Why Liquid Funds Have An Edge over VCs

Transcript

how'd you come up with the name split capital is do you think we'll ever see anything like that Wall Street bets era thank you for making me sound so magnanimous Andy are you going to split your way with my money or are we going to grow this bad boy GM GM welcome to another episode of the rollup today we have the pleasure of speaking with Zahir from split Capital which is a liquid fund and we're going to be talking about why liquid funds are operating right now a little bit different ly than VCS now in the title of this episode you may have guessed liquid funds currently have an edge over VCS primarily for a few reasons we'll get into on the podcast but of course none of this is financial advice as

always we're going to be talking about some of the current market Landscapes and why liquid funds are poised for success in these current market conditions Zahir and split Capital are professional do not construe anything they say or we say as Financial advice in other words you should not try this at home hope you enjoy today's episode first a word from our sponsors birex Edge is now live on say Network say users can now trade 50 plus spot and per markets with the unified order book liquidity of vertex Edge across arbitrum blast mantle and say the next 6 weeks 850,000 SE Tok up for grabs

as trading rewards every single week exclusively on say join vertex on network now on vertex Edge that's vertex protocol.com welcome aboard on our journey into the singularity this is the endgame road map for fra and fraxel the new L2 out of the frax ecosystem that is totally based on fractal scaling fractal the modular L2 blockchain built by fra with modular and fractal scaling in mind fractal scaling is based on the mandal BR set of fractal images and it explains how l2s become l3s and the entire app

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best out of frax you are still early join today take part in our Expedition into the singularity what's going on guys welcome back to the rollup today we have Zahir from split Capital how'd you come up with the name split capital is this like a is this a meme or something um it's it's a funny story um there's like there's there's two there's two there's three sto to this almost um but it all kind of ends up working out together but basically I started a fund back in like 2018 um and small little prop fund and um you know we had some disagreements with like a third partner

of ours and then um essentially you know myself and you know one of the other co-founders was like you know if we do any fund we're going to split it down the middle 50/50 you know no no uh no weird economics none of that um so was the original kind of idea um and then funny enough when I left my last firm um you know it was kind of a similar ordeal that was like on great terms so it wasn't a problem but it was more so like you know splitting away like the same kind of strategy in book and then launching split Capital um and then the third the third kind of angle is that um if you have any sort of uh financial institution and you have like a universe

of like domain names and and like you know trying to get a directory it's very very difficult to get like a single word like fun name um but I don't know how nobody's ever taken split um like in a bunch of different like jurisdictions and they're and they're like uh kind of you know naming like services so um we got really lucky because you'll see some like insane fun names like people will say like you know we have like I don't know Pelican capital or whatever right and then you'll read like the actual fun name and it's like pelicin you know digital opportunities fun three or whatever right it's like it's never like that you know uh straightforward but we got super lucky with ours like ours is pretty much SP Capital like down the

middle across like all jurisdictions with some variants but um so that's like the last kind of angle on the name I wonder if any of your LPS are ever like asking you like hey so the story of split Capital are you gonna split your way with my money or are we going to grow this bad boy I mean I've heard like every variation of of pum made and and I I love it and it's also nice it like it you know you want something that's like pretty sticky and like easy to to to you know identify um and it's also ambiguous right it's not really like a crypto native name right so I think that that also helps out right you don't want like you know like something to be related to

like some sort of like EIP or something like that right just like that'd be just way too nerdy way too nerdy that's not going to fly in the family office in the in the big boy game is it the EIP correct correct what has been your best investment ever in of split Capital um so the fund technically launched this year um so I would say like most of the best uh Investments have happened prior to this and like I'm more happy to talk about that than anything that's kind of happened within the fund um but uh best investment ever um kind of hard I would say probably synapse protocol um this was like something that like you know I just thought was like a

sick product at the time um was solving a pro problem in crypto that didn't really exist sorry like that didn't didn't really have a solution that existed um but that was that was basically the best kind of investment I made um but I think more of the compelling uh sort of uh you know Investments that I've made have been more on the trading side that's been more of the interest um yeah I wish I was better at buying and holding for like a very very long period of time but um I I just don't have it in me to hold something across like multi years and be that convicted this is why we also run a liquid fund right um I think it's it's a just a different kind of way to underwrite uh sort of investment what what's your time

Horizon there on the on the liquid fund like you looking like day trading or are you looking more so like weeks to months so we actually split our book between like a variety of factors right right so um it's really regime dependent is what I tell investors as much as much as possible so um a good way to think about it is you know we'll construct a multi-year view or onee plus view uh for the fund just like assets that we love like things that we want to hold things that we want you know uh exposure to um it's a very different ball game than Venture funds because Venture funds are closed Ed right so once like capital is raised then you make your deterministic kind of view on like what you think you know uh your your deployment window should look like obviously you tell your

investors one thing and then theoretically like that may or may not play out but with with liquid is different right because you have a you know kind of monthly quarterly or yearly subscription model so people can come in at any time and then the the other part of it that's more interesting is like you like invest as as much as possible you should not want your investors to uh kind of redeem from your fund right so um you want to be you know more positioned for an all- weather type situation which is you know how we kind of approach it right so um I need to think about the down markets as much as I think about the up markets right and I think this is where crypto is like now having a bit of a struggle with which is a lot of the long you know uh longer

term kind of liquid funds in crypto have been focusing a lot of their time on um you know maybe a multi-year view but it's really hard because every month you get Mark to Market and it's really tough to investors are down like 20% like eth is down 20% % this month right um so it's it's really hard to show that over over a long period of time if it keeps underperforming so for us basically we we have like a multi-year view then we bring it up to about six months three months one month one week um and then there's periods of time when we're trading the book around like quite a bit because there's a lot more activity and then there's periods of times you know where we're very hands off maybe you know one trade a month or something like that at most um and really not touching

the book but it's really like regime agnostic uh is is is how we think about it but we have to be more specific in in in each regime over time and do you guys like like and it makes sense like the continuous like performance to try to get better because you're marking your Mark Mark to Market like much more frequently do you have a like like cryptos 247 H like does that really impact the business that youve you have on the liquid side versus what a non- crypto Market fund would see on on something that's you know only open 9 to5 totally totally um and this is a good example of something that like um over time will be a more pronounced kind

of differentiator I think um in this space which is if you think about um earlier this month right um Bitcoin eth so the whole Market kind of really took a dive uh in early August when uh the carry trade in the Japanese Yen uh kind of blew out right and that happened over the the weekend right um and it's even more reflexive because then Bitcoin becomes the only instrument that people can trade so if you're like some guy who has like a family office or you're a portfolio manager out a fund and you have BTC within the fund or you have you know BTC uh you know access to BTC trading then you're going to use that synthetically to HED out your risk right so then it becomes even more kind of

important to be around online over the weekends that kind of thing so um it's a double-edged sword really um I think get nicer because you know you don't have to really you know you can have access to your Capital at all times but it's also you know it's a very demanding thing and I think this is where crypto goes from being a hobbyist industry which it has been over time into a more traditional like you know very kind of scaled up industry where you know teams that can operate 247 365 are going to just Crush over time um on the shorter time frame stuff and then the only Edge I think will be on the longer dat stuff um for most kind of individual participants right like kind of like it is in trfi right you don't really see people day

trading and making money anymore because you know people there's better firms out there that have more uh resources staff whatever whatever you want to call it um and conversely like you know maybe the average retail invester can make money on a long enough time Horizon if they you know don't really train around too much feel like this year the market is especially feeling that like this cycle it's been a really weird cycle um I think a lot of people have like underperformed what they thought would be like what they would have done so far I think a lot of people miss salana a lot of people Miss memes a lot of people just like paid no mind to it and also a lot of these like altcoins or these kind

of more longtail has really just been decimated the last like three months it just seems that it seems like it just seems like there's like some sort of entities that are in play in the market now now who have greater control over kind of like what is happening than previously before and I don't know if it's an ETF thing institutional thing but it just feels like this cycle has been completely different than anything in the past and even calling it a cycle I feel like is is an interesting take and I you know I think that we see more of this asset dispersion of of returns in the coming like from this like where we're at in this kind of like obviously majors are still quite high but I think in this like altcoin TR uh TR that we're

in kind of like this like bottoming period or or like this bleedout I I I think that we're going to see even further like which which assets rebound and which kind of don't and yeah it's just been a really really weird like last eight months in the market totally um and if you kind of index on that right you said last eight months so i' say 2024 in particular the ETF has fundamentally changed crypto um in a variety of ways right now we are in Industry that is no longer dominated by native Capital we are do we are now getting to the point where it's almost 50/50 between non-native capital and Native capital and what I mean by this is that there's a reason why BTC has really pulled apart from the rest of the

market the people who are bidding BTC do not care about the rest of the market they're not looking at the rest of the market to them this is a singular asset they're not in you know the race to figure out what's kind of behind you know door number three with salana and Tron and all this other stuff there's a world where eth might get to that Point um and I'm hopeful for that but until it happens and then you know we we we'll kind of see what what that looks like but I think it really cannot be stressed enough how big of a kind of uh Market structure Dynamic sh you know change has happened since the new year um for anyone who trades on a lower time frame for anyone who trades like on a more

professional basis they can attest to the fact that the market has gotten a lot more complex a lot less predictable a lot less kind of retail driven um and now we're kind of at the you know at the mercy of uh larger institutions uh for the next you know call it couple of years in particular I I think the other part of this that people really don't appreciate enough which is you know FTX was more or less you know the retail friendly exchange and once FTX got Unwound completely all of that money was just trapped there basically like in a lock box that you couldn't access right so if you were the average native participant not only are

you probably not out performing BTC and E uh you know over a couple of months or a couple of years but you also have your Capital just kind of sitting there waiting for to get out of bankruptcy hell right and for the people who sold down their claims well they're getting kind of pennies on the dollar right and the people who who haven't are still waiting for that money to thaw out right so um overall it's been a lot more complicated in terms of how people can get Capital back right if you're an institution you could theoretically always go and raise Capital but if you're the average retail investor and you get liquidated or you lose your money your means to get that Capital base back is very very difficult right if you had a chart of the amount of BTC that was held by native capital or

individuals and same thing with E and same thing with soul you would see over time that chart would dwindle down pretty aggressively because the average individual doesn't have 100 B anymore or a th000 BTC anymore right they've lost it all trading or losing money on bankruptcy or whatever it is right um which really sucks but it it is the case right um and I think this is why like you know people always ask me about you know running a liquid fund it seems very complicated all these things and it is you know it's not an easy Endeavor to undertake but I would challenge people to also think about it from a retail perspective that the game for retail is just no longer there you're like being being able to compete at a high level is very very difficult so it's either adapt

or you kind of just die over time right uh or or phase out of the game completely right um so it's like one of three options and and I think we've taken the you know very much the adapt and and try to grow in in in that realm um but the other two options are a little bit more Bleak right I think you either have to like completely withdraw yourself from markets and say I'm gonna buy BTC and E and I'm going to go spend my time doing something else or I'm going to lose all my money trying to like trade against this Market which is very very difficult do you think that that like 2020 like Wall Street bet meme coin retail trading like frenzy basically like the the dumb money movie do you think that was like a

very peculiar time and place where like the stars just kind of aligned and like covid hit it just everyone was online just kind of made sense that it happened in that time and place or do you think that was like a a trend that we're going to continue to see play out with like hyper financialization and and more access to information like the edge will kind of spread out like how how do you think we'll ever see anything like that Wall Street bets era like that era ever happen again both things can be true I think the only question is like how large can it get um I think it's totally possible that that kind of you know uh spontaneity exists in markets again but I think the like I'll give you an

example the when you talk to an investor when you talk to someone in the space you should never index on the fact that that has happened and we made a lot of money during that era right so whenever someone tells me that they made a ton of money in 2020 and 2021 it like doesn't translate to anything for me you know it's great you made your money you did your thing but that doesn't really indicate much to me because that's not a really repeatable thing and it should never be the Benchmark of which any investor should consider right like if my fund is predicated on or my performance or my whatever as the average investor is predicated on that level of insanity then I'm going to lose like nine times out of 10 right like if if and I think this is what what has

kind of slaughtered most retail slaughtered most like funds is that people have predicated their investment decision- making on a reality that would be a 10 out of 10 win for everyone but should not be the Baseline I'm not saying that that can't happen again but if it happens great like I'll be there right but I should not expect that to be the Baseline right um I should expect that it that that it will be harder and adapt in that environment I think also to to your point on like Edge getting eroded um a lot of why that you know era existed was because of very cheap money globally and very you know little understanding right so if you go to back to like 2017 that was when I kind of

joined crypto you know you did like RFID stuff right this was like you know Dent coin like you know there was no concept of what blockchain even meant it just meant we could do anything with it right yeah you know and then you got into 2020 which is okay we have a general idea of what blockchain can do but we still have no idea how to incentivize this and we'll create infinite incentives right you can't really regress backwards to a thing that people understand very very well right now every incentive mechanism in crypto is pretty well understood it's pretty easy to understand like how these Market dyn DCS will kind of move forward and so the you know complexity and like you know difficulty of being able to

make money on these New Primitives will will basically increase and the reward will decrease over time um unless you really come up with something that's like multi- trillion dollar like you know value creation mechanism which I don't think is a super rily available and again should not be the Baseline you know predication that this industry should exist on right no yeah to your point like markets don't really get less sophisticated with time like markets give you information you take that in and then and then the market becomes more sophisticated so it doesn't regress maybe interest rates go to zero again like Capital becomes cheap again people get more degenerate but still more sophisticated but degenerate and I think

there's there is a balance there and and so in that in that frame of mind like you know we kind of see this full circle moment moment with defi nowadays where we we are sort of like ethereum vitalic sort of coming back to defi in a sense but not with a less sophisticated view on it so I'm curious just from your perspective how are you viewing this this sort of resurgence of defi in the last you know few weeks yeah D5 has always been like the most interesting thing in crypto to me right ever like I've written about this when I was in was 2020 um that like the only interesting use case going forward like the whole point of crypto is money right it's not about like making money right

I'm just saying like the ethos of building right is about money right and creating good money and creating good monetary policy right and so defi is obviously the first leg below it right it's not going to be all these other things like governance and you know uh Ai and all that's all like Downstream stuff right and hopefully we get there right but the money has to be really really solid and the money has to have a tangible use case right um sov is interesting sov has like a finite T right you you need something more than that and I think the it goes both ways right I think the problem was in 2020 that we thought this stuff would you know grow infinitely and scale and we would be at a point where everyone is

using a to finance their mortgages into this is all worthless none of this is ever going to materialize right into now okay maybe if we have some regulation this stuff can be kind of cool right which is I think usually how the tech hype cycle works right it's like oh my God this is going to cure cancer wow this is the biggest fraudulent you know most egregious thing into ah it's kind of cool right and I think we're kind of getting like we're kind of creeping up to that this is kind of cool part um and I think that's where you know value is going to be kind of censored around right what what human beings thought the internet could accomplish back in like the 1990s or what human beings thought like you know uh aerial flight could accomplish in the 1940s and like space

travel could look like in the 19 you know 60s and then onwards to like the 2000s was a drastically different thing right Aviation hasn't gotten like infinitely better since you know 19 you know 1950 1960 era right um we we're not sending people to the moon or like other Interstellar travel right um so it's not a linear function but has it gotten cheaper more accessible more durable more understandable yes right so I think that's kind of the goal right it's like are you going to be able to do everything in your existence on a probably not but can you use a in a pretty sick way and can it grow you know materially over time yes I think it totally can um regulation being the key like you know decision maker

here yeah yeah very interesting yeah um I think it's quite funny that DJ Spartan's 36 Monon D5 bear Market happened like that was hard to believe at the time I was sitting there we were like no way and then he's like one month two month and then he eventually just disappeared um which was I don't know that was always just such a that time period just Rings such a nostalgic Feeling Just Between covid and all that and then just what happened so pretty pretty interesting and I remember just like I just didn't sell the top at all like well like I could have done so much better and I think a lot of people probably did uh failed to see that as well so like like selfishly like for you and like how you're looking at the cycle

now um I guess the question is lit like how do you get better at selling closer to Tops or like how do you get better at timing your exits and entries in the market uh I'm not asking you when the top is and like to tell me when to sell it but like I'm asking you how myself and our community can identify points in time and be better at exiting their portfolio when they have a bunch of different crypto assets um in times of froth and you're going to love my answer um don't like don't don't focus on this this is it's it's a it's a Fool's erand we have never internally said we are going to try to sell the top

or buy the bottom this is a really really ludicrous way to look at markets I'm not saying this about you I'm just saying this because this kind of exists as like a prophecy right I think people don't understand how coincidental buying or selling is when it comes to like looking at it in hindsight you will not know it's the top until 6 to 12 months later in which case then it's all a semantic game of what is the top and what is the bottom there are people out there that don't think that you know that think that the top was March 21 and don't think it was you know November 21 which who knows like who's right and who's wrong this is all like everyone can be right everyone can be wrong right um you know and it's like like where is

the local bottom is it 16k I don't know maybe right um so I I think this is all kind of semantic uh you know kind of confusion I think the more interesting thing is we we I tell our investors and I tell like our friends and and you know peers in the industry we buy and sell conditions we don't buy and sell price right there's a universe where I will buy 100K BTC and sell down you know 20K BTC right that has happened um not the 100K part yet but uh God willing we'll get there um but you see what I'm getting at like I don't I don't think it's an interesting way to think about the space when we're thinking about um you know buying and selling tops because I don't

we never view it as a price determinant right um if I told you you know a year ago that you would have the opportunity to sell you know 72k you'd be like i' take it every time right or sell 50k you'd be like I take it every time right and then you're at 50k you're like I'm never selling this asset it's going to Infinity why would I ever sell right so again we buy and sell conditions we don't really buy and sell price and I would say for everyone who's listening at home who's like thinking about doing this don't it goes back to the earlier you know kind of conversation which is either have a long-term view or like don't have a view realistically um and if you want to like trim around your portfolio fine but just consider conditions right when your neighbors

yelling at you at how much money they're making on like you know C coin or whatever then like yeah maybe you should be risk of it right um and when everyone's telling you that like you're a criminal for touching crypto maybe you can buy but right um this is something that I've really tried to work on over the years it's just Things Are Never As Good as they seem things are never as bad as they see somewhere in between yep y yeah super helpful I mean I think that uh I think that people are obsessed with like kind of trying to time the market um but I think it comes down to like knowing your style maybe you could talk a bit about this like kind of like the the different styles that you think will do well in the crypto markets for the coming years like if you had to choose a

couple ways of investing and I know you kind of laid out like because of the of the emergence of these different players in the market um you know that that there's basically there's less opportunity for kind of like the smaller fish and I I mean I even I was listening to a podcast recently must have been maybe maybe it was a blocker or something and it was they were talking about how uh that there's actually more opportunity right now in the uh liquid markets than there are in like the private markets for some of these like out non crypto native people that that the that the liquid markets are really kind of still inefficient there's still a lot of gaps to to be filled compared to trafi and they kind of feel this way and I know that you feel that way as well but um if you had to kind of lay

out a couple different styles of investing or uh you know participating in the crypto markets for for somebody like us for somebody who's listening like what would be some of the recommended um broader Strokes of participating in the markets from like the most basic like past to more like intensive yeah just keep it as passive as possible um yeah that's my number one view again like this is you know when you when you launch a fund when you run a fund when you when you do this stuff professionally it is the most arrogant thing in the world if you really think about it you were telegraphing to the market that I think I have some value above everyone else right um whether or not like I I believe this is kind of

irrelevant but it's more about the you know the intention you're making like you launch a protocol right building something you're basically saying like this is a problem that the market has not solved and I am here to solve it and everyone else has been wrong so far if they're trying to attempt something similar right um even running a podcast right it's like I'm running this because I think people aren't asking good enough questions or right so um I think this is a very similar view right like I don't think most people should be trading I don't think most people should be um spending their time speculating I take the approach of a very heavy kind of Behavioral Finance uh approach I went to UC Berkeley this was a very big kind of topic of conversation all the time uh a

lot of our you know kind of University classes were tailored around behavioral Finance right and I think crypto obviously heavily leans into this um and I think we've went away from the world of value investing um based off of you know metrics and we've gone towards a world of value B you know uh investing based off of belief um and belief of like what other people can kind of uh uh are willing to underwrite um so that's kind of how we we we think about markets broadly if that makes sense so um by E Bitcoin Soul maybe hang on or pick a couple other coins stick to the majors like most people should just stick to

the majors no but like isn't that just like the consensus trade right now like I think I saw you tweet about this you were like okay guys like everyone's saying stick to the majors but you're saying that there's a there's a there's a big chunk of of edge of meat to be gained to be grabbed from like this sector of coins that is people are all just writing off kind of like as like not as good as just like buying the majors and so like but now you're saying just Do the passive thing so like is the passive thing buying the majors there's the passive thing getting finding coming up with a thesis but then not over trading it like like and maybe you can talk talk to us a bit about kind of that the idea behind that tweet as well yeah so the Tweet was more so because you

know I I had gone to uh uh you know a few coffee chats and whatnot with friends that are other investors and you know VCS and whatever and every single person started telling me about like VC unlocks and how they're going to short VC unlocks and buy majors and I was like okay like this was interesting like six months ago right like this is no longer as interesting to me um and wouldn't you know it since the time that tweet happened like you know all St really pretty damn hard right um I'm not like claiming credit for this but I kind of am but um but getting more serious like I'm not I'm not you know my view isn't that this stuff is going to be true like forever it's just more so there are more interesting trades and less interesting trades and this was a very interesting

trade six nine months ago and it's not as interesting as it was then I don't think you're getting as much kind of value um as you did six months ago and obviously this has been true right can alts go down another 99% this is what everyone kind of has a conversation about sure but is that like the best way to kind of put your mind to to work I don't know I I personally don't think so um I think on the other end of it saying like what should the average person do yeah just buy things that you have a belief in right like and you can genuinely be like I can hold this thing to death and I won't really care um sharing conviction from Twitter is the worst thing you could possibly do um don't ever do it like you don't know what someone else's intentions

motivations um background you know view time Horizon is at all so don't ever try to like uh base your conviction off of them and I think it's pretty easy to have conviction in like BTC Soul if you're going to pick anything in crypto um and this is also why they don't really kind of puke out so much right are you going to miss the one-off memes and the one-off like E5 protocols that do really well probably but you know you will be better off right like the you know something interesting one of my mentors told me a long time ago that he said you know there's no there's no part-time doctor there's no part-time lawyer there should never be a part-time Trader right like that's full stop right and if you're doing this you know solo it's

like very very difficult so there's a very small Universe of people that I think are capable of managing their own money solo who can trade pretty actively in a 247 365 Market I just like think about that right like you want to be a solo Trader in a 365 Market 247 like you're just kind of guaranteed to lose over time right if you want to be passive great but yeah otherwise it's kind of impossible it's the it's the financial nihilist like uh these people are you know the people that you describe the retail traders that you know are trying to be active and and have some Edge like they're gambling at the end of the day um and I think deep down they probably

know that they're gambling but like it's tough for them to admit it um but ultimately like maybe there's a couple that graduate from that they end up doing something more professionally or not uh they end up just losing their Capital but yeah I mean the current state of of retail is a little bit sad like it is like a gamblers world and it's very nihilistic but I think the industry isn't isn't it's almost like it the industry kind of used retail to bootstrap a little bit and now it's less Community oriented and it and it's more uh more professional um and like you said we're starting to see kind of like the doconomy start like those two classes diverge right where the retail is getting a little bit less

sophisticated in a sense they're just gambling their money away and the the larger institutions are are kind of like continuing to set themselves apart I mean I I have like two kind of like competing like paths where this could go um one part of my brain is saying like we always need retail like the the Elite Class is always going to need some sort of retail to like you know use for exit liquidity and like you know end up like praying on and that's kind of the predatory sense but then the other the other perspective I I have in my brain is like well retails just kind of maybe they end up learning actually and they're not going to be active they're going to be more passive and then you're

going to have the elite Traders and the the institutional professional traders that compete against one another and so I'm curious if that's kind of like more of a more realistic Viewpoint and like what what what is the consequence of this industry when the institutions start competing against one another rather than competing against retail I think there always be competition against retail right um crypto is very different than like equities right for one it's like finite Supply right so someone else has to sell their BTC and order for you to get it right like doesn't really grow like f it growth like you know has net inflation daily but like it's still finite within the context of 21 million right so um you need you need people to participate and

there's still like tons and tons and tons retail that that that are active in crypto my view is more so that like over time like retail retail and trafi still exists right there it's just called 401ks and and you know Roth IRAs right so you know or pensions or whatever you want to call it right it's like this this passive bid daily on ETFs like exists right um and that's kind of what saves the market over time right so um that that that will always be true that will always kind of be the case I think it's just more so um you know in of getting retail kind of Traders and investors um the more interesting thing I think will be uh you know can people make money day trading crypto over a

long enough period of time I think the odds are really stacked against you and I say this fully knowing that like for us it's very very difficult like no part of this is like a you know Cakewalk and like I'm G to take someone else's lunch money no that's not the game right it's I'm saying this fully knowing that like and appreciating that it's very very difficult running a liquid fund uh in crypto so you know doing it from a individual perspective is a very different fall game like you just have to be honest with yourself at a certain point in time and say hey look like money wasn't as easy as it was back then I'm not really making anything best FRS have been when I've gone on vacation and they just held right that kind of thing welcome to the ignition Mantle's newest

campaign to liberate the growth power of Bitcoin fbt ignition has officially begun with a total token supply of over 2,000 fbtc with a tvl of over 150 million right now you can go on the fbtc website to see all of the featured campaigns saking opportunities and liquidity pools where you can utilize fbtc onchain today for some of the best yields available on l2s the ignition Sparkle campaign can be found at fbtc docomo dampa yeah I mean I am happy to disclose that my personal Equity portfolio is full stack

coin so with that in mind um Z I'm curious are you a coin bull as well and if so um do you think that coin will outperform like majors in in in a further Crypt bll run or are you kind of bearish coin and don't think it's really worth an investment I think being a crypto person you have to be if you're optimistic on crypto you are kind of almost naturally optimistic on coin um coinbase represents you know the most quote unquote regulated Exchange in in crypto so um that growth will have to happen somewhere like if you're bullish on BTC bullish on E like where is this

executing it's on coinbase mostly um for you know institutional investors so um naturally kind of leads like one leads to the other I think uh in terms of outperformance for Majors I don't know I don't really have a view to be honest U I could see both ways a lot of my sharper investor friends have have mentioned that they're more optimistic on coin than they are BTC and e um I could see it um I just don't spend time on on it fair enough do you have any uh particularly contrarian views that you think are um especially uh yeah contrarian or not kind of what people think about in the space today that you think are uh important to share like is there

anything that comes to mind where you've been either particularly right wrong or still hold of you today that you think other funds or other investors don't hold I think I have three things that I would kind of categorize in that the first one was the VC trade I think that's kind of already unraveled and people realize this now which was BC as an industry will get smaller relative to liquid funds and this will I think start being true true over time um I think we've seen the VC unraveling part and we haven't seen the uptick in liquid funds um so that was the first contrari in take I think the second contrarian take um here and now is that ethereum will probably be fine um from an identity perspective I don't think this is a

catastrophic kind of uh uh moment for eth and I think um coordination and human incentive will will triumph over infighting and and Dogma um and then I think the Third most interesting thing or probably the most interesting out of the contrarian views that I have is that um regulation while important is not as important as credit expansion in crypto the number one reason why crypto assets don't go up as much as they used to is because of credit expansion not because of anything else um to give you an idea like you know Genesis used to do like 2030 billion dollars and I I believe

this is the the the case but 2030 billion do in Loan originations in 2021 we have more or less probably you know a couple billion at most across the whole industry now um for anyone who runs a real financial institution outside of crypto they know that you know crypto is the most inefficient you know kind of uh Capital base to play in you know if you have like if you're an institution you have to buy your spot BTC you can't really do anything with it you can't cross collateralize it you can't you know you can't increase your gmv against it like it doesn't really work I bit kind of solves this but even then you're getting like a 30% LTV loan like which

is still big but like only really really large institutions are getting this so the number one thing to grow crypto is credit expansion and being able to borrow against your Holdings in a more you know obviously sensible but but uh uh you know being able to be a little bit more flexible on the assets that you hold right now it's just a black hole of you know if I buy the spot asset I can't really do anything with it right um once rates come off if uh traditional lending firms are more interested in underwriting crypto lending desks right then you can see asset prices do quite well because people don't need to sell down their bpc in order to finance their life you know what I mean so that is the single biggest kind of contributor to

asset price uh I think uh doing well over time um and I think like this is why the rates trade is so so so important for crypto not because you know uh rates come off and then people punt risk fine that's obviously interesting but rates come off crypto becomes interesting as an asset class again because now you can actually Park money here without having op cost of 5% in a bank account um that is something that people don't think about stable coin growth you know screams basically during a a lower rate environment right because why would I have my money onchain if it's not collecting as much as it is offchain and it has extra risk and it's like hard to

move around and have to like on you know onramp and off-ramp like all of these things inhibit growth in crypto so once people can move that money more freely because they don't really have that op cost then the space grows pretty materially you you might have just answered this question um but do you think there's any demand from larger uh liquid institutions to to use defi like put put funds on chain and like use a or like for larger institutions holding Bitcoin now to like go to a Bitcoin L2 and and use one of those um or do you think most of that Capital that credit expansion is going to happen offchain and then migrate onchain rather than originating onchain it can be both

right it just it doesn't really matter too much I mean I think I think it will be both like black Rock's Biddle fund right that's built on chain all Native Capital right um and then also on the other end right which is like okay if you're like some huge you know credit fund right and you know rates are 2% let's just say in like a year or two right um and then you have okay I'm not really getting anything outside of out of my uh you know brokerage or bank I'm going to move this money to a where yields are 9% on USBC that's like a very different ball game and people maybe not everyone but some institutions will take that you know that Gamble and now that just brings the cost of capital down

like materially right yeah so uh more Nuance take here that is the is the 25 basis point rate de or rate cut that presumably is coming um like is do you think that's going to make an impact or is like is there a certain threshold where where we need to see rates B to have us an actual impact on specul demand for crypto and other assets again I I don't really care about the speculative demand aspect of this because that's harder to kind of gauge right I think if it happens it happens and we'll see I think on the rate side um 25 basis points while it's trivial markets are always forward-looking right

the 10year rate is drastically off where it was in like mid July right or early July you know relative to no differences in uh you know uh Federal fundraising right so you already have the market pricing in these conditions before it even happens right so it's more about the telegraph change in you know uh the federal funds rate basically than it is about the actual change that they make right so if we look at the Dot Plot you know in September and we say wow this looks crazy right like all these fed you know people basically think that uh you know we should take off like 200 basis

points across the next two years right you'll see that reflected in the market before it happens and now the cost of capital comes off pretty significantly yeah that I think that's a sentiment that we've heard uh where it's like the kite uh and the tail and like you know the kite starts to shift and then the tail goes right and whiplashes one One Direction or another uh to an extreme whereas the kite just shifted uh it creates like a very uh a much more significant amplitude at at the the end of the tale um I had Andy feel free to jump in I had I had a question I distract myself yeah I mean I'm just curious like uh kind of Shifting out of the macro um into more of some of the some some of the crypto

stuff you guys are doing so I understand that that that you outside of the fund uh I'll be your anti VC or your your slowing down VC take you you know we we can't all do as we say and say what we do but um no I'm kidding but um you do some Angel Investing on the side in your free time for fun because you like to support you know early stage Builders and I know that we have some you know shared portfolio companies I think one of them being Anisha I'm just curious like what is it in particular like what is your Angel Thesis what is your deployment rate what are you looking for and maybe we can talk more specifically about Anisha kind

of like what what you see there yeah um thank you for making me sound so magnanimous Andy um out of the kindness of my heart I Angel invests into certain protocols right no uh I I think you know I I really hate angeling to be honest um it just like it feels like I'm never going to get my money back um and it's not that I'm not bullish on the projects I back it's just like the time Windows just so long right relative to like running a liquid book um so yeah I've written to in the angel in the past year I think it's of a trip it's kind of a trip you're like just sent another one praying that I get praying that I see that cash again you know who knows right right like you feel

you feel so jazzed about it right you know and you're like ah this is gonna be great and then you like have to send the money and you're like wait what like yeah this thing's never gonna give my yeah Anisha is gonna do pretty well I think they have a really cool model for their for their token and for their kind of incentives but yeah I mean what's the initial thesis for you like why was that compelling um I met Zan a couple years ago and so Zan is one of the co-founders for those of you who are listening I'm sure you guys have had multiple initia shill fests on these podcast I'm kidding um but they come on and they just they say they don't do this and they do this they

do that then they say this I was going to ask this guy what what coins we should be bullish on but I'm scared he's going to tell us some yeah correct no no um but I I think inti is a pretty simple thesis I think um Cosmos has never really had a kind of winner um you know that was like my original kind of idea behind it I thought the tech was always more compelling for people that are smarter than myself um and it never really had that like kind of strong uh uh cross- dependent Community um and I thought initia would be would be that that future um and I think it's also just being able to own the whole stack you know if you're the average like app

chain basically um or in their case the minute uh minisha um you know that is a very compelling thesis because I think now we have like so many conversations about L2 fragmentation um about you know uh you what kind of value uh should be kind of cross collateralized between uh the app and and and the L1 um and you know basically like how the entire messaging protocol system within NW works so um initia was always more interesting and compelling to me uh because of this it's also um something I really look for in Founders I think uh we have to remember none of these protocols have ever really been Vindicated there's very few I would say it's like BTC eth and soul have been

Vindicated as like real use case and and and value um outside of these three like everything else is kind of like a dice roll in terms of it working out and having product Market fit um you know hopefully arbitrum optimism hopefully they all get there right um obviously some of these are contradictory but I think um you really back the founder uh and I think that's a really understated part it's like I don't know what that future is going to look like um I don't pretend to know what that future is going to look like but I back people that have the um intelligence in one angle but Integrity also to say I don't know or you know I need to Pivot or I need to change my you know opinion or you know whatever happens right and I

think that's like a very good quality that I find within you know the best Founders and I think I see that with the initiate team in particular um and for me like my angel criteria I you know it's there's no deployment rate or anything like this um usually it's someone that I know really well and I have you know or I'm borrowing someone else that I really trust kind of uh you know point of view on on the person and um I believe them to be like generally high integrity and um most importantly like if I write a larger ticket then it's someone that's willing to listen to me um that sounds arrogant but like really like I I think that's a big part of it like if the team is not willing to

listen to me I just don't want to be a part of it um you know I'm not saying that I know all the answers but I think it's really important that like they have good feedback back mechanisms and I find that a lot of VCS nowadays are like really hands off with their with the with the protocol and that should be the case generally but in areas that the VC knows better than like you know in some cases like kids that are younger than 20 right it's like they should be stepping up to the plate and being like actually you have no idea what you're talking about let me tell you how this is going to work right um right and and it's fine like maybe we can I can disagree with someone on on on their pro project Vision or whatever but it just makes me

a little bit more reluctant on on any in um I really like people who are willing to take productive like uh feedback basically yeah and act on it and execute on it I think that's a trait of a winner um in in all areas of life kind of like I think we probably have to bounce here in a couple but one last thing for me as far as like like what you're doing with split and kind of your career in space and just kind of looking to to keep building like what is the what is the vision for split capital in five years 10 years for for kind of your your personal brand like like where are you trying to go is there something else that that you're looking to build um is

it strictly just kind of uh take care of your clients as best as you can and grow the fun and kind of scale like where is it that you want to end up um and kind of leave the community here with some inspiration for what's possible out there yeah um I've been fortunate enough to live a pretty um great life you know all things considered um got into a good school you know had you know good mentors and you know good family and all these things so um the sum of my ambitions is not to make more money um even though that seems like that's the direct you know kind of uh byproduct of working at a fund or running a fund running money um the my interest in crypto is not you know only in the angle of being able to be right in a market

it's larger than that I was around in an era um you know I think a lot of people like we're in in 2017 and early 2018 then left and came back in 2020 um I was around in that 2018 2019 period where a lot of the you know belief in crypto was basically stripped away and it became a philosophical argument every day for what crypto should become um and I still kind of really think about crypto in that way I think you know when we when we launched split the idea was obviously you know make a product that people can get behind and understand and and and value but also how do I become someone that is you know quote unquote an ethical uh uh kind of thought leader in the space even if it's a small you know

little corner of the space right how do I push the things that I think are better how do I remove Financial nihilism right from being this Z guys topic right like um meme coins are great like we'll make money on them but like broadly speaking I'm not like you know I'm not going to support the average mem coin that's like brain rot for kids right like um some of them are better like and and we like you know some of them a lot but um I don't want to participate in these like really really nasty kind of zero some games like I'm not big on gambling we've never backed a gambling protocol right like um I don't believe in it right uh personally so um I think can there be a way to be someone in the space and uh operate you know make money and do all these things while

also kind of evangelizing the best parts of this community uh in space like going forward um you know without trying to be like white nsh right like I'm I'm not saying that I'm better than anyone else in this regard but the idea is like can we bring some sort of better Frameworks for the longevity of crypto um that is the goal for split Capital that will be the goal until you know uh this fund no longer exists or owns the universe hopefully one of those two scenarios or whatever is for the best um but you know and in whatever way that we can help move the space forward like we will try to do so um we do a lot of things that like no liquid fund should do or you know does um go to conferences or do podcasts or whatever right like this is

not necessarily the best use of time in terms of making every dollar like in the next day but it's better for the space overall which means it's better for uh our fund as well um and kind of the the the vision that we want to put out there so that's that's the goal with split Capital um you know we will have I hope uh complimentary business lines over time that we think can achieve this Vision in a much better way um we want to do it within a US Centric view uh and we want to bring crypto back in the US in a very major way so you know all of these things are very important to us and I feel like um in the last couple of years we've really really seen some of the nastiest characters in the space and

people who've really tried to uh Rob uh people in the space in a in a way that that is Unbecoming in any industry right um so you know how can we bring something back make it positive for other people and hopefully you know net positive uh over my my question was about the current election and and the political landscape of crypto nowadays don't feel obliged to give into that brain rot uh after uh after what you just said um and realize that uh it's not exactly like this podcast is something that like is very much a learning experience for us and hopefully for everyone else as well and so you know we were around and uh I think we share a lot of the same values

yeah I mean even with the political stuff right like you know I I grew up in California um went to a very liberal college right like so uh I have very you know specific point of view on these things and like I would say even then like it's changed a lot in the last couple of years when uh this industry has gotten demonized in the way that it has right it's it's irrational uh illogical like doesn't make sense hard to get answers right um so you know it's pretty it's pretty straightforward that like unfortunately it has purely become a binary bet in crypto with you know what the outlook on the political landscape is supposed to look [Music]

like cartey is your home for app specific rollups at the Forefront of developing new tools and platforms that enhance the capabilities of blockchain Technology ctei enables applications that are flexible and built to scale build on a full Linux environment and use traditional software libraries but in blockchain development go to carte. that's cares. to learn more about building your own app chain today Z here it's been a pleasure um really enjoyed the conversation and um the insights shared really appreciate it love to do another one um sometime in in the period ahead in six to eight months

I think the market structure will be significantly different um so would be cool to have you on again and yeah cheers for coming on man thanks so much for having me guys