The 4-Year Cycle Is Dead (Next Bull Market Explained) - Haseeb Qureshi

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But these kind of longer tale ETF issuers, I I don't see a realistic story. I mean, even when Black Rockck launched the Ether ETF, it massively underperformed for a long time. It was really when Ether started rallying this year that the Ether ETF started blowing up to be seen it as today. >> And generally, what do you think is going to make the difference between Poly Market and Koshi for for the ultimate winner in this in this category? >> Welcome back to the rule. This is your home to learn from the biggest guests, the brightest minds at the tip of innovation. Our goal is to help spread the collective knowledge of everyone in our community. We are breaking crypto out of its echo chamber and taking it to the real world. Sit back, relax, and enjoy it.

>> Pleasure to have you on again. I think the last time you were on, we were live from permissionless if I remember correctly, and you broke the internet with your claim that staking's dead >> and yields are going to zero. >> Yeah. Well, that did not happen. Luckily, DATs saved uh yields. So nominal yields are are here to stay as long as DATs are here. >> Yeah, I maybe that's a good place to start, man. I mean Tom Lee came out. He said the DAT bubble has burst. And then I had Smokey on yesterday and he said $110 million DAT for Bar Chain. We are so back. I mean it feels like Micro Strategies kind of tailoring away, tapering off their buys. I I did see that uh there's a new billion-dollar DAT

coming out of I think it's Huobi uh that is should be going live soon and usually these guys they announce before they fill their their bags. So we should see it uh we should see the execution of that here pretty soon and then the long tail I just it's just a swath of more more of these coming in. Where what's your take on DAT mania nowadays? Do you think do you think this is still going to have a material impact on liquid markets as we get into the long tail? I mean, how quickly are we going to see these MNABs go negative?

>> So, the first thing to recognize that a lot of the MNABs, maybe even more than half of them by number of companies are negative and the biggest ones are not negative, right? So, if you look at Bitmine, you look at Micro Strategy, they are not negative. And the other thing to appreciate about them is that almost all of the trading volume in DATs is just those two names. It's something like 90 plus percent of the trading volume is just Micro Strategy and Bitmine. So you can kind of ignore almost everything else at this point because nothing else has really permeated into retail uh the way that those two names have. So now that being said, uh I I think it's pretty clear from anybody who's a participant in the market that DA mania is over from the private side in the sense that none of

these new DATs are getting off the ground. Uh a lot of the fundraisers fell apart. Uh that even even the people thought they were going to close. Uh a lot of the commitments are getting pulled. A big part of the reason for this is just that people don't have that much money anymore to say nothing of the MNAVs themselves compressing, right? So when all these assets are trading at, you know, 3 4x um or even at 2x or even 1.5x, then it's just kind of free money. It's a free money machine. And the way the capitalism works is that if there is a free money machine, people will keep pressing the free money button over and over again until it stops spitting out free money. And it stopped spitting out free money, so people stop doing it.

Yeah. Um, now the DATs that currently exist, Micro Strategy and Bitmine, they're somewhere right now between I think it's like 1.15 and 1.3 >> lower than they've been recently, but they're still positive. Yeah, >> they're still they're still positive. Um, you know, in the limit like as long as the MNAV is above one, it is accreative for you to issue more shares and go buy more of your underlying. So whether it's Bitcoin, whether it's ETH, like it makes sense for you to do it mathematically. Um, and I suspect that both these two assets will keep doing it. And if it trades below NAV, they'll probably stop and take a breather and wait for the market to kind of pull back up and, you know, spend more time talking about the asset than actually going out around and buying the asset.

Um, that was inevitable. Like there is there's just no way that in the limit these things are going to trade materially above NAV. they can trade a little bit above NAV because of the fact that they're doing this financial engineering, they're staking, they're they're earning yield through all these other strategies, but them maintaining like 1.5 or even 2x is just mathematically impossible because they would just keep issuing more shares and keep buying more more tokens until like all of the financial assets in the universe are in debts or at some point the MDS have to go down, right? They're only two options. Um, so I I don't think this is an unsurprising outcome, >> but uh a lot of the people I mean, you know, this like uh this bear chain uh this bear chain one, wasn't it only 50

million? I think that was cash. >> Something like that. >> Oh, maybe I saw $110 million in the in the pipe, but it could have been 50 and then they had to back it with some cash if you contributed in kind is what I saw. >> Something like that. I don't remember the exact numbers. It was a mix of inind and cash. Yeah. if I recall and um you for this for this ETH one I mean this is like the Asian one that I think it was like Hashki Venbushi Sequoia China now called Hongchan they were potentially going to get involved in this one um it wouldn't surprise me if that one just never launches because they're just like hey look at these MDAs they're awful even Metaplanet the one in Japan has traded down really dramatically over the

last couple months and Metaplanet makes more sense than probably any other data I've ever seen Because in Japan, a corporate Bitcoin vehicle is actually a tax arbitrage. It's a it's a it's tax advantage relative to just buying Bitcoin because Japan is this like crazy high crypto tax. So if you buy Bitcoin in a corporate shell, it's actually better tax- wise. >> Whereas in the US, it's the other way around. It's worse to buy Bitcoin in Micro Strategy because Bitcoin in Micro Strategy you pay corporate tax on like all the stuff in payroll taxes and all this other stuff that's like a drag on everything that's happening within the micro strategy level. Uh whereas an ETF is tax advantage. That's why ETFs exist.

>> Um so there's there's a lot of weirdness about the fact that this has even worked in the US. >> Uh and and the premiums have been as elevated as they have been. >> What we're seeing is the market normalizing. It's rationalizing and that that's an inevitable uh outcome of just capitalism. >> Yeah. Yeah. And mean reversion is one of the things that's just tried and true. These things come back to reality and they normalize out like you're saying. I I think you also brought up the ETFs and I had James Seafar from Bloomberg come on last week and describe essentially how a lot of these things are chomping at the bit. 150 plus ETFs that are that are primed to go live and we're set to go live until the government shutdown.

Once the government comes back, it's really just a matter of time. These things are inevitably going to go live. But I'm curious as as you're looking at the DAT landscape and you're seeing a little bit of maybe call bull market fatigue. We're not seeing as much demand for these things. Do you think that's also going to carry over to the ETFs? We're not going to see as much pent-up demand like we saw when Bitcoin ETH, you know, uh uh launched back in 2023, I think, and then ultimately rose a lot in 24. Had a ton of demand. We're just going down the long tail. we're not going to see as much demand as maybe we're expecting from these ETFs >> almost certainly. I mean, so it was actually 2024 that the ETFs launched.

So, it was just last year, beginning of last year. And if you remember the Bitcoin ETF when it launched, it was just this rip roaring crazy ride. And then the Ether ETF launched and it was a massive disappointment. >> Mh. >> And I remember Ether rallied like crazy into the days of the ETF launch and then after the ETF launched and people realized like, oh, nobody wants this. It's getting almost no trading volume. like the inflows are very weak. Uh it just kind of slowly started driving down and then of course ETH E the Grayscale Trust >> could basically just start selling. It was just massive amounts of selling of of uh of the of the first and biggest ETF. Um now other assets aren't going to have that problem. There's no equivalent of ET or GBTC for Soul or for XRP or for any of these things. So that dynamic

won't be there as there was for the E3 ETF. But the general sense that like, hey, an an ETF is this magical moment that retail can finally buy this thing that they wanted, that's kind of what the DATs were supposed to be. >> The DATs were supposed to be like, hey, it's what's even easier to buy than ETF? The answer is an equity, you know. So, the story of like, okay, there's some access story that the ETF is now, you know, opening up the the floodgates. You know, maybe if Black Rockck launches an ETF, they'll be able to market this to a broader set of buyers. Um, but these kind of longer tail ETF issuers, I I don't see a realistic story. I mean, even when Black Rockck launched the Ether ETF, it massively underperformed for a long time.

>> It was really when Ether started rallying this year that the Ether ETF started blowing up to the extent it has today. >> Yeah. So, just to be a little reductive, I mean, like you said, the gray the grayscale E, we don't have that overhang on on some of the long tail of ETFs, but again, we're not seeing a lot of the the demand. there is fatigue in the market. Do you anticipate that these ETFs are going to be they're going to go more like Bitcoin and be a buy the news event or they're going to go more like ETH and be a sell the news buy the rumor sell the news event?

>> Honestly, my view is that it's neither. I think like when you see these ETF announcements now, the markets aren't even moving. >> Yeah. >> Like you know, somebody announces like, oh, we're doing an XRP ETF, XRP moves like 2%. >> Right. >> You know, it's like it's it's nothing. And I think the market is correctly discounting that this is not going to be that impactful to the underlying. Now, if Black Rockck comes in and they say, "Hey everybody, get out of the way. We're launching an XRP ETF." I think the market would react because they understand that Black Rockck has distribution and a sales engine that nobody else has for these products. But, uh, just having, you know, some longtail ETF issuer say, "Great, I'm going to issue, you know, Doge ETF." I don't think people actually believe that's

going to move the needle that much. >> Yeah. I'm just I I I I like to segue into like what actually moves the needle these days. Is it is it big names and tariffs because I'm generally looking at this and I'm seeing the same thing. I'm seeing that we have all this bullish sentiment really. I mean the Fed is hosting a payments conference. There's all of this this you know it it feels bullish. It feels great what to see the level of adoption and generally the Overton window of crypto just open up and everyone is is kind of open for business now. But we're not quite seeing the reaction in the market that would warrant or justify these things.

Whereas, you know, 6 months ago, a year ago, we would have think every single one of these announcements was the biggest thing since sliced bread. It you think it's a matter of fatigue? Is it just where we are in the market? Is was it that we were so overlevered and we had so much open interest in the market and we needed the wash that we had a couple weeks ago in order to kind of clear things out and kind of start a new what just what if you have your you have your finger on the pulse you know I you know you're as much as anyone these days just zooming way out where do you think we are and what do you think just the vibe is if you're if you're doing a temperature check on the industry >> look I'm not going to tell you anything

you don't already know which is that uh like the fundamentals in crypto have really never been better for any time that I can remember being in this industry, >> but animal spirits are pretty low, right? And so, you know, why is that? One thing, of course, is that >> uh the reality is that especially the flush that happened um a couple Fridays ago, the the big leverage blowout um that that like retail is out of money and retail at the at the margin is a marginal buyer for a lot of these assets, especially in alts, right? So, so Bitcoin's holding up, okay, and that's the, you know, the the reality is that Bitcoin is the institutional bid.

That's where all the institutional money is going. Uh, a little bit to Ether, but mostly to Bitcoin. >> And everything else is retail. And to the extent that everything else is kind of lagging, it's not really doing that amazing. And the longtail of alts is really dragging. Um, you know, even before the election, like even last summer, alts were higher than they are now. uh which is which is weird because you know last summer Trump wasn't even elected there you know there were no laws government didn't own any crypto uh there was no you know there was no Genius Act there was no Clarity Act there was no none of this stuff was happening you know the Fed was not announcing that they're going to incorporate Fed master accounts for stable coin issuers or whatever none of this stuff was even on our bingo cards a

year and a half ago and yet prices were higher um so a lot of this is connected to macro a lot of it is connected to retail the fact that retail is just not they they just don't have the money. >> Um, for the most part, the institutional bid has been holding up the market and retail has been bleeding. And now, why is that? You probably just saw today, uh, Beyond Meat is up 600%. Uh, you saw, uh, what was there was some other meme stock that was pumping really hard this morning. Uh, >> I didn't see I was Beyond Meat I saw was a 14x in the last few weeks. I I didn't see the other one.

>> That's right. That's right. I think it was it was like it was like 600% pre-market or something. there's just so like basically the answer is that the AI bid and the the the crazy volatility that's coming back to the stock market >> is ultimately pulling a lot of the hot money away from crypto and where is that hot money going the answer of course in the stock market there's two assets that retail's trading which is Bitmine and strategy which means that yeah none of that money is going to Salana none of that money is going to you know arbitrum or um you know whatever anything further on down the list So, what you're seeing is this tale of two cities, which is that Bitcoin and ETH are holding up pretty well. Not not amazing, but they're holding up pretty well. And everything else is kind of dragging

because that's just not where the hot money is. So, I do think that changes. I think this stuff is cyclical, and I don't know that it's that easy to foretell where, when, and how it starts. Um, and so I think for the most part, my advice to investors in the space is just be patient. >> You have to be more patient than you think you're supposed to be. >> The wait is over. The Talis test net is live. Be part of the revolution. Join now at testnet.talis.network. >> Relay, low fees, lightning speed, and the power of multi-chain at your fingertips. Instant multi-chain payments. Choose any token on any chain.

75 plus network supported. More than 5 million users. 8 billion plus volume processed. 70 million plus transactions. Fast, reliable, everywhere. Start swapping today. Only on relay. >> Habachi provable. Trade perks with speed and security. Earn rewards. Visit hibachi.xyz. Trading on fire. >> Yeah, that it feels like sideways is kind of max pain at this point because people are just fatigued. They want to go on vacation. They want to take a holiday and it it the market's just not letting them because it's not letting them put on a bid and just hold, but it's also not letting people just cash out because it seems like there's enough substance where there's still things

that could >> Yeah, that's right. I mean, look, rates are coming down. We know that. Um there's going to be a new fetch within 6 months, right? And probably whoever Trump puts in there is going to be a let it rip kind of guy. Um, and so we're going to be in a very different macro environment a year from now. And that almost certainly is going to is going to impact risk assets, right? Because all that money that's sitting in money markets, that's sitting in T- bills, that money is coming out and it's got to go somewhere. So crypto is almost certainly going to be one of the places where it goes. Uh, now how long does that take? When does that happen? I don't know. Uh, but that affects both institutions and retail.

>> Yeah. >> That have their money locked up in these assets right now. >> Yeah. So, I I'm curious about this because I I've started to to keep track of macro a little bit more. Uh I love Arthur Hayes. You were on a panel with Arthur Hayes. Kind of had a fireside chat with him out in in Singapore. Um I'm curious what your takeaway from macro is because at at the 100,000, you know, foot view. it's tariffs and then it's usually like, okay, do whatever the opposite of of the tariff announcement is, but there's a lot more macro uh money printing that could or could not happen at play here. And and you also mentioned the Fed governor situation, whether or not they uh you know, Trump takes control of the Fed and he's able to print kind of at his will um before May of 2026 or if we're going to have to

if we're going to have to wait for that. What's your what's your tabs on macro? Maybe first if was there any takeaways that you had from that conversation with Arthur or broadly you had a lot of good panels out in Singapore and Korea. What were some broad takeaways that you had from from the Asia conference tour? >> I mean look my my takeaway is always that no one knows anything. We're all roughly we're all basically in the same boat staring down the same river and like you know people will say like oh I can see that there's a curve coming down and that this thing's going to happen. Oh I I know it that there's a rainbow right at the right around this corner and I I don't know. No one knows anything. It's it's macro, right?

Obviously, if the market knew something, it would be priced into the market. So, I I tend to not uh be too bought into people's prognostications about macro beyond the obvious stuff, right? What I mentioned is obvious. What I mentioned is what everybody already knows. I I do think in crypto it is possible to see around the corner with respect to flows um in just the sense that it's difficult for crypto to price a lot of these things in because there isn't that much institutional capital in alts. For Bitcoin, there is. For Ethereum, there is. in alts there is no marginal buyer who can say like well this thing is clearly be worth more in six months so let's just bid it up now >> there is nobody who has that money to do that >> so that's one of the reasons why I think you can just kind of see far enough down

the future and and that's why it's sort of being patient can be an effective strategy with with respect to a lot of crypto markets uh for Bitcoin I don't really know that anybody has any alpha at this point um I think it's just like this big Ouija board that we're all playing together and just kind of pulling in as we go like it's it's very unintuitive that you've seen uh bit uh uh gold >> rockets all-time highs. Same thing with silver. You know, silver rallying like crazy. Obviously, there's been a pullback in the last couple days where uh gold went from like it was like, you know, 4600 down to like 4K. So, big big pullback in gold. Um but uh still massively up on the year. Very very good year for gold. Nowhere near as good of a year for Bitcoin. Uh but if you if you

line up to when Trump got elected, then Bitcoin has outperformed gold over that period of time. But from the beginning of this year, gold's outperformed. Uh that that's weird, right? If you think that what's going on, the way that many people in macro describe this is the quote unquote debasement trade, which is okay, the dollar has been weakening. Um you know, people are moving into harder assets. They're they're concerned about uh debt levels. And if you're concerned about debt levels, the natural thing you're going to go into is gold. Maybe that's what's driving this gold trade. The reason why that doesn't really make sense is like, okay, one, Bitcoin is not responding the same way, >> right? Um and Bitcoin historically has been this kind of debasement trade. Uh that's classically how it's been marketed. Um and then second is that you can also see there's a lot of markets

that already exist that anticipate future inflation. >> And if you're implying that you think that okay the dollar is going to debase that probably means that there's going to be inflation because dollar is going to buy you less. It's going to buy you less eggs and less metal and less houses and less you know everything that that that's what debasement means. um and we are not seeing an elevation in future inflation um expectations for the dollar. So it seems that people are just bowled up on gold. Maybe it's this more like multipolar world that we're betting on. Uh but then again, Bitcoin should benefit from that. So I think a lot of this stuff is very difficult to understand what the market thinks right now. Um and that's part of the reason why my answer to most of these things is to just be patient, just chill out. I

don't think there's one consistent narrative that explains the whole thing. Is is there anything that you do to help you stay patient on the investing side if you're looking at more adventure than you are liquid or just if you're just taking a break and like zooming out and what do you what do you do in your free time when you're being patient? You're not taking so much of of your time in the market. >> Yeah. I mean, look, I'm I'm a VC, so it's kind of a little easy for me to say be patient because that's literally I'm forced to be patient with a lot of my investments. >> Exactly. I have I have a long time horizon. Now we do we do also manage some part of the liquid book. So we do make decisions about liquidity and when we sell things and obviously so

liquidity if you're doing crypto liquidity matters to everybody and when you get in and out of markets is is a universal. So, um, the answer from my perspective is just that like look, you're always looking at the delta between fundamentals and prices. And when fundamentals look this good and prices seem not bad but mediocre, >> the answer in every like look, I've been in crypto now for like eight years. Uh, every single time in the past when I thought, hey, this that doesn't look like a great time to exit, the answer was chill. just chill, relax, like you know, go read a white paper, go learn something, you know, go try out some products that you haven't used before.

Um, but like don't start making panic decisions because eventually the market catches up with fundamentals. It just takes time. >> Yeah. Got it. I just going to double double double down on my question. What do you do in your free time? Like I I I totally agree with all your patient mindset, but I am just curious. >> Um free time, honestly, I don't have that much free time these days. Uh, I kind of work like a dog, but um, free time that I have, try to work out, try to eat well, um, spend time with family. I, um, try to go hiking, although the weather is kind of turning now. Um, and, um, you know, just chill, watch a good movie, you know, play a video game. I I don't know. I don't think I'm going to surprise anybody with what I do in my

free time. >> We're taking it easy. This is what happens. We get bull market fatigue and then and then our podcast, you know, we just take take a little more more laidback. >> Yeah. I don't think I have any great advice about how to spend your free time because I I anybody who knows me knows that I do not um indulge that much in free time unfortunately. >> Okay. Well, in that case, we we'll go back to fundamentals here and how they may or may not catch up with price. I I think one of the most fundamentally interesting and bullish things that came out just over the last couple days was this Fed payments innovation conference. I I mean just to see our industry be recognized at a a a scale like this was incredibly reassuring and encouraging uh to be kind of taken seriously like this

when we all sort of knew what was brewing underneath the surface. Uh Fed Governor Waller announced this uh skinny master account. Uh you and Dragonfly are very involved in the stable coin boom that's happening is I think a stablecoin super cycle. It's been coined. Um, and so one of the things that came out of this conference was that stable coin issuing companies could get Fed master accounts or these skinny master accounts at the Fed. What's the significance of this? H how could this change the stable coin landscape by no longer requiring that these stable coin issuing companies go through intermediaries to get their treasuries or or to hold uh cash?

>> Um, candidly, personally, I don't think it's that big of a deal. Um, I mean, I think obviously as an industry we're not supposed to say that we're supposed to say like, "Oh, this is amazing. Thank god that the Fed is finally acknowledging that our industry exists." Um, but I mean, you know, was that the problem with Circle or with Tether is that, you know, they had to go through somebody else in order to get their um hold their treasuries or to hold cash? Um, I think them being directly on the balance sheet of the Fed is more secure, but it's not like BNY Melon or State Street or Cantor were not secure. It's not like people were worried about these guys being intermediaries. Um, so I think it's a streamlining. That's nice, but does it really fundamentally change the game? Not really. Um, and of course,

like the the thing about having these sort of skinny Fed Master accounts is that they don't have any yield. So, you can't get the overnight Fed funds rate on your cash the same way that a bank can, in which case, like it really is just the same as parking your money at a bank that is actually getting the yield, right? So in some sense it's actually negative sum to do this because if you give your cash to you know let's say you give it to BNY Melon okay BNY Melon then goes parks that at the Fed and then earns the overnight rate uh if you directly have it in a Fed funds account uh or sorry at a at a skinny Fed account then you're earning zero nobody's earning anything on the cash so it's kind of worse from a net perspective um

and you can imagine maybe what it does is it gives leverage to Circle to go to BNY Melon and negotiate more of the overnight rate that that BNY Melon is making because they're say look if you don't offer us some of this we're going to go just get our own account. Um >> if I'm bank of New York I'm telling Circle like you're not going to go to the Fed. You're not going to get any more interest over there than we're going to give you here. >> Right. Right. I mean I don't know. That's the thing. Yeah, you're right. I don't know that it's going to have that much of an impact at the end of the day. But that's the only thing I can imagine they would have an impact on. Beyond that, I think it's the the Fed is being I think it's going to matter a lot more

for FinTex. Uh that that's that's the thing I'll say. For fintex, I think this matters a lot more than for stable coco issuers. Stable coin issuers, they don't need the Fed to affect payments for them. Uh like what they have right now is is mostly fine. >> Um I think fintexs that basically can circumvent the banking system entirely and don't have to go through bank risk controls and like you know, hey, I don't like you as a fintech or I don't think you have enough uh track record or whatever. If these skinny fat accounts can just be adopted by fintex, that's great for fintech innovation. But as far as I understand it, I don't think it has that much of an impact on stable coins.

>> The the result of this from from my perspective is that the current banking regime and and how we have, you know, some too big to fail banks and we have commercial banks, regional banks, if everyone kind can go directly to the Fed, this sort of kind of blows the system up. like what's the hierarchy once everyone has the opportunity to kind of go direct to the source. >> Um so you know to be clear because you are not going to be earning yield at a Fed master account or a skinny master account or whatever it's called because you can't earn yield. Um it is more attractive to you all things equal to go through a bank. Okay?

>> Because the bank can offer you some yield, right? They're not going to give you the whole yield but they're going to give you some yield. Um, so they intentionally designed it that they do not want to intermediate commercial banks, but it's been the Fed's MO from day one, and it's a part of the reason why the Genius Act does not allow stable coins to pay yield, is that they do not want to intermediate the banking system. They want to make very, very clear commercial banks are here to stay. We don't want there to be a big stake. We don't want there to be a big shakeup. We don't want there to be instability. We don't want deposit flight. We want everything to mostly be as it is. And for stable coins to be this like cute little thing over here, that's what the Fed wants. That's how this whole thing

has been designed, right? If you remember way back in the day, there was this uh this uh this thing called I think it's called the bank of Chicago, which was like this a narrow bank. And a narrow bank is this idea that you take a you you get a bank charter and you open up a bank at the Fed and you create a full reserve bank. So most banks are fractional reserve meaning, you know, they lend out most of the money that they're getting and at any given time it's like 30% reserves or something like that. Um, a narrow bank means that all the reserves all the time are sitting at the Fed and they're just earning the overnight rate and they're passing the overnight rate back to you >> and uh they were trying to apply for uh a bank charter from the Fed and the Fed

denied them. This was like in 2018 or something 2019. Fed denied them and it was a big kind of brewhaha. And the reason why the Fed denied them is they said if we offer this, if there is a bank that is allowed to be full reserve and have a bank charter and offer yield that is going to be so attractive to retail that is going to drain deposits out of the commercial banking system and cause a financial crisis. >> Right. Basically, all the money is going to leave JP Morgan. It's going to leave Goldman Sachs. It's going to leave uh, you know, Bank of America and Wells Fargo, and it's all going to go into this narrow bank. because it's just better, right? It's just it's full reserve. It's completely safe and you're earning they're just passing through the overnight rate. They have no branches.

They have no employees. They have no nothing. It's just like this this this, you know, pass through. And uh the Fed was like absolutely not that this this will be the end of the American financial system if we do this. So that should be ringing in your ears when you hear about stuff like this. Like oh skinny Fed account, how's it going to work? The answer is of course no yield. >> Right. Okay. >> How is stable coins going to work? No yield. Right. >> Right. The answer is the Fed is willing to do this as long as there's no yield because that is going to entrench the existing commercial banks uh for most use cases. Only in cases where it's really cumbersome to go through the commercial banks is it going to be the case that uh these things are going to be attractive for for a fintech or for a

new company, >> right? And so for stable coin issuers, they own the treasury. So they can capture all the yield and then they can choose to pass it through to the users or not depending on if they're they choose to be genius compliant. And so that creates a large spread here where if users or or consumers are not able to go and make deposits at a narrow bank like Bank of Chicago and get the Fed funds rate uh because you know they have to go sit in their savings account at their regional bank and get 0.001%. then it means it's going to force these companies to go and get treasuries. Is that is that kind of the case? And that's going to be closed to a certain set of institutions that are able to to institutionally custody and hold

treasuries and and that is going to create kind of this this layered system that we want so that we can extend credit further and further down the line. >> That is basically correct. Um from the Fed's perspective, they see stable coins as a product for non-Americans. Mh. >> And if you're a non-American and you can get access to a stable coin that doesn't pay yield, you don't care. You're like, great, it's a dollar. That's that's all I fundamentally want. Um, and so this whole system is really being designed, I think, with that as the mental model for what stable coins are for and who's going to use them. Uh, if it was Americans that are primarily using stable coins, then a lot of this stuff feels like very anti-consumer, >> right? A lot of this stuff really feels

like hey why are you why are you making it so that this new product is hobn is hobbled >> and uh it's unable to compete on a level playing field with other fintech alternatives. Uh if the answer is that like well but this thing is you know completely outside the US banking system these are all incremental owners of US dollars US debt then who cares you know we're not we're not hob we're not hob uh uh what's the word I'm looking for? um uh we're not hobbling them, handicapping them. We're not handicapping them with respect to what they might otherwise get access to because if you're in China, if you're in, you know, Japan, if you're in, uh India or whatever and you're getting you're getting UST, you weren't

going to get dollars anyway. >> So, this is your only path to getting dollars, in which case you don't really care about the fact you're not getting yield, >> right? And and from and it's a win-win because they they can get access to the dollar. Um, and then the the United States can continue to expand global homogyny of of the dollar and dollar dominance, but they don't have to pass on any of the yield. So, they can kind of get the best of both worlds. Um, let's let's switch gears a little bit. Let's let's talk to let's talk about this longtail altcoin, good TGE, bad TGE price rise uh situation that we've got going on. Uh you should see the chart up there now if you click on the little box and you commented on this. Uh they put they put a lot of coins up in the strong

TGE half of this uh this plane. Um when in reality we could have flooded this graph with weak TGES uh that occurred over the last the last uh the last 12 months. And I saw your comments on this was essentially this. It was like we could have added a lot more coins here and we chose not to. It would have thrown the proportions off a little bit. Are you looking at this and you're thinking to yourself, "Wow, did we did we actually have that many strong teach?" What? Maybe I'll just ask you, what was your first impression when you see this? And and before you look at it too closely, it's you're looking at this, what what's your initial reaction?

>> I mean, the first reaction is, okay, what's the story this person is trying to tell with this data? I mean, data is maybe a strong word. Like, I don't I don't even know what these lines are. These red lines just seem to be doing random things. Um, but let's ignore that for the moment. Uh, and then okay, look at the axes. Okay, there's like strong TG versus weak TGE and there's token is down, token is up or the axis, right? The the Y- axis and the X axis. And okay, so what is a strong TGE? I think what he meant by strong TGE is like hype that there was a lot of hype around the TGE. Um, that being said, like a lot of this is a little bit in retrospect because, you know, did Scroll have hype around the TGE? Yeah, it did. Did uh did

Sonic have hyper on the TGE? Yeah, it certainly did. Um so some of these things are a little bit just so stories of like well we're kind of memory hauling the fact that this was hyped at the time um relative to the fact that it's done well. Uh and then you know then you you get like corn and redstone or redstone super hype TGES compared to those like I don't know it kind of feels like he had a story to tell and he decided to tell that story by just moving you know this very arbitrary thing of strong versus weak TGE. But fine let's take this data at face value. Let's assume that it's true. Um the the the issue I have with this is that look when whenever you have data that's this messy. Um it's always there's a lot of degrees of freedom and uh you know

there's there's the old line of uh there's lies damned lies and then there's statistics right and this is kind of very much in that in that vein which is that look when you have this many degrees of freedom with your data there's just a lot of stories you can tell and it depends on what story you want to tell and you can find a way to tell that story. So the story that this person was trying to tell uh in the tweet alongside this chart was that this strong big bang TGE thing is over. These big hyped launches have mostly been failures. And the thing that you really wanted is to be in the bottom right quadrant. And what is the bottom right quadrant? Bottom right quadrant were things that had pretty crappy TGEs that hung out for a very very long time and then eventually blew up. So the the two

examples are Zora and Virtuals, right? Which Zora and Virtuals both launched with little fanfare. they were relatively small applications and they blew up and got really big and his his you know the learning that he's supposed to take away from this chart is that's what you should do. You should be like virtuals or Zora, not have a lot of hype around your TGE and slowly become this like big, you know, runaway success and have all your holders uh participate in that in that success. And I look at this, I'm just like this is this is just obviously stupid. This is extremely stupid advice. Basically, what ad like what does that mean? The advice is basically like okay launch be a failure and then become a sleeper hit. That is not advice. That's not useful advice.

Nobody could can plan around doing that. Um if you become a sleeper hit that's amazing but that's not a strategy. You there is no such strategy. >> Uh the second thing as you pointed out is that the vast majority of tokens are failures. Vast majority of tokens there's no hype there's no nothing. So that bottom left quadrant should have 100x the number of tokens in it. Right. like there's just this gigantic graveyard in the bottom left that he is not pointing at because it doesn't help tell the story that he's trying to tell. Uh and when you do that, it becomes more obvious that the bottom right are outliers.

>> These are not that again that's not a strategy. You cannot decide to do that. And the top half of the quoteunquote strong TGS, half of them are winners, half of them are losers, which also fails to tell the story that he's trying to tell, which is that obviously strong TGES are overrated and you should not do a strong TGE. >> Do you think Do you think he missed anyone? I in any quadrant really I the where you want to be is the top right quadrant. You want it you want to have a strong launch. You want to have a strong community build up have a lot of uh demand around the product and then launch at a fair valuation a fair float and ultimately rise from there. Did he leave anyone out of that category in particular? But but more like is there anyone that comes to mind and you think

why are they not here? They clearly had you know a terrible TGE or they went down. what anyone that sticks out is uh being being left off. >> I I'm not going to I'm not going to call people out for shitty TGS. I think for for strong tokens um it's hard to think of other great example. I mean, but the Sweet TG was was actually a little while ago and then the runup happened over the last year and a half. Um so I don't know I don't know if you would count that. I don't know when these uh when the sort of specific date uh that's set in stone for when these launch. Then of course there's Athena. Um uh so I I can't I don't know about whether they launched I don't know if he had states on here but I don't know if it's like launched the

beginning of 24 maybe is what this chart is meant to convey. >> Yeah I think these are most of 24 launches >> 24 25. Yeah. >> Yeah. I think these are mostly 24 launches. Um so I don't know but then if you're including like Zora and virtuals >> virtual virtual have been around for years. >> Yeah. Yeah. Exactly. These have been around for years. So, it's a little again like you're sort of cherry-picking to tell a story you want to tell. Um, which is fine, but it's just like, okay, is that story true? >> And the argument that I made in my post is that no, I think the story is actually just wrong. And not just wrong, it's like worse than wrong, it's unhelpful. So, if the story you're trying to tell founders is like don't have hype around your launch, is that really the right advice for a founder?

uh because the vast majority of things that don't have hype just they die a silent death. They don't even have a chance of getting into the the the the top quadrant or the top top right quadrant. Um and so I think the >> the overall thing look I I think a lot of people have have noticed the vibe shift in tokens and in TGES, right? And and I think in a way that's what this post is a response to is the vibe is bad. >> A lot of these tokens, a lot of these TGS in the last year have been down. Almost every TG has been down. And uh now that's true in large part because alts have been down >> since the beginning of this year. You know, if you remember, alts were rallying like crazy when Trump got elected and almost everything is down

from the beginning of this year. Even Salana, which has had a blockbuster year with respect to fees, is down since the beginning of this year. Um and so that is the backdrop for looking at this any meta story is that look, the the beta is down. So, if the beta is down, it's not surprising that alts in general are down or that TGES in general are down. Um, but the fact that TGS have been so weak, I think people tend to uh overdraw conclusions or they try to find too narrow of stories to explain what's going on. >> Um, you know, I think people also don't know just general facts about how the distribution of assets works. Generally, most IPOs trade down after their like a year out of IPO. Most people don't know

this, but uh I think it's something like 60% of IPOs are worth less than they were at IPO day. And that's even inclusive of the pop. That generally happens during most uh ICO ICOs IPOs. IPOs, right? Most IPOs trade down. Now, that being said, despite that, IPOs are still profitable on average. Now, why are they profitable on average even if 60% of them are down a year out from IPO? The answer is because IPOs are power law distributed. is that a small number of companies end up making a shitload of money and becoming 10x 15 20xers and most companies do okay uh and the average company goes down you know moderately right uh tokens are the same way is that tokens you know if you think

about when a token TGES it's like three years after or two years after the project was initially created >> that's like a series A startup >> you know normally in in startup land we still consider series A to be power law distributed meaning that most things fail. A small number of things do well and one or two things are going to knock it out of the park and do amazing, >> right? >> And that still applies to tokens when they're ting. They're still very much a part of that power law distribution. Now, when you get into the S&P 500, it doesn't look like that anymore, right?

The power law collapses and it becomes much more normally distributed. But at the early stages, the power law, I mean, it's it's part and parcel of what we do as venture capitalists is that we have a big portfolio. We understand most these things are going to go to zero but a small number of things are going to do really really well and they pay for almost everything. >> Yeah, >> that is how tokens are mostly distributed in normal times. >> Even the S&P now the bag seven is just continuing to make most of the gains in the S&P and and it's just compounding what what you're saying. >> Um and and so this is the nature of the hyper financialized world that we live in. price discovery and liquidity is coming earlier and earlier in the capital formation life cycle of a company and and I mean this is extended

this is even to the nth degree in crypto where we have pre-markets on mega e that just launched their sonar their sonar around and now we're getting pre-deposits on hyperlquid or excuse me pre pre-market uh perpetuals on hyperlquid which is just an incredibly early place to start price discovery and and a recipe for incredible volatility maybe to to wrap up on on this chart Is there what are some of the the TGEs that are coming up that you know don't belong here because they haven't launched yet but ones that you're most excited about you know coming up supposedly in the next three six months any of them that are public.

>> Yeah. So we're we're investors into Mega ETH and into Monad. Um obviously two big TGES that the market is very excited about. Um I'm eager to see how they fare in this market and I've also told both of those teams that I think it's a great time to launch uh because markets are depressed, people are down bad. uh valuations are are smaller. I think that's good. That's a healthy thing because it gives you a chance to allow people to participate in the rise um as the market gradually recovers. And of course, it's not guaranteed that any of these things are going to go up. Uh you have to actually deliver. You have to actually prove it. You have to actually create something that the market wants.

But I think at the end of the day, infrastructure is still one of the most important problems in crypto is how to just make a better mousetrap, how to make a better blockchain. So, uh those are two of the TGs upcoming that I'm most excited about. And I think also the market is most anticipating. >> Asset management redefined built on ERC7621. Standardize how you launch, manage and trade onchain baskets. This is Alvara, the standard for onchain asset management. Blockchain shortcuts, templates, and widgets launch without friction for builders by builders. Visit enso.build.

Yeah, it's interesting to hear you describe um what what good timing looks like. And I think maybe that's the storyline to take out of what what you describe because if you're looking for kind of that that rise up that strong TGE with with strong community monad both have um then it all comes down to timing. It all comes down to you want to have uh that strong community that will continue to grow with you as the market appreciates and and compounds from kind of a local low where where it was. Um okay, the next uh the next thing that I wanted to talk to you about uh because you guys are investors in poly market um and and you know we're we're big fans of prediction markets on here have been. It

was one of the first uh DAPs that I found on Ethereum was was Uma and Augur. Uh, and so the NHL has done deals now with KHI and Poly Market. Um, and so man, the NHL announced both of these guys. They're both claiming to be the official prediction markets partner of the NHL. >> How can you have an official I mean, how can both of these guys be the official partner? >> I think we are probably going to see a lot of this. So, if you remember, the same thing happened a few weeks ago with the South Park prediction markets episode where they both claimed that we were the first prediction market to ever be listed. We had a South Park episode about us, about KHI, and about Poly Market. Um, I think these guys, they uh

they obviously don't like each other. There's a lot of bad blood between these two companies and uh they're both engaged in a very aggressive ground game now about just kind of papering the world with partnerships and deals in order to get as much distribution as possible for a product that's really starting to take off which is of course you know for in this case it's uh it's sports and especially domestically in the US um sports betting is is a huge huge huge market. So it was just announced earlier today as well that uh Poly Market is going to be the official clearing partner for DraftKings. DraftKings is is launching their own prediction markets and they're using Poly Market for clearing. Uh DraftKings getting into this game now. I mean, it's maybe good to some degree, but DraftKings very clearly a competitor um to the three of these, right? Because

they're the the largest uh sports betting venue in the US today. Um I think all of this spells that it's going to be a dog fight. >> And uh the market here, you know, we're no longer playing in the kiddie pool. This is not Kumbaya crypto stuff. This is like big boy money serious markets that are very very cutthroat. Um, so I expect to see a lot more of this. It's a little silly when you see it uh happening like this, but you know, look, we've been we've been longtime investors in Poly Market, and I think um Shane comes at it with this very cryptonative spirit. He's been, you know, you mentioned uh uh Augur and Uma. We actually invested into Augur and UMA way back in the day. Um and so we were we were there in the very early days when prediction markets were dog Did

not work. Absolutely horrendous products. There was no demand. There was no volume. And Shane was the guy who just grinded it out for, you know, the better part of a decade just because he believed in the story and he's kind of the guy who made prediction markets a real thing. >> Um, and so I I believe in Shane. I think Shane's going to win. He's he's right now playing from behind on the US side because of course they were uh targeted by the Biden administration. They had this, you know, FBI raid. All of that got resolved and dismissed. Um, I think it was like 3 four months ago. They had this big investment from ICE, the parent company of the New York Stock Exchange.

And now they're re-entering the US market in a fully regulated way with the blessings of the US government. Uh so they got this no action letter from the CFTC which allows them to come in. >> Um but like I said it's you know Koshi is no u no slouch. >> Obviously they've been doing very very well with their Robin Hood integration. Uh and so now it's like Battle of the Titans. Uh and we've got a new third player coming into the game with DraftKings. So I'm I'm very intrigued but I think at this point it's uh it's anyone's game. Limitless TGE today. Kind of a weird one. Kind of a stealth launch. They kind of came out of nowhere and did it. Now people are claiming, oh, they sniped their own token. All kinds of shenanigans. Their team >> I saw some tweets about it.

>> Yeah, they're market makers. They launched without really telling anyone and then uh looked like they had one entity that gobbled up a ton of tokens and then started selling the tokens. No one really no one yet knows who this entity is. They suspect the onchain retail salutes are suspecting it's the team itself. So, we'll we'll see. I'm sure we'll we'll find out more about that. But, uh, last question here as we wrap up is who what do you think is going to make the difference? How do you think these prediction markets are going to separate from one another? Do do you think any of the the long tail the you know, Limitless is probably a third at this point, but then there's a whole long tale afterwards. You know, where do you do you think a third or or longer is going to have any chance at uh

superseding one of Poly Market or KHI? And generally, what do you think is going to make the difference between Poly Market and Koshi for for the ultimate winner in this in this category? >> I don't think it's very likely that you're going to get a third unless the third is bringing their own distribution, right? So, if you're if you're coming in and you're trying to compete head-to-head like directly on the big markets, right, like on politics, on sports, um I think it's pretty tough unless you are a DraftKings, right? You already have your own distribution. You've got your own betting um uh uh sort of you've got your own customer base that you're bringing into these markets. And for somebody like DraftKings, the reason why this is so compelling is that uh right now sports betting is regulated on a state-by-state basis, and there's about

20 states in the US that ban sports betting. So, you're not allowed to offer these products in those 20 states. Uh the prediction markets are CFTC licensed. They're licensed federally. >> And what that implies is that these prediction markets are these event markets. Technically, they should be available in all 50 states. Now there's been lawsuits filed by I think seven states attorney general as well as some uh Indian tribes against Khi for offering these uh prediction markets on sports in the US in these states because Khi has claimed we are the first legal sports betting uh venue that's available in every single state and it's kind of a regarb right now and this regardb is being challenged by the state attorney general as well as by you know these other uh uh uh plaintiffs. We'll see how

it plays out. Um there's obviously gonna be lawsuits and fights about whether or not this is legal and if not um there will be state-by-st state regulation most likely of prediction markets. If not, somebody's going to get a cut of something. Uh but this is a big part of the reason why DraftKings is so compelled by this is is that they say look if this is the way that you are accessing 20 states that we are not allowed to access, we want in we want to off also get into the prediction market game. And that's the exact same thing for Robin Hood, right? Why is Robin Hood using Kchi as the back end for their sports betting? The answer is that one license, extremely easy. You don't have to do the state-by-st state um you know uh state-by-state licensing for for sports betting. You can just have one

product available everywhere in the US, which is exactly the way that that uh um Robin Hood would like to like to play it. So, there's a lot of legal and regulatory wrangling that's going to take place over the next 12 to 18 months to see how this market is going to play out. And it may not be it likely won't be uniform across the the entire US. Um, but this market is so big, many, many really big players are going to want a piece of it. So, is some tiny crypto startup that doesn't really have a unique value prop going to be able to sneak a word in edge-wise? I don't think so. Uh, but if you have a unique angle, if you have some unique mechanic, if you have some unique innovation, then I think plausibly, right? So, it really is more about innovation like coming up

with something new than it is I'm just another prediction market. Am I going to be able to, you know, it's like saying, are you going to be able to create a new exchange to compete with Coinbase? It's like at this point, no, not really. >> Right. This is where userenerated markets could get really interesting if someone cracks that. And right now, it seems like there's still not a way to really do that. You need discoverability. You need liquidity across all of these markets. Things get duplicated. You end up with regulatory hurdles where people create assassination markets or all the all these wonky kinds of things. But I if you if there's a prediction market that does crack it and maybe it looks like you have to stake a token or some sort of cash requirement in order to list that feels like that's everyone can kind

of suspect that's where prediction markets are going but no one's been able to crack that nut just yet. >> Yeah. So I'm honestly I'm pretty skeptical of this story. I think this is one of the oldest and most obvious ideas in prediction markets and there's a reason why it doesn't exist which is that >> in theory it sounds good in practice it's a horrible experience >> which is just that users learn that they cannot trust the markets that they see in front of them they learn that some of these markets are scams I mean do you remember the um >> uh what was it uh um >> uh suitgate >> the thing about wearing a suit and there was this gigantic like that was that was like >> it was it was a genuinely innocent disagreement about whether or not this

market should resolve yes or no. Did Zilinsky wear a suit >> and there was such an enormous uproar over this market, right? >> And that's not even a scam. Nobody was getting scammed, right? It was just genuinely a dispute. Um, >> if you are getting rugps in markets, you're getting fake oracles. You're getting people who are setting up markets and manipulating them or they're they have direct control over the outcome because they're betting on something that they themselves control. People lose trust. They get extremely mad. They get away. They run away from the platform. They say, "Fuck this place. Never coming back." Um, you just learn this very quickly. It's the reason why, you know, you could think, okay, why don't you just create an exchange to out compete Coinbase that just lists everything. The answer I will tell you very, very obvious, is oldest idea in

history of exchanges. The answer why is because there's a lot of tokens that are just rugps and if you list them, your users will lose money. They'll get really mad. They'll never come back. And so people learn, it's like it's not even about, oh, I need like this regulatory uh cover. I need to make sure that I don't list securities. A lot of it is I need to make sure I don't list tokens that just go straight down because my users are going to be upset and they're not going to come back. >> I think that's a great way to to sign off. Don't list coins that go straight down. And how about hey founders, don't make coins or build projects that go straight down >> you don't want to invest in those. Thank you so much for coming on. Always a pleasure.

>> All right. Great to be here. Take it easy.