeeding, whatever. and they're real bare cases on Bitcoin.

That said, I don't think that world exists, but they they are two very independent risk factors, fundamental factors. Um, and so when when LPs asked, it's like, yeah, you should go buy if you want Bitcoin, you should definitely go buy Bitcoin ETF. Like that is absolutely the correct decision to make. And then if you want access to blockchain technology, you do have to make a bet that you think blockchain technology will ever turn out large productive use cases. And obviously I believe that otherwise I wouldn't be here. But if you fundamentally believe that then you should probably get access to that or have exposure to that and that's why you might you know entertain a fund.

Um this is the first dare I say like cycle or maybe we're not in cycles anymore. Who who knows? But this is the first market regime I'd say in crypto where it's a token pickers market. Like Seth, when you joined Coin Fund, it's I mean, you could close your eyes, throw 10 darts at the dart board, you know, and all nine nine of the 10 things go up. Very different market now. Um, you know, you pick a 100 tokens today blindly and probably two of them go up and 98 98 don't. Uh, talk to me about market or portfolio construction.

So, I I think you're totally right and and I think both Cosmo and I love that type of uh environment that it's a good market for you guys. It's a very good market for liquid funds. Yeah, it it's it's an environment where if you do the work, if you have the connectivity, if you're going to the developer conferences, if you can see where the tech is going, um you you can actually drive really good returns. That that that was the biggest frustration over the last few years. you could do the work, but it you you weren't seeing those positive fundamentals reflected in the the token valuations. And there have been some really big changes that that have happened. So, it's not just it's

not just the the change in administration that's been a catalyst, but but and by the way, like I I think stepping back, one thing that I'd very quickly add as well is look, if if we're wrong and altcoins are never going to outperform Bitcoin, then I don't know why why you need an altcoin focused fund. like the the core premise of why why I'm investing in altcoins um is because I think these are secular growth opportunities with massive and expanding addressable markets really sharp developers uh and entrepreneurs coming in to lead these businesses and those should if you're coming into a a seed or series A stage startup and and you pick

the right ones those should massively outperform form a fantastic asset in Bitcoin, but one that is already in the trillions and and well along its maturation path, albeit with a lot of upside from there. So, when we think about a token picking market, you you really want to be relatively concentrated. You you want to do the deep work. you want to um have a an underwrite that provides for um really nice upside. Um, you know, you you guys at Block Works put out a a really helpful transparency framework a few months ago and and in my mind it was

almost the consolidation of a lot of discussions that had been happening um among portfolio managers and projects where um it it basically comes down to listen and this this is for for traditional investors. This is going to sound like table stakes but it's like you need transparency on how management is incentivized. You need transparency on which vehicle is going to be the relevant vehicle. A lot of times these companies have equity and tokens. Well, if you have a token and we're investing in the token, we really want to see you 100% incentivized and 100% focused on the the token. Um, you want to have obviously strong fundamentals, meaning

revenue. Um, and you want that revenue or or user growth if you're a little earlier stage. You want that to acrue value to the tokens. So it it all kind of feeds together. Acrue value to the tokens, have the management team incentivized on on the tokens appreciating. And what you're doing is you're you're creating a structure that is it it looks like equity. You kind of understand what you're investing in. Over time with some additional legislation, you'll have the legal protections of of equity as well. Um, and it it gives a lot more confidence not just in underwriting the the startup like asymmetric outcomes, but it also

gives a lot of confidence for traditional fundamental equities investors to start reaching over into into the token space when they see businesses that really resonate with them. Cosmo like I mean Jason on your point like the uh this has been a the dispersion in the market this year has been like truly crazy like I'm used to a lot of dispersion and I having been a PM for a long time in the equities world but like this year and the the reason why there's so many questions of Bitcoin versus everything else this year is Bitcoin's up 24% this year the average top 100 tok through July end of July or whatever

there the average top 100 token is down 30, right? And so like in a world where the average token is down 30 and Bitcoin's up 24 and uh it's just like the contrast becomes pretty crazy in that you know it's something like 5% of tokens are positive on the year in the top 100. So it's it's been quite a uh in some ways yes a token pickins market but unless your token is Bitcoin wow like good luck. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, Scale allows for limitless scalability, and has already saved its $50 million users over 11 billion in gas fees. Scale's high

throughput, zero transaction costs, and powerful web 3 infrastructure make it the ideal platform for gaming, AI, and other high-put apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X at scale network. That's scale spelled with a K. Thanks to Scale for making today's episode possible. Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, assets,

and partners like Morpho, Chain Link, and more. Katana's 1 billion CAT campaign is live. bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk, terms, and conditions apply. How do you guys pick tokens? Yeah, I mean, the core of what we do is uh is fundamental underwriting, right?

And so, what does that mean? you know, we're looking for and this will sound like table stakes for any equity manager. I probably get like shouted out of the room as saying nothing new but for some reason this is all very new for a lot of people in molasses and that's you know part of the opportunity but we're looking for you know like call me crazy but protocols that have found product market fit or have a semblance of a product market fit that you know have management teams I can talk to that I can trust that I can underwrite uh and uh ultimately a a business model that has unique economics that are money-making today or eventually I can underwrite to some future uneconomics That makes sense. Um and you know all that ties into you know I I strongly believe that all assets follow the laws

of gravity which is that the only thing that matters is cash flow. There are some like gold gold has managed to be a special snowflake for a couple millennia and I think Bitcoin is taking that mantle but otherwise if you are not gold or bitcoin so literally two assets and what has been obviously trillions of assets over time you're probably not you're probably cash flow based and uh and that's that's you know crypto is now learning that lesson right now and I think you know a lot of our criteria fits along that that path there you know it's it's funny there's there have been some really cool conversations so The initial value capture discussion um was really around like if you're generating revenue, you need to put it all into into a buyback of your token,

right? Or or some other way like through staking of of giving that revenue back to token holders. And and it was great because you start down that path and then you start to have founders say, "Well, hold on a sec. I have really interesting reinvestment opportunities." So like Amazon didn't have to like dividend out or do a buyback with all of their uh all of their profit um or or EBIT when when they were in their early stages. Why should I have to do that? And and it leads to these great conversations of like awesome. So like start talking about those those reinvestment opportunities. start talking about obviously in a way that doesn't open you to aggressive

competitive attacks from um your your peers, but start talking about uh ways in a a transparent returns focused framework. You want to reinvest that capital rather than giving it back to token holders. And again, like ju just a fantastic set of conversations to start having with founders that really push you down the path of um fundamental investing. Yeah. How many tokens do you guys hold at any given point in time? Generally, we're uh I'd say like 10 15ish names is probably right. Like top top half of the book or 50% of the book is five names. So pretty concentrated.

And then you know we tend to have a somewhat longer tail. But yeah, 15 maybe sometimes 20 names for that is really um when I think about a portfolio construction even in my prior world I like I also had a you know 20 name book um and I realized over time that that's just because that's the number of ideas I can hold in my head at any given time like any given time I want to be try to be the best analyst I can be on any of the names in my in my in my book and uh I just physically I think as a as a lone analyst I don't think I can physically get above 10 12 uh but you know fortunate to have the resources and a really strong team that you know we can scale to 20

well and also if you think about a a market that um is pretty narrow and again to put another cut on what what Cosmo was laying out over the last 90 days and this is uh coin market cap's altcoin index over the last 90 days only 37 coins are outperforming Bitcoin so 37 out of the top 100. Um, so in a narrow market, you want to size up in your winners um in in the names that have the most uh compelling fundamental cases and being able to build that conviction, right? It it's great to to be able to build like mimetic conviction like yeah, this is like this has a lot of momentum right now. There's a big community. it

it is a lot easier to say like look at that activity, look at that onchain revenue. Um like this right this is really seeing momentum um from a fundamental perspective and by the way it's selling off with everything. So let let's lean in and add to that position as it's um seeing kind of idiosyncratic activity in its underlying business while the market is getting worried. Um so so having that conviction in larger positions super helpful.

Seth, how many tokens do you guys hold? We're we're relatively concentrated very similar to to Cosmo. So 10 to 15. Got it. So we're on the lower end of that right now. So you're only holding like 10ish tokens. Um, how do you I mean, you guys keep mentioning fundamentals, but like I'm sure you're not just like, oh, their revenue is like more than their revenue, like let's buy like what can you can we double click on what fundamentals means to you guys? I mean, growth is the key element. So, it's not about absolute levels. It's about where where those levels are going, how fast they're they're growing.

Um, and you you can also pretty much assume that anything that's onchain is priced in nearly instantly. Um, that that wasn't the case four or five years ago. That very much has been the case, I'd say, for the last two years. Um, you're saying if metrics move onchain, like if metric if metrics move onchain, like so I I like to look at revenue multiples, right? And and if you pull up um like Ave and and its revenue multiple, what what you'll typically see is the the multiple will stay constant as revenue is is going up, which means you're you're pricing in that revenue

growth as it's happening, right? Like it's in real time being reflected in the the token. So, I'm not going to to generate any edge by saying, "Oh, look, it's grown 25%, revenues grown 25% over the last month." That's already priced in. What you need to do is have an understanding of what opportunities are on the horizon and whether that revenue is likely to continue to grow at that pace, whether it's likely to accelerate, whether it's likely to to decelerate.

And what's interesting is just like in equities, you start seeing the multiple price in that acceleration or deceleration in the top line. So if the multiple starts compressing, right? So you're trading below the typical multiple that you trade at, that's typically the the token uh valuation saying, "Hey, we think this revenue we think they're over earning a little bit right now and the revenue is likely to to decelerate or maybe even roll over. Maybe we're going into a cyclical downturn. And likewise, if people think we're in the early phases of a really big acceleration, you'll see the multiple trading at a premium to where it normally trades. So, you get a lot of information out of how

the market is valuing a token. How do you guys grapple with the idea that the market still moves largely on narratives? I think equities move on narratives, right? So part of that narrative discussion is are you going to see revenue accelerate or are you going to see revenue decelerate? Is that narrative going to actually play out in fundamentals getting better? But e equities um there there's a a long history of equities um trading on narratives where fundamentals then catch up. Tesla being a a fantastic example. It was all narrative until it wasn't. And it's like guess what? like the the narrative was actually right. So that that I think like the more

certainty, the more clarity the investment community feels about a narrative, the more it gets priced in quickly. I may be more forgiving on that question than Seth. I actually tell my analysts to never use the word narrative ever with me. Um because I think it's like it uh really it's it's sort of like narrative is this way for humans I in my view for humans to like shortcut the brain and like just say like oh it's like you know something it's like this thing when in reality it's a much more complex system and uh and so and I do think there's a big there so there's a lot of things that go into it but there's there's a question of time horizon um as well as likely there's truth behind quote unquote narrative that's driving action and So,

you know, I I actually don't I think the market in short and you know, over very short time frames tends to move on narratives or it's very easy to use that to backwards explain why things happen. But I do think the reality is that on average and over time the higher more fund the more fundamentally sound tokens are very clearly outperforming the not fundamentally sound tokens. We do this you know I I sort of have this stable of name. I think of my investment universe as everything that I think is fundamentally sound and it's of the top 400 tokens maybe 75 80 tokens that might fit that category and that 75 to 80 tokens you know has outperformed the not fundamentally sound tokens by on the order of 20 or 30% this year on average.

Um well that doesn't sound that sounds like that's like a massive number in tradi. It's like a okay number in crypto and sort of says people sometimes get it lost in the wash, but that's like a massive number. And so the the true reality is that yes, like quote unquote narrative storylines drive a lot of short-term price action, but the the real data suggests that no, it's actually fundamentals matter a lot. How do you grapple with the idea that um so Seth, you mentioned Coin Market Cap, altcoin stuff? I just pulled up this this chart of the top 100 coins performance over the last 90 days on coin coin market cap and you know some of the names are names that you would think would be in here. It's like Morpho and A and Aerod Drrome and Pendle and Hyperlquid and things like this. But a

lot of the names are Pangu, SPX, CFX, Form, uh, Crypto.com's token is the top top 10. Uh, what is X? Uh, Stellar, um, Mnt, Tron, like I'm I'm guessing you're not buying anger some people by calling out some of these. If not, I mean, I'm going off I'm going I I'll use the word narrative, Cosmo, even though you don't like you don't like it. Like the crypto narrative is that those are not fundamentally driven tokens.

Yeah. Yeah. I think um and let me give you the fundamental value case for why SPX is up a lot this quarter. No, I'm kidding. Um but like uh the I think I think this goes back to like what are we trying to solve for and what is like what what am I as a manager trying to solve for and uh like what is my domain of expertise and uh my domain of expertise is finding fundamentally sound sound investments that compound and grow and make money over time. Um, and I think as a manager over and over time you realize that a lot of you have to learn to be okay with missing things that don't that to you don't make sense because it's just otherwise distracting to your process and not helpful. Uh,

because you you only have so much time in the world and you got to really refine your process. And so in that world I'm like, dude, there's plenty of garbage that trades up way more than the S&P in like in equities, but like no one really talks about it cuz and I don't really talk about it. Um, but so yeah, anyway, this point being like my my focus is on stuff that that actually makes sense and there's always going to be stuff that doesn't make sense that trades higher, it trades lower. And it your job is to not my job is to not let that borrow bother me. I mean, I I tell you like first of all, there are plenty of times when meme stocks are the best performing equities um wi within traditional markets. So that that's not unique to crypto. Second thing I'd say is um the ability to drive

direct value capture and actually change the um the the fundamentals of a token to be more uh tied to to real uh value capture. It it's probably um more um of a dynamic system than than what you see in the traditional uh equities world. And but but even in the traditional equities world, I mean Tesla was the most shorted stock back in 2013, 2014 and and it was because people felt like it it was a meme stock and well ahead of where where it could ever go from a fundamental basis and obviously it it was able to um catch up. So I I think we

have an even greater ability in crypto to have a project start to turn on real fundamental angles of value capture. Bonk being a great example um here on this list. And then the last thing that I'd say is this list of coins that are outperforming Bitcoin over the last 90 days. it probably has the highest concentration of projects that actually have revenue and have that revenue going to the token than than you would have ever seen in history. So I I think there's a a very good forward movement on greater and greater fundamental penetration in in the tokens and the tokens that are outperforming.

Yeah. Talk to me guys about um so uh one part of your job is getting the token picking the token uh the right token. There are two other parts of your job that are that are interesting to me. One is when to sell that token and the other is how do you execute the trade? Um maybe we can start with how to execute the trade. So I'm curious if you guys are just buying these on spot if you're going to you know you can do treasury deals with tokens obviously and get things at at a discount but it's locked up. like how do you guys you could do you could do pers you I don't know if you guys leverage and options and like how do you guys think about structuring these trades go ahead kaspa yeah no I mean I think it's like uh it's

all of the above you know the core of if you think about where if I were to distill down where our strategy is supposed to generate out performance it is primarily in the selection of tokens right the other managers are going to be other managers edge is going to be around uh perhaps the the the acquisition part of the token uh and other manager strategy you know might be better around the um uh the execution side and you know that'll be the market neutral guys the market makers and things like that and but on the far end where I'm on the far end of like I believe the vast majority of our performance if I were to do performance attribution comes from stock selection or token selection excuse my you know forian slip and uh and uh and less so

like the actual execution. That said, we use a variety of options. We primarily trade spot. We have the unfortunate consequence of being a US doicile fund. I sit here in the US. Dan sits here in the US. So, we cannot uh trade on international exchanges. Uh fortunately, and we believe that all changes and the the playing field will be more leveled going forward uh for us and international funds. But today, we trade primarily spot. We do some derivatives uh uh to get access to liquidity elsewhere. Uh but yeah yeah I I would say same thing all of the above from an execution perspective but we think the alpha really comes from selection. I'd just say though we we focus very much on having institutional quality infrastructure. I talked about

how that kind of brought me into the the space feeling like it was it was a possibility to be able to launch a fund with all of that infrastructure and uh that that's like try parties on uh spot execution with OTC desks um it it's having uh IM VM uh in certain situations so very much um looking at um institutional counterparty risk management risk assessment Um because like the the token picking is what's going to drive the the alpha and then you want to make sure you don't um you don't give up the alpha if you have another 22 type event with Yeah.

uh counterparties starting to go under. Yeah. What tokens do you guys hold right now? O I don't know. I don't know if we can talk about that. Can you not talk about I mean not not financial advice, etc., etc. All the disclaimers. We already have that on the podcast. So are you can you not talk about the tokens you hold? Uh we tend not to but I I can at a at a high level. Uh the uh you know our largest position as a firm uh remains in Salana. Uh you know we continue to be really bullish on Salana being a leading L1 blockchain. Um we are expressing a lot of our views in the other tokens through uh digital asset treasuries right now. So you know we're we're the

largest investor in caner equity partners outside of soft bank and tether of course. Um and so uh that is a large position that we hold in lie of Bitcoin and then we also you know we're one of the largest anchor investors in Bitine and so own that in lie of ETH. I um I I'd say one of the areas where we've been very out of consensus um this year and it's paid off well is um Ethereum. So, we um we had built a an ETH position primarily in um the options market going into to May. And um the the thesis was that there was a a great

hindsight thesis that that could play out, which is like everyone was totally down on ETH, but ETH is still it was still the second largest market cap. It's the place where Tradfi was coming onto uh crypto rails. It's the home to uh the plurality of stable coins. Um it uh is a little bit of an activist play right now. People over the last six, seven months have been really frustrated with um price uh price movement relative to Bitcoin being really underwhelming.

And um you you had people from the Ethereum Foundation to project leads trying to do whatever they could to uh to get ETH on the right path again to to drive a more uh commercial mindset. You had Etherealize come into uh being which is an institutional business development arm. So just seemed like there were a lot of catalysts that people were ignoring into um I I couldn't say what the what the big price catalyst would be but it felt like price itself would be a catalyst for refocusing um on ETH and we started to get that coming together in um May um and then we started to get the digital asset trend.

So uh the digital asset treasury trend um with ESP coming initially for for ETH then Bitine um and and those are driving now a sustained flow into ETH um which I think has just um it's added tailwinds and credence to um the the different components of that hindsight narrative really playing out. So that that's been a um a big counter consensus positioning uh for for Coin Fund this year.

So So if I'm listening to this podcast and I'm saying, "All right, these guys are really smart. This is great, but they're two things that they hold are Salana and Ethereum. That's not super unique." Um I'm sure part of that is sure part of that is because you guys can't talk about it and you know lawyers and all that kind of good stuff. But are there any like are you able to go a little deeper on anything? Like are there any sectors that you're excited about or yeah any I mean I don't I'm sure you can't mention certain tickers it sounds like but any any deeper that you guys can go. Dude that's pretty vicious. You said your your pitch on ETH was not interesting. Um yeah I mean look that is people being like a classic Blockworks not like an ETH like

dangerous man. Dangerous. I thought you were on board now. Come on. Um well look I mean you know one token that's done really well recently and I think it's well known that we own it is is Athena. Um as as the whole world looks at the explosion in stable coins we're going to see post Genius Act. I think that's you know something that that we're really excited about the post Genius Act with regard to stable coins. And then you look at, you know, Paul Atkins's speech on DeFi last last week or the week before like holy crap like these guys are really really leaning into Lending DeFi and we're things are really going to open up. And so if I look at Athena, you know, it's growing like a weed. It's very procical and we're in a procyclical environment. So

it's growing like a weed. you can map out to over, you know, a short period of time them getting to closer to $20 billion of TVL, you know, close to probably, you know, few hundred million of earnings, you get to you can get to a really really interesting price target on on Athena in the very short term because of all these secular tailwinds and frankly because they're out competing everyone else in in decentralized stable coins. Yeah, I so I I completely agree. I think stables are a really interesting theme. Um, part part of the reason why I don't like to to talk about specific tokens is because then they're they're the ones that I haven't named and it's like, you know, talking to the founder when you haven't named their their token on Empire. Um, but look, I I'd say um if

you think about that theme, Athena love what guy is building. Um, as Cosmo noted, look, I think a very well positioned for for proliferation of stable coins, leading borrow lend uh protocol. um Pendle very much on the uh the stable coin theme um as well. Um and then there's a a private there's an ICO which is going to be launching um in early September. Um they they did a really interesting race. So this is Plasma. Um great team there. Uh Paul is the the founder. They um they said you know what come and lock your stable coins with us and if you lock your

stable coins whatever percentage of the overall stable coins that you represent that will be how much of the ICO you can participate in um when when we do the ICO. So they they ended up getting a billion dollars of stables. The first 500 million came in I think two minutes it was sold out and then they came with another 500. It sold out in about 20 minutes. Then they said, "We're not going to come with more." So, it was only a billion that they took in. Um, and then the ICO was, I think, seven times overs subscribed. There was 50 million that they sold at a 500 million valuation. Um, I I think they're they're approaching this the right way. It's a stable coin focused chain. Um and and the monetization angle is is to bring

all of the the traditional stable coin players together onto onto their chain and then have a bunch of services um that that they monetize. So I I think that's one to to watch in um in the post Labor Day period, so early September. Um and and again, great team close to Tether. Um and and with the Genius Act, I I think that's going to be an area that sees a huge proliferation of activity. When do you um maybe rounding out this convers there's some other stuff I want to cover too on these DATs and other stuff as well, but rounding out this conversation on tokens and portfolio construction, when do you sell?

So, we like to let winners run. Um, I I think that's super important when you're dealing with strong secular growth, emerging areas with fast growing addressable markets. Um, you you don't want to try to call the top. Um, but we sell on draw down. So, um, when when we have a a a token that has really strong fundamentals, really fast growth, it's doing well, we'll risk manage that position when it has a um a decentsized draw down. Um, and and that's adjusted for for the volatility of the token. But in my view, you want to let winners run and then um and then adjust on a

riskmanagement basis um once once they've started to see fundamentals stall out or prices stalling out either because of something token specific or something happening in the market. Yeah, I mean from my perspective, I mean a lot of similarities what Seth does, but maybe starting from how I think about risk management, starting from portfolio construction, there's always a top- down view of where where I think we are in the market, how heavy we want to be playing in any given sector or factor, meaning large cap, small cap, you know, DeFi, non-defi, uh, L1s. And so that that plays a lot of role in our portfolio construction and relative sizing. And so that could drive some uh not idiosyncratic or not bottoms up

decision-m. Um but from the bottom up perspective when we're looking at any position in isolation, it very much is like we have a pretty I think we're pretty processoriented. Not to say that uh not to say that others aren't necessarily, but our process is you know we check KPIs for our tokens at least once a week. Um a lot of that has been you made a lot easier thanks to blocks, you know, dashboards. Thank you. Um, otherwise it's a good marketing episode for Blockworks. Great. Otherwise, it's it used to be a lot of manual work. I used to have all these dashboards created for ourselves in in Excel. And now it's like, well, I guess fine, we can use the Black Works one.

It's it's just as it's almost as good as doing it ourselves. Um, and it's definitely a lot more time. Hopefully better hopefully better than your dashboard soon, Cosmo. Yeah. Yeah. Hopefully better. For sure. I'd love for that to be the case. Um, and uh, and so we're catching our KPIs weekly. And I agree like you want to when you're invested in high growth stories, you want to let them run. But I am also when things are trading at sky-high valuations, the fundamentals have to keep going. Otherwise, the second the market sniffs weakness, like it's it becomes tough. Um, and the more and so we are we are hyperfocused on on how the weeklies are tracking. it's not that if it's down revenue is down week over week I'm not going to sell but it adds to it especially over it's over a few weeks um and uh and then you know we

go back to our thesis we rewrite our thesis on all our all our all our positions every at least once a week reviewing them you know these are the three reasons we own this these are the reasons why now and if any of that's changed we ask ourselves why that is and reconsider our sizing as a result and by the way I mean we have uh ju just to like I I think it's really important to lay out like what fundamental investing look looks like in crypto from all of these different angles. We we also do a weekly portfolio review and risk management meeting and it it's literally like a 6070page packet. It varies by week and it's macro, it's top down crypto, it's what's outperforming in the top 100, the top 300, what's

underperforming in each of those areas, what's uh working and not working in the portfolio. governance proposals, key news, charts of the week, and then we have two or three KPIs for every name both in the portfolio as well as names that either are under consideration for the portfolio or that have recently come out of the portfolio. And it it's just so that everyone is level set around the table, whether it's myself or the analysts or the trading team or or the venture team, right? So we we understand what where we're seeing uh fundamental momentum in um from a top down perspective which sectors are seeing that momentum and which are maybe seeing momentum recede.

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blockchain technology involve risk terms and conditions apply. Yeah. So, one thing that exists in equities but doesn't exist in crypto um is investor relations. So, this could be investor relations portals, investor relations teams, quarterly earnings calls. None of that exists in crypto. It's I've just started to see it pop up. Um like uh I saw Maple did a some semblance of an IR call the other day um that I think a bunch of our analysts joined. Um how if you were if there's a founder with a token out there listening to this, what advice would you give them in terms of managing IR with the liquid funds?

Oh, it's super important. Uh I think I think people have to realize that you know when you when you have a liquid token it's it's a huge responsibility uh to do that uh because you're now in the open market and uh and so you should be engaging with who your ultimate stakeholders are which are your token holders. Um and increasingly we're seeing as the market starts to focus more on fundamentals and not pure hype or pure narrative if you will then uh the team management teams are realizing oh shoot like we actually do have to like focus on on on fostering a healthy share investor base and so we're seeing a lot more engagement on that side uh

and we think it's just so critical and so important to the long-term health of a token. Totally agree and I what what's interesting is under the prior administration I think a lot of teams were afraid to do that investor relations role because it would make them look less decentralized. So having an administration that is moving in the right direction from a policy perspective that's encouraging teams to come in and not having teams come into the SEC so that they can get a wells notice but encouraging teams to to come in to have a a real dialogue I think is um is encouraging more teams to think about that uh investor relations function. We're actually seeing the digital asset treasury serve a um a a

big role in that realm as well. Um if you look at like the Bitmine website, um Tom Lee, who's the the chairman, um put out a a great video a few weeks ago, a a a detailed presentation. I think some of the key elements of what they're focusing on are the velocity with which they're adding ETH to their uh their balance sheet and how that compares to how quickly Strategy added Bitcoin. Um they're they're very focused on the the liquidity of the the equity as well and how that's opening it up to uh institutional investors. It's one of the most traded equities on the market writ large. I think it was just behind Uber

uh when they ran the numbers a few weeks ago. So those types of messages getting it out to traditional investors and crypto investors. I I think we're we're seeing the digital asset treasury serve as a nice bridge to then seeing crypto protocols uh lean in in a big way in uh in investor relations. Should every founder with a token with a reputable token whatever fund token with fundamentals whatever be thinking about a digital asset treasury right now I think you need a certain amount of liquidity um because the digital asset treasury what what's it doing it it's doing a few things one it's driving education so big

big role right educating traditional investors about what the protocol is doing about what Bitcoin is doing what ETH is doing what Hyperliquid is doing when when these digital asset treasuries come, ENA, they're um they're they're great education moments. They're also um removing some friction. So, a lot of traditional equities funds can't own tokens directly. A lot of tokens don't have ETFs. The ETFs often well ETFs right now cannot stake um cannot in in uh do yield generation. So there there are a lot of frictions that are overcome with the um the digital asset treasuries, but those flows from TRDFI, they're massive compared to the flows

that that we have out of cryptonative funds right now. So you need to be able to absorb tens of millions of dollars of demand um on a a daily basis. And that really limits the opportunity right now to call it the top 50 or top 100 tokens. But over time, I think you'll see more of these bridges coming across and then you'll have traditional funds after a market structure bill going directly to tokens.

Yeah. Yeah, when I think about how this this stat space plays out over time, um I think there's two outcomes that that are reasonable and possible or two like reasonable possible good outcomes rather. There are plenty of bad outcomes uh which maybe we should talk about. But on the good outcomes, one is you you just have a sustainable self-sustaining flywheel business much like Micro Strategy has achieved. And in order to get to that scale, you really need two three billion dollars of public float to get be able to get the full menu of uh of capital markets options available to you whether it's convertible debt or preferred or things like that. Now, to get to a 2 or3 billion public float debt, so that's public float excluding insider ownership, you probably need to be a 1015 billion FTV token plus.

Otherwise, how on earth are you going to support a billion dollar debt or $2 billion debt? Um, and so there's only so many tokens that will factually achieve that self-sustaining financial engineering flywheel. That said, another totally fine option and something that we are advising, we get a lot of questions about from our portfolio companies and we do ask them to consider is that there is a world where you set up a DAT because it's just really good for your ecosystem, right? What these DATs are, they're almost like a third leg of the stool where the other legs are, you know, your equity labs entity, your foundation entity. Both of them are hamstrung in a lot of ways um from doing certain things. The equity labs entity totally can't talk about the token. the the foundation kind of can, but it's not

supposed to pick favorites. Not supposed to be a totally independent neutral body, can't make profit. Uh, but a for-profit public company can pound the pavement and and on uh on your token, which is what Tom Lee is doing out there with Bit. And so that is and can make very aggressive bets in deploying in DeFi that in a way that the foundation and the equity labs entity cannot. And so it really is a third leg of the stool if the capital markets will give you permission to do that. And and that that if is a big if. Like not every token should or will or should succeed in raising capital to launch a DAT, but if they do, like God bless, you should.

Yeah. I've seen this with Pavle and Telegram, right? He's he he can't be out there pumping the ton token, but once they have a DAT, you can talk about the the DAT. So um which then got Michael Sailor to talk about T Telegram on Fox Business. It's it's yeah it's it's it's weirdly the the marketing angle of the DATs is almost more important than the financial engineering angle. That that's the the ton one has been a a great launch and and again a big visibility um expanding event for them. Yeah. Um zooming out on DATs um there's two frame of minds I'd say in terms of like how the industry is viewing these. One is uh largely I could bucket it as these

are a fad. This is a six-month play. It'll blow up in January. Fad. Good for you for making money, but this is a fad. There's a maybe the other side of the industry says, uh, look, this is the new reality, and you have to position for the new reality. Um, this is not a six-month fad. Sure, the MNAV might, you know, that it might collapse or whatever, but like this this is these are these are these are here to stay. Um, which I'm I'm guessing you guys are both in the ladder here. I I think this is squarely bringing us down the path of convergence between crypto markets and traditional finance.

So, this to me is like th this is like capital saying, okay, we get it. The regulatory and policy landscape is opening up. This is like a material change. This is like probably like the second biggest growth opportunity outside of AI. And this is actually the one that is more directly investable. They're they're like there's more accessibility. It's clearer where you want to be deploying. And I think like what you're seeing with the DATs is that capital flowing before these funds can invest, before traditional funds can come cryptonative, before they can do things on chain. So I think it's like it's it's capital flowing in a very

efficient way to where it sees the biggest opportunity ahead of actually having the full regulatory green light to do that direct engagement. So I think as you get a market structure bill, you start to see the MNAVs come down, you probably see concentration in a few big winners across each ecosystem. Um and then like it will still take two or three years for every traditional fund to onboard and be able to engage in tokens directly. So I think these are here to stay but but I think they're like they're reflection of this like of of markets saying crypto is real. It's important. We want to deploy now and we don't quite have the the regulatory

clarity to be able to go direct. So we're going to go through these bridges until we get that clarity. Yeah, I mean dot telling on stats point and not answering you know Jason's question um the uh I do think one of the most and like least most uh less the least well understood the the least least underreported thing the most underreported thing is the real is the fact that Coinbase getting added to the S&P 500 I think was a very groundbreaking event because now every single asset manager in the world whose benchmark is the S&P 500 all of a sudden now is required to decide whether they are overweight, underweight or equal weight crypto. Before this, before

April, before that happened, you could choose to ignore it. But now, if you manage any money whatsoever in the whole world, all of a sudden you have to care about crypto. I think we're now seeing that reflected in the markets, right? you're seeing that reflected in Coinbase and Robin Hood performance and circle's IPO performance and the emergence of DAT um and like the strong market reaction that they've gotten and uh and so I this is all part of a very large trend of equity investors are now required to allocate or make a decision on allocating digital assets and they're clearly choosing to overweight rather than equal or underweight.

It it's funny. I totally agree and I I was talking to a friend in in the industry today and he he was like so I said look like one of the frictions that gets overcome by DATs is if you're a mutual fund you can't own a a ETF on a commodity that's just like that's not in your mandate but you know what you can own you can own strategy you can own a an operating company that that owns a balance sheet in crypto you can own Bit mine you can own ESB and um he he was like, "Yeah, but like is a mutual fund going to want to own Bitmine?" And I was like, "They're going to want to own it when their closest competitor just beat them in their annual performance or in

their quarterly performance because they had a big position in in Bitine." So like and and we saw that I mean a few years ago what one of my friends who runs a small midcap fund was like okay I just got trounced by my competitors that owned a bunch of the the midcap miners Bitcoin miners like tell me about them like how how do I get up to speed on them? So it it's when your competition is starting to run circles around your performance because they've owned these names in this sector that you don't quite understand. That's when you say like, "Hold on a sec. I need to understand what's happening here."

Yeah. Price is the best marketing. Yeah. Um what is the what is the counter for this? Like what is the um if you guys are Yeah. putting your thinking cap on and you're saying, "Okay, maybe these could really blow up or like maybe this could end really poorly." What what is that argument? How dare you ask us to put our thinking cap to What's the narrative here, Cosmo? Um I mean look these are these are clearly reflexive up and down you know and so uh you know the reason why they're reflexive is because uh when they are when their MNAP premiums are are positive they can more aggressively buy the underlying token um and when their MNAP premiums compressed they

can't buy the underlying token and to the extent that was a persistent bid uh leading to positive price reaction potentially leads to negative price reaction which you know is has a negative uh negative flywheel effect to it. Um, and so I think the uh, so that's certainly one way is just that they are, you know, they're they're not not factually, but they act like levered bets one way and the other. Um, the other is actual leverage. You know, today we don't see any meaningful leverage on any of these guys. People talk about Micro Strategies leverage all the time, but if you've ever put together the cap table on it, you realize it's like total non-issue for them. Um, and and it is a non-issue for basically every DAT that's been launched so far. But inevitably, you know, we're seeing the genesis of a whole new

category of companies. So there's a lot of capital flowing in. Excess returns drives incremental competition which compresses returns which causes people to reach out on the risk spectrum to drive returns and and that inevitably leads to to to leverage, right? And and so we haven't seen that yet, but presumably someone will do something crazy either on how they manage their treasury or how they how they put on leverage that might cause things to go under. That would be the the bare case. Who knows where that plays out, but that would be yeah reasonable. And I think that I I think your point, Cosmo, about how and and totally agree, leverage is probably the um the thing that creates some of these trading uh creates the environment where some of these trade under their net asset value um at some point. Um but but I think

you're you're going to have underlevered uh DATs as well um that will end up scooping up the um the the DATs that trade under their uh NAV. So and and all you really need is um one or two players to propose an acquisition and then I think everything goes back above NAV again because it's like okay I get it. They're going to be buyers there. I I also think right now it's interesting there there are a bunch of investors I was talking to a friend who's in town from Hong Kong and and she said traditional equities funds in Hong Kong had missed a bunch of the um the the original deals on the digital asset side

but they're waiting and they're coming in as they see net asset value multiples compress. They're stepping in and buying in the secondary market. And we we saw that with ESB. it its multiple compressed all the way down to like 1.2 times that asset value and then you you saw secondary buyers come in and it expanded all the way back up to three. So I think there are a lot of protections right now that's not going to last forever and and I think like so think of it as being in the early innings here, but eventually it will get long in the tooth and then you'll have some of these You think we're still early innings for debts?

Oh yeah. I I think we're I think we're early innings here. Um I I I'd say like third third inning. Uh Cosmo, you agree with that? I think uh I I I hate calling innings because when I remember when we did the first debt deal in the US, uh DFTV, I was like, man, this is super non-conensus and I don't know, but like let me structure some downside protection. And we did it. We wrote what we thought was a big check when they couldn't get money from anyone else. And uh and I was like, okay, this like one and done. this is going to be the only treasury company in the US outside of Micro Strategy. And then and then the second one approached Caner Equity Partners. Okay, fine. Now it's like two and done. This is definitely it

for digital asset treasuries. And now we're sitting here like a 100red pitches later. Um and everyone's doing them. And so I I don't know is the answer. But I I I think one marker of that is where the incremental capital is coming from. Like for sure the cryptonative capital is getting increasingly tapped out. And so like Crypton Native Capital is maybe nearing the end of its uh later innings of where it can deploy. But if you look at Sharpink yesterday, Sharpink just raised $200 million in an overnight session. Like they raised $2 million in roughly two hours after market yesterday, two days ago from four people. That's four funds putting in an average of $50 million each. Obviously zero of them were crypto funds. We are the largest allocator in DATs by far in crypto. And like I put in like they

obviously called me and I asked if I wanted to participate. I was like, "Yeah, this is my size." They're like, "Ooh, that's like that's that's like that's like small potatoes." Like, and so I was just like, "Oh, wow." Okay. And and then they obviously print this. So, we are now seeing serious big money allocators start to take these debts seriously. And so, for them, this is if you're Tro or you're a Capital Group, like $50 million is literally nothing. Um, so that's what I was that's what I was going to jump on. Like, so so you flip it around then. 50 is a lot for crypton native, but that's what makes me think it's early innings because 50 is far like 50. That's right.

It's like below their minimum. They had to go out of their way to say, "Fine, I will maybe put as 50 million because I think it's interesting." Who Who are the four I I haven't seen this announcement yet. Who We don't know. They were Yeah. Got it. Seth, when you see like um you know a deal like the one we were talking about before we recorded like you um you don't think that's like a little toppy? Um so I I think we're going to go through some mini waves. So there is a a little bit of exhaustion as as Cosmo was laying out um from this first wave. But I I guess my point is the engagement with digital asset treasuries. Um the ability of the multiples the MNAVS to

expand again um the the wave of M&A activity consolidation. I I think we've seen very little of that to date. So maybe the first three innings were about a lot of launches of new digital asset treasuries. Maybe we're in the eighth inning or seventh inning of brand new launches certainly for the super majors where we've already had a bunch of Bitcoin and ETH and Salana um digital asset treasuries, but I I think we're in the early innings of these becoming very big companies and attracting a lot of traditional financial c capital. I

think, you know, if you look at again the purchases that arc that Kathy Wood has done of um Bitine, she's done a few hundred million, which is a great sign of support, but it's small compared to where she could be across her funds as she builds that into a full position. And she's on the cutting edge typically. and then you're going to have a lot of the fast followers and then the slower followers coming after it. So that that's why I think we're in the the early innings here. But I I mean just looking at some of the I I'll give you the the latest volume data here because I pulled it up

earlier today and and it's now stale, but like it's 1:30 in the afternoon when we're recording this and Bit has traded $2.5 billion dollar. Like that is wild, right? Two and a half billion dollars today. And it's not like we're we're not even an hour before close. We're we're a few hours before market close. So the these are liquid. They're attracting a lot of attention. Um and and that's where I think it's early days. They're they're going to be a lot of these 200 million plus overnight block trades coming and it's not going to be in the pipes. It's going to be after they're trading after they're registered and and fully liquid and but they're attracting

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As we think about wrapping, talk to me about this idea of convergence. And we've seen there's been a So, okay, so we've got these digital asset treasuries. There's a few other things I'm holding in my head which is like the Atkins like you know financial markets are moving on chain speech. Um and then there's also uh stocks moving on chain right you see that with you know Kraken's acquisition of Ninja Trader like what what does the world look like in a couple of years? Well, I I think the key question that that I've been asking a bunch of different players around the space is look, if you own a let's say Coinbase does their tokenization of Coin equity later this year, early next year, which is what what they're planning on, and let's say that um that's trading 247 and it has plenty of liquidity. If you're a

fund that owns Coin stock today and it only trades 9:30 to 4 Monday through Friday Eastern time, are you fulfilling your fiduciary responsibility to your investors by holding that traditional equity rather than holding the 247 liquid coin tokenized equity? And I think the clear answer if there's enough liquidity is going to be no. So that ends up then you you end up having that trading getting people to to onboard come into the the crypto space and be able to own equities uh that are tokenized. Then Robin Hood does that, Circle does that. Then then you get to the traditional uh brokers like uh

Schwab. You get the banks coming on and and it becomes this um tsunami of uh equities, traditional equities that start trading 247 and then from there these digital asset treasuries, right? The these are going to be mid and large cap. They're going to go tokenized. And just in a similar way, their holders are going to say, "Well, obviously," and and they're some of the more forwardthinking equities, traditional finance equities holders. So, they're going to say, "Well, hold on a sec." Like, I'm obviously going to own the tokenized version that trades 24/7 because I don't want a basis between the underlying and the equity that I own.

So, I I think you're going to see it move very quickly. When it starts, it will move very quickly. the market structure bill is probably a key component to getting that to to happen, but I I think everything is 247 very quickly. And look, NASDAQ, NYC, they get it. They filed for 245. I think they have to. They're real operational concerns. Like if you're a 9:30 to 4 Monday through Friday operator today, exchange broker dealer, anyone on the infrastructure side, you're used to doing your tech upgrades in the evening or over the weekend. You're going to have to switch into a mindset of 247 markets where you're going to have to do

your upgrades in parallel and then do shifts into the the new upgraded version. So, I think there there's some inherent advantages to the the cryptonative players and then there going to be some real steep learning curves that have to come together to get the rest of it going. But that that's where the future is, I think. And it it comes really quickly. Yeah, it's pretty simple. I think like uh or I sorry, it's not simple. I think it's very complicated, but for me, I like to keep things simple because as you know, Yano noted, I don't like to think a lot. But the I I I think in in five years from now, I'd be shocked if not all the financial applications on your phone were running on blockchain

rails. I'd be shocked. Let's go. I I I like to the framework I like to use is like if you can envision it and you can kind of see the path to get there, it happens way faster than you'd expect in crypto. And and Cosmo, like I think you're spot on. like it it is so clear that you'll have like stable coins being used to settle these securities. Securities will be trading 24/7 across all different securities markets. So, and by the way, securities also commodities because a lot of tokens will will be straight up commodities. So, like you can see the path to getting there. Payments, you can see the path to getting there. So, I'd say like the next

two to four years, bam, this all comes together. Yeah. Yeah. Last question here before we wrap this up. Um, what sectors in crypto will benefit the most from these digital asset treasury companies? And my thought here is okay, you've got billions of dollars of I don't know, ETH then you know we had uh Aichel on, we were talking about ETHZilla and they want to generate yield on the ETH. So then okay, you got to put that that ETH has got to move on chain and who who's going to benefit from this? I mean Seth, you mentioned a like I imagine a will benefit pretty greatly from this. Yeah, I think it's all players, right? Um, right. And I think it it's all the DeFi players. It's all the large cap DeFi

ecosystem. Uh, we're going to see a lot more like these are when you think about what DATs are, they are they're they're funds, right? And they will deploy capital as they can to maximize yield. And you know, you're going to find they're really interesting yield opportunities across DeFi today. So anyone where anyone that's generating excess yield on reasonable amount of risk is going to find going to be a huge beneficiary whether that's Athena or their 10% stable yields whether that's um you know whether it's staking providers or loop lending providers uh those are all going to be massive beneficiaries of this I I also think one area it's going to be anything that people can fundamentally underwrite um so totally agree DeFi is

going to be one of the the key areas base layers I I think one of the hot areas that we haven't seen activity in yet. Um and and I think it should come soon is the intersection of AI and and crypto. Um I think that's like it's such a big MAG 7 theme. It's such a big traditional markets theme. Um and I think there's some really interesting opportunities um at that intersection of AI and crypto. So I I think that's an area ripe for digital asset treasuries. Nice guys. Anything we missed?

That was great. I I think What do you guys What do you guys Seth and Cosmo hearing you guys talk? I mean, you agree on pretty much everything, I think, but uh I don't know. What are your views on Pump? What? What are your views on Pump? I I think it's hard to bet against um a team that has a lot of capital and is um very ambitious. Um but but look, I think um it it came out fully priced and you're you're going to need to see the market kind of absorb that. Um and and that's what's been happening since the the launch. Um, but I I think they're going to take a lot of shots on goal

with the capital that they've raised and um there there's going to to likely be an interesting time to to deploy there. All right. I tried I it sounds like we agree on that one as well. Yeah. So I don't know. But but there's an obvious disagreement. East coast, west coast, come on. Although I have, you know, Columbus Circle in my background. So and I love LA. So there you go. Seth Cosmo, appreciate you guys. Awesome. Great. Awesome. Yeah, I know. Thanks for having us.