AI Fatigue, Robinhood & Every Market Becoming Crypto | Weekly Roundup

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Nothing said on Empire is a recommendation to buy or sell any investments or products. >> Now we're ripping. >> reporting live, ladies and gentlemen. We don't We don't do anything so live stream. It's all very heavily edited. We're missing Yano today. Rob and I have things under control. Rob, what's going on, man? >> Well, we're letting the inmates run the asylum this week, which is great. So, I always love to see that happen. So, just let's you know, bear with us. >> We have come a long way, my friend, since you were a guest and now, you know, running the show.

You leave left. You're left on my screen. You're leave left, you know, so. >> I You know what's funny is that my face is still up a lot on the you know, when they do uh the the little clips, but I'm still not on the masthead. So, you know, I know people Maybe it's just they needed somebody with a like a kind of a a good bone structure, like a little face to put up front there. >> Is it Are you talking about the jawline here? Is is is >> Yeah, the jawline. >> Got it. Nice. Um all right, let's get let's get straight to the jugular, I guess. Um we need to talk about clarity coming off last week. Seems like it was all-time high. There's a lot of optimism on the timeline. I think Brian Armstrong said a couple tweets.

You're a clarity guy, so what's going on there? >> Yeah, I mean I I talked about this a couple weeks ago when I was on in DC and then also I think you guys had um Greg the uh the GC of Multicoin on last week who on a good good podcast. Listen, I Polymarket is like I think down to 27% and so it's been kind of trending down for a while. There was a sort of, you know, spurt of optimism to your point on the timeline, which I think is Listen, people want to get it done. And so, they're excited about it. They're, you know, talking about it in public. They're showing a lot of just conviction and, you know, I think confidence because that they think that helps get it done.

If you talk to people in private, I think the reality is there's a lot of bearishness on the expectation that gets done. There's I mean basically two open items. One is the ethics language as we've talked about a bunch, which is just you know, what is the administration and the Trump family willing to do around carving out you know some of their ownership in these crypto related projects. How are we going to you know litigate that in the future should there be you know complaints? And like who would have the power to bring those complaints? Would it be the FBI or the state AGs?

And so that continues to be I think you know probably the major issue. There is one other issue which is around essentially these developer protections with the called BRCA and how the federal law enforcement feels they are able to use different types of tooling to potentially catch or you know bring you know bad actors to justice. That piece is I also think quite fraught at the moment. Senator Cortez Masto who's a you know one of the leaders on the Democratic side who's been championing this has had a perspective on that that both the Republicans and the just the rest of the industry likely would not

be okay with. At least she put out some language sorry he put out some language a couple of days ago that said hey like this is a new agreed upon language with us and the and some of the people on the on the Republican side and some of the people in in in the the industry and that language was things that would the industry and and the Republicans would not have agreed with. And so I those two topics right now feel like you know potentially tough to surmount at the moment. We're still trying to get something done. I think there might be a vote next week.

The vote might be upon partisan lines and then we end up in September and you know the longer this goes on, the less likely it is that, you know, we we get to an agreement, but I'm still hopeful. Everyone A lot of people are still working really hard, but we're in a tough spot. >> This is not the Rob voice that I heard last week. You know, last week you were like, this is going to That's like, let's [ __ ] go. And then right now, you know, I'm looking at Polymarket. As we know, we like Polymarket. We're not We're not sponsored or anything, but Rob and I, you know, like Polymarket. And it's at an all-time low. It's an all-time low, 30%. >> It felt like we were almost there. I mean, it jumped all the way to 46% last week.

And then just, you know, like like semis, man. It's It's just traded down. >> [laughter] >> Is that That's what you have in your mind? You're like, what is happening to my semis book? What is happening to my memory book? >> But Listen, I'm I'm just saying the market's up today. Uh sounds like a There's a We'll get into the market and stuff. Boy, I was I thought Well, anyways, we're not going to get there just yet, [laughter] but market's up today. I thought I'd seen some volatility in crypto. And it's like the name of like crypto bros is pivoting to memory and like just getting absolutely whipsawed. >> Everything is trading like crypto now, but >> And if we just say Here's the thing, if you weren't crypto, you survived. Pivot to just trading all assets, and I think that's where the world is going. Like just in a more

serious note, like we're going to talk about Robinhood chain. We're going to talk about tokenized stocks. We're going to talk about But it is truly uh crazy that just a new market structure uh just, you know, Robinhood reported earnings this week. We're going to talk about that. We're going to talk about their crypto numbers, which was a a really interesting stat. We're going to talk about Robinhood chain. But yeah, just zooming out, like markets just in general, I mean, it's been pretty volatile. You have like semis, you know, doing 10 up 20% today. I mean, that's just If If there's one takeaway in all this conversation, it's just don't use leverage, ladies and gentlemen. Charlie used to say, what is it? Ladies, liquor, and and leverage.

Just Out of the three, definitely avoid leverage. It's just really hard. I know you guys don't use that much leverage or at all in your in your >> No, we don't we don't at all. >> It's um it's crazy. Should we talk about obviously the most important headline that was running around yesterday? >> Yeah, so before we get into situational awareness, which I know you want to talk about, I want to make one last point on on clarity before we move on, which is you know, you've seen it come out from both Chair Gensler and from Chair on the SEC and the CFTC side. You know, they're ready to move forward on rule making and and trying to put something a package together to help the industry have, you know, clarity on how to move forward even if there isn't actual legislation. That obviously creates a

situation where that could be rolled back under, you know, different different chairs. But I do think regardless the SEC and the CFTC are going to move forward with haste here and they're going to try to bring something that you know, is good for innovation on shores, is good for, you know, bringing back entrepreneurs and it's good for both the industry and finance and and you know, the a lot of the companies that want to participate in this space as well. And so so that's positive and so not all hope is not lost if, you know, clarity does come along. >> Are you buying at this level in poly market?

Not financial advice, but like like gun to your head >> No, I I wouldn't buy. I think it's appropriately priced. I wouldn't buy the 30% on poly, but do I think that crypto will be in a better spot, you know, regardless of whether it becomes law or not in 6 months, 9 months with, you know, the the leadership in the SEC and the CFTC? Absolutely. >> Yeah, I mean, let's not forget. Like we're in a point where like there's a conversation that's happening. Like 2 years ago like you know, 3 years ago there was no conversation. And so just the fact that we're talking about it is is positive in my opinion. Obviously the the bill in whatever form I still think that the there's obviously different stakeholders here that care about certain things more than others, but a bill passing you know, as it is or somewhere to close

to where it is, would still be very much more positive than a bill not passing and the signaling And we talk about like on the margin are enterprises going to slow down and is it going to be an issue? I mean, I think genius is like a landmark bill, but clarity would just be so much it's just net positive for the space. There's people that are always on the margin want a little bit more here and there, but as it is, if you were to pass it, like I don't know if you would disagree with me here, but I think it would be uh you know, it would be much better for the industry if we got a bill passed. It just It just provides a legitimacy and and you have a like a Then you can like do amendments and whatnot, but it's uh it would be

obviously much more detrimental if we didn't pass it. >> 100%. We should I hope it gets passed. We should continue to work try to get past. There's a lot of people working on it. But we're going to get rule making out of the the state of C and and the FTC uh the SEC and the CFTC regardless. And so, listen, we'll be in a better spot regardless. I applaud everybody who's working on it. Hopefully we can get something done. >> There you go. Uh where do we go next? >> But we we got to talk about, you know, your boy >> No, but if we get in there, it's just we're opening a can of worms. I I do think we we have to we have to talk >> How are you, by the way? Like I feel like you're like a little bit of a like

a mini Leopold here. So, like you're you've you've been fashioning yourself. So, like are you surviving? Did Goldman Did Did they Did they liquidate you? >> I got an email from Goldman today. It was not about that. It was about something else. Uh no, no, no, not at all. I mean, look, coming out of last pod, I was like, look, I'm unbothered. Uh moisturize in my lane. I've always felt like these things are extremely volatile. And you just go look, like it is similar to crypto, I've always felt like it is very important to obviously underwrite a thesis, but factor in, okay, what's the volatility of these things and ex- and just bake that into and also have like a certain price in mind.

I still think uh we're nowhere near the opportunity like of capturing the opportunity and just AI and semis in general. Big week because you had meta, you had Microsoft report earnings and everyone's just looking at and Google last week. Everyone you guys should go listen to the all-in pod. There's good discussions around Google's numbers. What the market is really focused on is capex. There's a great post by Satya Nadella around the ROI of AI and how we built it. It was kind of surreal to see something like five code and just like create an artifact that he was sharing in in earnings and then tweeted it. Everyone's on the timeline right?

Uh And I think that capex, meta Google Microsoft have all maintained or increased their capex guidance. Uh so there's like I think the market is responding well to that. Um and and the the um the longevity I guess this applies to your portfolio USDAI. You remember like there's always there's always a wall of worry that you need to climb when it comes to like crypto, AI just in general right in investing. In in AI we've heard like the usefulness of these GPUs, of these like if you're going to invest all this money in the building out hyperscalers, what's the life like what's the useful life of

that? And I think um one of the [clears throat] interesting things that I saw yesterday this is Satya's post is like the ROI like one the usefulness life. I think it was meta that said it actually. The useful life of these um racks is much longer than what they anticipated and I think what other people are anticipating. So that obviously bodes well to everyone that's behind like just deploying these. Um Uh but yeah, you know, it's it's it is more of a semis ladies and gentlemen if you haven't been paying attention has been more volatile than crypto these days. Sort of like crypto is quite muted.

>> Just a trillion dollar assets with like 100 120 vol. It's like crazy. >> I totally, totally, totally. And so, the last thing I'll say is I think the the Korean market is extremely volatile. It has had more circuit breakers, and there's a circuit breaker for anyone that doesn't know. You have a circuit breaker in town, there's like a pretty big move in the market up or down, I think. There's been more circuit breakers this year than the entire history of the Korean stock market. So, just just and I think that's relevant for crypto because you said earlier like crypto I think has like foreshadowed what is happening in every other market. It's not that like uh you know, the entire market's coming to crypto, not crypto trying to mold into

the other market. And I think that just means like the um what I want to want to get your take is in your conversations, cuz you come from TradFi, too. It's like if you're in an institutional fund, like I understand retail and Robinhood and zero-day options and that whole phenomenon, I think it's like if you've been paying attention crypto, we all know true and well, but let's talk about institutions for a second. Like it just also feels like institutions are becoming incredibly short, you know, short-sided momentum-driven. Um like if you're running a hedge fund today, is it like the most difficult time to run a hedge fund ever?

>> I have to tell you, I Listen, I'm not an active trader with although I've done a lot of investing in like, you know, uh capital markets infrastructure. And the I mean, this was bound to happen, obviously. And you know, the advent of AQR and then everything that we've had since then and you know, just how much more quantitative, how much more ML is being used when people think about, you know, what their you know, the the the trading activity. Uh and so, that's why you see, you know, the vast majority of the trading activity today is of course like automated. Um and it's you know, ingesting a bunch of data, it's spitting out a bunch of data.

A- And it strikes me that what has happened is we've just sort of lost the like the long-term buy and hold like fundamental investor because people cannot stomach the volatility of what's brought been brought into the market by my more leverage. I think uh Goldman said in uh the final half of 2026 that there was more leverage at their prime than they had seen uh like since the since before the global financial crisis. And not only that, there was about 20% of that leverage was basically in just a few AI memory chip names, right? And so you have this bunching that's happening at the biggest names. You have leverage being put into the market in a way that

we've seen in in in crypto. You have retail active trading getting be a much bigger part of the market and really in in many often feels like the retail active traders are the marginal buy, right? You have much more of the both the the market makers and just generally a lot of the takers are doing a lot more quantitative uh a lot of total quantitative strategies instead of just, you know, call it, you know, buy and hold long-term. And so you bring all that together and the the volatility in all asset classes is just exploding. And it's exploding in a way and it's bunching in a way that, you know, does make it look very much like uh like like crypto has uh in the past.

And so it does feel for me like it I I know it's not dying, but I at least in the conversation and what people are focused on and our attention spans, the the long-term fundamental investor is struggling more than ever. And also because the LPs are struggling to take uh to say handle the volatility. I mean, we This is something that crypto funds have heard for a long period of time, which is it's like, "Oh, well, we we like the fact that, you know, tokens potentially give us earlier liquidity, but also like this is a venture book. It's not supposed to go up by 50% down by 50% in a quarter. Like that makes no sense to me. And now you're seeing it in like across a bunch of different asset

classes. And so people don't know how to stomach the volatility yet. And it's it's creating incentive structures that I think are are are quite perverse. And you know, then we talk about Leopold, right? You know, he's he's supposedly sold his entire $14 billion of notional value in a single block trade because he was 4x levered, right? And going into the you know, when then when we've had memory stocks down 50% in 2 months. So like it's crazy. >> In 2 months, in a month. >> [laughter] >> Yeah, in a month. >> It's it's it's it's yeah, my current portfolio earnings and everything the entire like everything is just down 50. Today's obviously a bright day there. But um Yeah, I wonder like I I remember we never experienced it I

think, but I I have heard from a couple of fund managers that a lot of LPs were like, "Just don't send me quarterly statements, please. It will make my life extremely difficult when I go to a committee and do like portfolio review. In a perfect world, just send me something in 4 years, 5 years, 10 years. Just I don't want to see the intraday ball. It just But it it just tells you a lot about how like how difficult it is to underwrite crypto and or like other you know, high ball asset classes and um Yeah, I think people just are not set up traditionally to to to see this kind of ball. Um Uh Goldman has some interesting stats where they're like the momentum index just worse than uh at or worse than 2008. Just to put it

in perspective, like we've had a massive deleveraging. Um all all the different banks are like obviously commenting like JP Morgan said, like uh like 70 now 90% of all the like leverage in the system has been rinsed out. So a lot of this conversation we've had in crypto is like we look at portfolios >> exactly like we were people tweeting about crypto. >> So so anyways, this is this is a word of encouragement. Like the we've always said here and I felt it like the the lines between crypto and tradfi are increasingly blurring. >> Yeah. >> Uh if you're a trader out there, an investor that is in crypto, you've had to sort of be a venture capitalist and a high-frequency trader and simultaneously. But I do think the world is just becoming more like that. Um Ken Griffin said something interesting. He said like who who is probably like was

way ahead of his time of just being super focused on short term and tight tight risk books and pods. Now he's saying the opposite. He's like there's there's he's more interested in long-term fundamental investing and he's always in my opinion been ahead of the curve and for someone like him to say that just I think tells you a lot of what the opportunities which is just like again, don't necessarily use that much leverage or any at all. Expect a lot of vol. Uh if you want to get creative or crafty, >> HODL. Figure out You got to HODL. HODL your micro. >> Or or figure out a way to cap like make money on vol.

And that's what I think a lot about, but you know, it it is crazy when you have Meta like down like yeah, today like 9 10%. >> I mean the best performing liquid funds in crypto, if you take over the last you take like the whole last 5 years, are all delta neutral funds. All of them. >> Delta neutral. >> And yeah, and because of the volatility. And all of those guys are now delta neutral, you know, in traditional markets. >> It's funny you mention that. I I was having lunch with these guys that started in London and I think managed close I heard close to 4 billion and they're all market neutral.

I was like, "Whoa, I've never >> Heard of this. Oh, this is QRT? >> No. No. Um and I think the guy used to work at a uh JP Morgan and Goldman prop trading. Um and started doing crypto and then just slowly like totally ditched tradfi strategies and just was is focused on arbitrage opportunities market neutral in crypto. They they did say Vernon's like this year has been a bit more tough than prior years. Like 2022, 2023, 2024 had been much better. This year has been a bit more difficult. Um but I was just blown away. I mean, they are I I'd clarify um they do have a like we used to have or still have like uh when I was there like a stable coin arbitrage

fund. Like there were marginal deviations between die and USDC and curve has come around and there was Uh but I asked them like how scalable this strat before knowing AUM. They're like, "Uh no, we have like 4 billion." I was like, "Wow." And and not all of them >> That No, no, again, like it just tells you the the crypto to your point, like uh market makers just uh arb funds. I mean, Goldman I think has pretty big strat. Right? Couple of the trad players. Citadel's probably doing a lot. Jump's doing a lot here.

Um it feels like to your point, market neutral funds and lawyers are the best performing >> [laughter] >> people in crypto. Everyone else is uh struggling. Uh >> I I will say that maybe worth noting here on the this like AI uh versus like crypto LP I've been I'm on the West Coast this week and uh we've had a bunch of uh LP meetings this week. And one of the things that I've started to hear probably for the first time is a little bit of AI fatigue from the LPs, you know, big institutional um endowments, fund of funds.

And you know, 3 months ago, 4 months ago, there was still just insatiable appetite to, you know, get exposure to these AI funds or the generals funds are doing a lot of AI and are very good. And it started I mean, it's it's unsurprising, I guess, that also what's happening in the public market is is going to affect that. But we're starting to hear a little bit of like, "Oh, maybe this got ahead of itself. There was way too much deployment in the first um you know, first half of the year and and late last year." I heard one LP who is not that exposed to crypto at all, is only in a couple managers.

Compare it to the 2021 crypto cycle and the just say it simply that like listen like valuations are way too high. A lot of these companies are just you know software companies that are you know change the business model. It's not SAS anymore but it's still just software and you know it shouldn't be there's no reason it deserves a you know 100 x multiple. I mean by the way that the open router strike thing that you know when it's 140 150 million dollar revenue business it is insane to me but that's uh it's a >> Did they did they is that confirmed 10 billion? >> Uh that was just a rumor so I don't know what the yeah actually deal is.

>> more on that yeah. I don't know if they would exactly be your or cash flow. >> Yeah. It's interesting because you you might have heard me say in the pod like earlier this year or late last year like I feel like there's exactly what you said. I do think that there's more nuance into the discussion around like AI's is bucketed like like crypto was back in the day like it just crypto was a massive bucket but you can make like there's names that are very undervalued under priced and there's stuff that is extremely overvalued. Um and I think AI's in that camp too. Like you can slice it into hyperscalers you know new clouds you can have you have you know memory names you have testing and burning and testing like there's many different parts of the

stack and everyone's trying to you know figure out what the bottleneck is but Gavin Baker I think worth to follow I think he has some of the best takes which he said it was like there's there's pockets of AI that are extremely overvalued hard to justify valuations especially also the private markets and you have these I get that like researchers are now like rock stars and getting paid a billion dollars to join like meta and stuff. Um but if you're just as a traditional venture fund like I struggled with like why are you investing in it? Like you see these rounds that you close at 3 billion and then it jumped eight and then now it's 16 and then there's like what has changed in those 3 months other than you missing out on investing in the first round?

We saw that a lot in crypto, right? And so that to me feels very hot and I have my own opinions on like who's going to accrue value. I I think you had mentioned that it was rumored that Leopold who has position in Anthropic had sold a lot of that. There's a big discussion on open-source models uh that I think uh >> That also sounds like crypto. Like that's also a crypto thing. >> crypto. Like where does value accrue, right? We're going to talk about Robinhood chain and Ethereum yet again. Uh ladies and gentlemen, we can't escape that. But uh I do wonder like um money I think the AI trade is still very much intact.

Uh I think there's probably more rotation within AI and where you put your money behind. Like like I'm not sure Anthropic at a billion is even though I've heard like the ARR just keeps crushing. I think I see way more risk in like open-source models eating into that business and Harvey like you like if if open-source models are progressing quite a bit, it does wonder like are you still going to be able to like get that much profit margin on your on token spend? Like I don't know. Um but um But yeah, all of this is starting to rhyme with crypto.

>> We have a we have a portfolio company that's still in stealth and I think it's it's going to come out stealth next week uh who has a a router product that is uh it similar OpenRouter is probably the only other uh the only other competitor to it, but it has uh much better benchmarking in terms of actually optimizing spend. Uh and if you want to go and um optimize your token spend. And they are one of the things that they've started to see is they they've kind of serve a lot of um agentic businesses, people who are building agents to you know to run their business fully or both for internal use cases, potentially also consumer or direct to um you know, end customer use cases. And you know, you've seen I think Coinbase came out and

talked in public about how they actually built an internal router for the their own context, which is a route that helps them optimize cost. You saw Ramp come out and and and launch a product. It's it's sort of a an odd kind of like more closed-loop product, but you know, trying to do a little bit of the same thing. And it's very clear to me that now with the how much better the cheaper open-source models are getting and also how the vast majority of workflows don't actually require the you know, whatever the frontier model is, that uh token spend is going to start to become a much bigger topic of conversation and that the you know, being able to charge people for the most frontier models uh is a a a real premium. That's

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[music] or click the link in the show notes to find out more. >> [snorts] >> Reminds me of NFT craze, right? You're paying like a thousand bucks to settle a transaction. >> Um Yeah, TBD. I mean, obviously um a lot is moving quite quite quickly, but yeah, for for when you guys did that investment in the like a router company I'm curious if you're able to share like how much um how much growth is that company seeing? Like how much demand is it cuz we hear some companies that are really focused on token spend and capping that and making sure that the productivity is there and others that are just like token max. Is um and then what's the defensibility of a

routing product like that? >> Yeah, I don't want to get too deep into it. It's It's one of their products in a suite of products which should provide more of a moat cuz they do a bunch of stuff around you know, just enabling gigantic businesses generally um including payments which is uh on the which is where some of the crypto angle comes in. Uh but the the growth has been a lot. It's It's much earlier stage than Open AI's the growth has been a lot in the last few months. But they've got some you know, initial uh some initial pieces of data which is that for for one of their uh clients who runs a ton of spend, they've reduced cost by 80%. So it like like that is an an incredible number.

It's only you know, one you know, one benchmark right now and so it's not say that for some of these other people you're seeing uh benchmarks not nearly as drastic as that. But it's clear to me that that's where the market's going and that you know, both Anthropic and uh and and OpenAI are going to have to figure out you know, net new business models. But they're you know, the CapEx spend that goes into you know, training and goes into all of the work that you know, they you need to uh go and and launch one of these frontier models, it it is really uh incredible. And so like how does the economics work?

I think that's the question everybody's asking themselves still. But from an Anthropic standpoint like to your point that when that goes public, I don't know anybody who thinks that goes public for less than two 1.2 trillion. So it's uh it's there's still a ton of demand there. >> Yeah. Yeah, yeah. Uh it just feels the the most exposed in this shaking like in this world where like there's increased scrutiny for token spending and you know, at that valuation, I'd rather own other stuff in like long AI, but I'd rather own other stuff. Uh and I'm not coping, you know, I clearly I could have you know, 200 billion, maybe 100 billion, but like obviously the ARR number keeps growing.

So, as long as that continues to happen, I don't think it's like crazily valued to your point of like one you know, we might be in a world where ARR for them is like what? 150 billion? >> Yeah, I think there were some numbers that said they were close to uh like as of July like yeah, like like over like close to 150, I think is I saw a tweet about it. So, >> Yeah. >> Um >> That's crazy. >> So, but but but like I mean, we'll see, right? It's um I don't know. >> be and I think this is the to put it in perspective, fastest growing ARR in the history of mankind.

>> Oh, yeah. It's incredible. >> Like like like by a country like by it's just incredible. Uh >> Yeah, I mean, we the fastest growing companies we used to see are companies that, you know, might grow eight, nine times in a year and they would do that for one year and it would slow down and you know, uh companies like, you know, Ramp and uh you know, Rain event and uh and stuff like that. Like we've seen tremendous amounts of growth in these companies where you know, they've put big multiples on their business in in a short period of time. But like what we're seeing on the AI side from the foundational labs is so far and away unlike anything that anybody's ever seen, which is part of the reason you get this mania and also part of the reason that you might have a very big

correction. But that doesn't mean that the the long trade, if you have the right long-term viewpoint, isn't the isn't the right one. It's just you have to stomach the volatility in between. >> Yeah. Yeah, yeah. All right. So, should we pivot uh just a brief second on Robinhood chain. I think, uh, you know, obviously we discussed about the >> your biggest holding? Is that your single biggest holding? >> Not at all. Not at all. I have some exposure, but no, no, no. I used to own it quite a bit. Now, it's definitely not that. Uh, you guess what it is. It's it's, uh, >> AI related. It's not Robinhood. Um, but I think there's So, to put it in perspective, they

launched a couple weeks ago. Uh, a ton of activity there. There's a tweet by, um, Frank. And I'll just kind of go through it. Like, less than a month after launch, Robinhood chain has become the largest network by tokenized stockholders, surpassing Solana, BNB, Ethereum, and base. Distribution matters. Uh, I think there was some nuance to that, which is like, um, like the way you count users is tricky. Like, we've gone into this like discussion around in crypto, like, a wallet is not necessarily, you know, a user can have multiple wallets, and how you count them is different. Um, >> And also, by the way, active the the active accounts have actually trended down after that initial bump. So,

they've been down the last week or two. >> Yeah. Uh, but not pretty impressive, um, I got to say. Um, it's, uh, I don't know if you have any any any particular take on that. Uh, I just found it pretty interesting to see that a lot of the attention is there now. >> Yeah. Listen, I I think very clearly, number one, just like the Robinhood wallet product is good. Like, anybody who hasn't used the Robinhood wallet product, it's different than Robinhood itself. It's a good product. It's obviously, like, they they do a very good job of building consumer product. They things that are easy to use that people like to use. They've done, I I think, a really good job on distribution, a really good job on marketing, you know, and also bringing in instead of like building their own like

closed loop like net new, um, protocols, you know, they brought in lighter and Morfo and Athena and these guys to Uniswap to come in and be kind of the cornerstone, but still distributed the same way that they've distributed the other products. Obviously, the smart move. It's been It's It's been really really fun to see. I you know, I expect we'll see after this initial wave of excitement a little bit of a trough and then, you know, we'll have to see what what happens over time. I'd love to see them be able to bring the Robinhood wallet product together with the Robinhood core app in the same way that, you know, Coinbase eventually did that.

That would be, I think, a humongous unlock for for the chain. I think it's very clear that they see this in the same way, you know, Stripe and some others have embraced crypto that as a core growth engine for them in the future. And so, I'm excited to see what continues to happen. I do think people get a little bit too excited, probably a little bit too quickly on like the initial, you know, thing. Like, there was a bunch of people trying to front run like the meme coins but like the same thing has happened on other on other chains. That that's all all fine and dandy, but once this thing kind of settles in, then we have to see how how growth goes over time. Same thing happened to Base, by the way.

>> Yeah. Yeah, yeah. Look, we're going to talk about like publicly traded companies that are have a crypto business, not just Circle, Coinbase, Securitize. Like, really like Robinhood, in my opinion, is the most forward-leaning traditional company that is moving into in a very like across prediction markets, their own chain. So, I'll just like spend a minute. Their earnings just for people like they they reported like 1.3 billion in earnings, growing like 32% year-over-year, so pretty strong. Um they beat like consensus estimates and whatnot. Um I think the the average trading per account, like the has come down quite a bit. Maybe it's summer.

Some cyclicality to that. Um prediction markets did 156 million >> Bigger than crypto. >> Yeah. >> No, right. >> Exactly. >> crypto did um 100 million. And so that that volume, starting from a low base, is like 10x year over year. Like >> The 156 is is revenue, correct? >> Uh revenue, yes, yes, yes. Not volume, obviously. Right. >> Yeah, I mean I mean that's I think that that is to be expected with the World Cup. I'll be interested to see what that is in like July and August. >> Fair point. Yeah, World Cup was the the the biggest contributor there, I think.

Um Again, interesting. We've talked about this before. Robinhood drove, I think, over half of Kalshi's volume. Then they bought uh NYX and >> they did a So, they did a um essentially a it is So, so they bought NYX or the the old LedgerX business. Yeah. And they um and then they did a JV with Susquehanna to launch a thing called RothEra. RothEra is their prediction market exchange, but they started to move some of their Kalshi volume to RothEra. Expectation >> Right.

>> Uh expectation is they'll continue that over time. Um I'm sure they'll still do, you know, best pricing, but you know, that I you know, you'd expect more and more over time that, you know, they want to own that full stack. >> Yeah. Exactly. Um Not to get too much but but I feel like that's pretty indicative of like how traditional firms are going to start implementing stuff that is working in crypto. Like if you have distribution, you launch your own chain, you launch your own prediction markets, and you know, you're route away from a uh Kalshi or Polymarket, you know, in France.

>> I I don't know if you saw this, but um so so the CME right now is suing the CFTC on perps. Then they came out in their in their um their earnings call, and they were like somewhat actually positive on perps, which like very clearly tells you they're like talking out of both sides of their mouth cuz they're doing something as well. And then they've been very upset with the prediction markets uh exchanges. They came out and and said yesterday that the CME is probably going to launch a sports linked prediction market contracts or options contracts. And so like it all of the incumbents it just tells you like you try to get in front of the innovation when you can't get in front of it when you can't stop it you embrace it. That's what we're going to

see from everybody. >> Yeah. Yeah, yeah. Yeah, but look it's interesting obviously like Robinhood just another point on like it's been now four weeks 12 billion index volume 100 million transactions. They are doing holder count like 328k like like maybe this is probably that number obviously we might revise that um but they're like number one chain by RV holders. That's Frank's tweet. Some people might contest that but it's still impressive in the sense that like you know they've sort of leapfrogged every other crypto native operation out there and with their distribution. Uh which to our earlier point like the Robinhood user is the prime user for a

prediction markets and just on chain activity right. Um My view is Robinhood is probably the most important company to try because it will tell you if flows are coming into crypto the sentiment that like if it's true that like there's AI fatigue people want to now trade crypto or NFTs or what have you you're likely going to see it first Robinhood. Not Robinhood earnings Robinhood chain and the activity there right. And I think that was like before it would have been like BNB chain which I think we haven't talked or don't talk about too much. >> I mean BB still has those like Binance still one of the biggest fintechs in the world in a lot of localities. Yeah. >> Yeah.

So anyways pretty interesting to see that. I I I don't I don't think tokenized stocks I think so they just one last point there they launched tokenized stocks obviously not available to US customers so everyone else ex-US can use can they get exposure to tokenized stocks in the Robinhood chain right. >> So, that's also That's also a metric that I'm really closely following because it is the true expression of you know, what hyperliquidstance well, you know, like with hip three and stuff like that. Solana is done it, too. So, um I'm I'm quite curious to see how much activity and we've talked about it at length here about just tokenized stocks.

>> That's Robinhood. Um Similarly, there's another great tweet. Um because Jason's not here, we're going to reference to the block. Um >> [laughter] >> The total So, so obvious Robinhood chain is built on Arbitrum, which is an L2, so it's in the Ethereum ecosystem, but that's a bright light, low light in every other L2 out there. I think the total value the TVL lot in all other Ethereum uh L2s is back to roughly 5 billion. The last time we saw that was 2023.

So, pretty big reversal. I think all the other L2s have find themselves in a you know, difficult spot, to say the least. >> What do you make of that? >> I don't know. I I would like to see if there's been an actual rotation away from these and like, you know, those maps where have the flow. I don't have it in front of me, but not surprising. I mean, I think there is just we're in a point where like, there's nothing really truly exciting happening. Like, you have the Ansem bull coin in Solana that was like the only thing that, you know, gave a little bit of life.

Um but there's not The this chart talks like optimistic rollups, secure rollups, Palladium, plasma, and state channels. There's just not It's not interesting for a retail user. Like, they'd rather be You have days where there's like 10 plus like, there's super high vol in traditional markets. Korea is always been The penetration of crypto in Korea has always been very high. I think it's the highest in the world. These guys are not trading crypto right now. They're trading other stuff. You know, >> Yeah, I will say the like the blocks numbers are a little bit odd because I think it's L2BEAT who also said that the like combined TVL for you know everything in the the

ecosystem and the Ethereum ecosystem not including like there was like some some They took out some team controlled tokens that like they didn't think were like particularly real on on Arbitrum. But they still say that you know it's they put out a number that I was like 33 billion this week as well. And so there I don't know if you've spent any time thinking through like how the block or if you looked into how the block is coming up with that methodology, but it is it is lower than other sources are coming out with.

>> Yeah, I will say the trend is all if you look at DeFiLlama like Blockworks like the trend is in one direction. I think the other thing that we've talked about a lot that I don't want to talk about on this spot like it's been pretty brutal this year in terms of hacks and um you know you know you had Kelp, you had a number of others. I think there's increased awareness of like look it's increased hacks this year. So the first half of this year I think is the highest in crypto history. Like 212 exploits, it's been over a billion of funds lost. That's three times three and a half times more than last year.

Um North Korea Lazarus is like half of that or more than half of that. Um Kelp and Drift were the biggest, right? Um And a lot of this has been social engineering. I don't want to say like smart contracts all of a sudden just became more vulnerable and fable and all that. I think it was just a lot of these are social engineering attacks and bad like risk management policies, but nonetheless I think when you combine um like low yields on chain, increased hacks plus AI becoming like the momentum trade I'm not surprised. Like I think those three things just really explain less TVL.

Um like the basis trade is not as interesting anymore, right? Like the rates are like what's at the end now? Like you know, it used to be like 10 plus. Now it's like three, four. >> It's just not in time. >> It's over four now, but they're doing uh obviously they're doing a lot of RWA stuff now. I mean still well above sofa. But you know, it is hard when uh you know, I think Robin Hood chain right now is on USDG to give you 7%. But clearly they're just subsidizing. >> Uh X money is giving you six. >> Like 6% yeah. Yeah. >> Yeah. Yeah. Are you guys um I know your part like partner receives talked a lot about like on chain like like hacks and pretty good at like, you know, diagnosing that and posting about it.

Like internally as a firm, um is is this like a major concern for you guys when you think about the viability of crypto and deploying stuff and advising founders? Or is this just like look guys, this is really have good opsec and you'll be okay. >> I I am Sorry, I'm going to I'm going to make one last point on the on the TVL stuff before we go into this, but I think on the TVL stuff too, like we we have one portfolio company that um that that kind of does a is it runs a lot of these vaults for a lot of the institutions. And you know, we went we had the board meeting a couple weeks ago and it TVL for sort of the whole industry was was down a lot of all products was

was down on the quarter, but it does seem that you know, when people talk about TVL numbers, about half of that number is actually just like ETH coming down and Bitcoin coming down cuz a lot of these these TVLs are in >> Yeah, it's denominated. And so I think it's worth keeping that in mind when you when you talk about these numbers, but um okay. So that's that's the last point I'm making on that. On the point about security, listen >> Wait, wait, wait. Before we go there, before we go there, there have you guys looked at to me the most important metric is active users on chain. I think A16Z came out with a report last year that you might have also heard me say quite a bit It's roughly they kind of slice it in their own way but they're like less than 100 million active users

on chain. They give a range of like anything between 40 and 60. I think that is worth like just keeping tabs on if it's 16z or whoever but to me that feels like the most important metric. TVL to your point can be just like price action related but users in my opinion is like the most important metric because I don't think we've on boarded >> and I probably lost quite a bit of active users. >> Yeah well and I think the TVL and the users like a lot of this is related also to the question you asked about security. So we actually saw that the vault products they struggled a lot after um April and after the after the kill pack uh for because there was and then there

was a a few there's stream finance there was a a few others and people were and and drifting people and then there was Austium recently on the OP side. And so peo- people have started I think to be weighing the risk reward of being on chain a little bit differently. At the same time I do expect that active users should pick up with the usage of and the proliferation of you know a lot of tokenized assets that are being distributed by people like Robinhood or other neo banks where they don't you know they're abstracting away the being on chain part. Uh and so you know you have these two kind of railing forces which is that you know a lot of the very crypto native um activity is like maybe coming down where you know the more you

know retail oriented users through traditional uh distribution modes um are starting to grow. And so that's what will be interesting to see how those interact. >> Yeah. Yeah. I do think applications benefit more than the Arbitrum and Ethereums like the infrastructure providers. I think applications like Uniswap and others benefit much much more Athena and some of the others right? Um just shifting gears a little bit. What do you make of Ondo and them launching? I don't know that much about it, but I did see that they launched this like private chain. So, we're back to, you know, curious if you guys have looked into that and what your thoughts are around their like their design choice of that.

To do that versus being public. >> Yeah, I haven't looked that closely at it, but you know, they they announced Okay, we're going to do sort of an institutional L1 and it's going to be Um I I think sort of They're saying it's going to be private. A lot of the the language sounds a lot like Canton, right? Which is that Yeah, it's like basically we want to compete with Canton. >> Canton's working really well. We're going to double down our effort that we announced earlier this year and we're going to be full on institutional. We're private. >> Yeah, so it's like, oh, it's going to be verifiable like a blockchain and but it's going to be private and it's going to be but also non-custodial, but you know, you won't necessarily be able to have run an independent independent validator. And like it you know, they

they didn't give a a ton of, you know, details about it yet. And so so we'll see, you know, what it actually ends up looking like. But I think what's very clear is that for these, you know, the Ondos of the world, the Cantons of the world that are focused on, you know, how do we serve the needs of larger institutions who are trying to use tokenized assets. Also, by the way, who are potentially worried about you know, uh non lack of privacy, but not open source hack risk as well and they want to be able to control maybe also a the regulatory risk that's specifically on their chains.

Um there is a a much bigger conversation today around you know, how do we serve those people appropriately? I I have a perspective that this is a little bit like I don't know if you remember a decade ago, but we had like the Hyperledgers and the Enterprise Ethereum and >> All those years. >> Yeah. We and yeah, this feels a lot like that conversation then, which is like, oh well, people will think that, you know, completely enterprise private doesn't really work, but maybe something that's like hybrid will work. And maybe that will just someday in the future end up being actually public and permissionless. But it sort of feels like you just need to pull these institutions along. I don't actually think a lot of this infrastructure

that's been talked about about right now, which is like sort of just a database, but a database that looks like a blockchain, but, you know, doesn't have a lot of the the capabilities or or maybe the the the ways of which blockchains are actually, you know, useful, which is like coordinating trust across a bunch of different counterparties. And but I I don't know. We'll we'll see what happens. >> Yeah, in fairness, like it always goes back to like execution, verification, and settlement. Like those are the kind of the three functions of a blockchain. In fairness, I think if we had the Ondo team here, and if they want to come on, we're happy to have them on, is like we're keeping we're keeping the settlement public, but like the execution, and maybe the verification,

but the execution itself is private, because that's what institutions want. You can't have order flow being public, and It's fair It's a fair argument. Like I think that was their whole like messaging, which is like it's still public to uh verify, I believe, but the execution itself is is very much private, and that's what institutions want. So we got to listen to that, and we're going to build that in this direction. Um yeah, it'll be interesting to see like a discussion between like Canton, like Yubal, and Ondo, and maybe like Mike Cagney or someone figure talk about like what they're doing.

Um and maybe secure to I I don't know. I think that would be like >> obviously the figure side, like they've they've tried to make providence like completely open >> [clears throat] >> and permissionless, right? And they just haven't been able to get other people to build there. So it is Listen, I think there's a lot What's very clear is the direction of travel is tokenized assets. Everything's going to be tokenized. The people are coming on chain in one way or another, but whether that is Ethereum or base or Avalanche or Monad or Solana or it's Canton and a private Andor or, you know, nobody knows. Right? And there's a lot of competing conversations happening right now. There's also a lot of differences of opinions at the organizations themselves. And so there

is an ideological fight happening here, but what serves my needs versus also what do I think will serve my needs in the future in a different regulatory environment. >> Yeah, yeah. TBD. It goes above my pay grade. Sounds like a lot like a dark pool with some sort of blockchain settlement, but it's like they'll believe this architecture is secure enclave, yada yada yada, and like these are trusted, you know, execution engines, but it's like a dark pool and and that. But I I don't know. I don't know that much about >> TEs are I mean there's a lot of there's a lot of work being done around TEs right now. But I mean this is not new, but I I think there's more excitement around them than there's been in a while.

>> Yeah. In contrast, I think so like you hear Andor talk about institutions want like, you know, the ability to their or like the order book not like not be public and exposed. And then you have this Robinhood say, "Yeah, we're going to launch a fully public permiss public chain and like, you know, free for all kind of thing, which yeah, it's a different uh different customer base. I will say one's more retail, the other one's more institutional public chain. >> you're definitely seeing more more willingness to take risk among the people who are direct to consumer than the people who serve institutions. The institutions who also serve institutions. Um but also like, you know, it's very clear like Robinhood has

innovated in a way that has hurt the Schwabs of the world and has hurt, you know, the traditional uh the traditional wire houses. And so like you know, doesn't say they're not right about what the world will actually look like in the future. >> Yeah. And by the way, there's a world where both Yeah. are equally are successful like Robinhood clearly is monetizing distribution. Uh you know, and retail and and activity there, and they've done that with Citadel with flow and stuff like that. Now they're doing their own chain, and Ondo is totally different animal with institutions. So Interesting. Um Any What else is there on the agenda?

>> I mean, probably maybe just end. I I don't think there's much else, so that's probably uh most of what's happened this week. I think the the AI conversation has been just dominating both from like the open weight conversation, and now uh and now what's going on with situational awareness. But maybe the last thing that interests me that that I saw was the the Visa announced their you know, stablecoin platform, which was essentially just a way for them to say, "We're we're going to do value-added so that for institutions who want to use stablecoins as part of a a wallet stock that we own as part of, you know, uh you know, potentially you know, doing settlement direct settlement with us in stablecoins for, you know, your your

card product, potentially doing, you know, maybe uh non-card non-network stablecoin transfers as well. Uh and we've just sort of seen this growth in what I would call the forward deployed model in stablecoins in a way that you've seen it in AI work really well. We have a portfolio company called Velocity who's doing quite a bit of this on the institutional side. Uh and [clears throat] I I do think that now we're a year from past from genius, and we're starting to see every institution say, "Hey, like I think this is interesting. I need a strategy." And that's been happening over the last year. But they're still a little bit unsure of how to go and put the the pieces together. Visa is understanding that. And and so this forward deployed model I do think actually causes another you know sort of

wave of of adoption or a quickening of of of growth in that in that market and so I'm interested to see what what that happens because obviously it's been very forward-thinking on stablecoins for for a long period of time and so that was an exciting thing for me. >> Yeah, definitely. There is obviously one last tidbit here not to end on negative news but uh I think it was also the record quarter or like the lowest amount of VC activity new deals in crypto. Um >> Yeah, although although the amount of money put to work was still holding up well. It's just the the later stage deals have happened.

>> deals are getting more attention and also from just more fintech focused funds but especially on the earlier side um yeah pretty tough. I even also have had conversations with companies that have raised series A and raising the B without much it's really really tough out there. And I think that's just not just in crypto like if you're not in the AI train it's really tough like like let's not forget just software in general like and other types of businesses are really really tough. I think the only thing that's really getting funded in a very meaningful way and sucking the air out is you know like defense robotics and AI related. Uh like anything like frontier model anything like edge like chip design stuff like

that like massive massive rounds and everything else I just feel like it's been very tough to to fundraise against. Um >> Listen VC is a it is a hurting culture. Like people are just all chasing the same things all the time which is it's always refreshing when I see I did talk to one or two LPs this week who were like now is actually the right time to invest in crypto and I was like speaking to the choir here. Yeah Uh, and so but we're I think we are we are coming back a little bit. Uh, and so, I I expect >> How many of those things have you heard, uh, >> I heard it from I heard it from a very big I've heard it from a couple of very big allocators this week.

>> Fair enough. >> now now the question is, like, you know, to be very honest, the people I'm talking to are like the champions, the crypto champions, right, at the firm. And so, when they go back to their IC, what is their IC going to say? That's still up up for debate. >> It would be quite alarming if Like, I understand new money not coming in, but um, as, uh, like, if if you're raising another fund and existing investors don't at least put in however much you distributed, that is, you know, that is the cause of concern. I don't have intel on that, but, um, >> I mean, the biggest thing that gets asked every time uh, is, you know, what is your existings doing? And if you have less than 80, 85% from your existings,

like, it's a conversation. Every time. >> Correct. And for just for people, like, if 85% of your investors are not double like doubling again or just putting in money into your next fund, >> least the same amount of money in your next fund, yeah. >> That that at least the same dollar amount. Do do they really focus on the dollar amount or do they just care about, like, are they in the fund? >> They focus more on if they're in the fund. It doesn't have to be the same dollar amount, but, um, if the existings are saying, "Hey, I want to support, but I'm coming down," then usually that means you have to bring the fund size down. >> Right. Interesting. Do you feel that we've seen the Ponds of the world, Paradigms Paradigms a bit into its own?

>> I mean, they just did a nuclear deal this week. >> Yeah, I know. They they're they're just frontier tech as I think of it, just like anything frontier. Um, um, robotics, AI, small modular reactors, all this stuff. Um, but are is is the idea that, like, crypto just the investable universe to create venture-like returns, like, you just need to bring your fund size down until we see just major wins. >> I think if you're going to do crypto only but they it depends on how you define that, right? And so like if you define that as fintech and a lot of these like fintechs that are using stablecoins, you can still deploy uh you know, 500, 600, 50 million dollar fund like ours.

Um I I think if you're going to do a billion, two billion dollar fund, it's really hard to be like very deep crypto only right now. Um you know, Andreessen is obviously trying to do it with their 2.2 billion dollar fund. They historically also just Yeah, they they already raised it. >> They already raised it. >> Yeah, it and but they also do a lot of liquid in that fund. So they you know, buy and hold Bitcoin and even Solana and all these things. Um whereas in like most of the smaller VC funds, they either are like more explicitly one or the other. Um I I I think Listen, I think fund size is we've seen it for almost everyone came down. So it came down for a little bit for Paradigm.

Um it came down for Andreessen. Um it came down a little bit for Haun. I think it came down for Framework. It came down for Variant. It came >> Still big for Haun. I mean, Haun is just continues to >> A fund that I don't know if >> fundraiser and then obviously obviously they were one of the first checks or one of the biggest shareholders in in Arbitrum, which has been an incredible return for them. >> Incredible return, yeah. That's right. That's right. >> Good stuff. Um shall we go confident of the week? >> Let's do it. >> Nice. What do you got? >> Uh so I've been watching the show Lucky on Apple TV, which is like Anya Taylor-Joy.

And um I didn't I didn't know anything about it and I you know, I you know me, I spend a lot of time uh like the one thing outside of investing that I like is is is film, but not as much TV. And um so I just saw this one day. I was like scrolling past and I started watching it and it's sort of just like uh an interesting like caper like mobster show uh where she's you know, like running from the police because she stole some money. But I've actually been enjoying it in my you know, my week of travel. So, I'm I'm going with that.

>> Nice. I got two one the Nadal documentary on Netflix. I just have a I love anything related to sports. Um, really well done. I actually had no idea. I loved I love watching tennis with terrible tennis player. But I had no idea that he had a foot um, deformity issue since very early on and they had to he was always like working with that and struggling with that and yeah, pretty amazing like mind over body kind of thing and really interesting. It's a couple of episodes well worth the watch in my opinion if you like tennis or you just like the mentality of like the relationship he had with his coach, which was his uncle.

Remind me a lot of the movie Whiplash. I don't know if you've seen the documentary. Yeah, Whiplash is like um, Whiplash is like I love that movie. It's like takes two to tango, right? So, it's it's just not the professor. It's like the the student clearly like wants to get pushed and and I think you see that very much in the Nadal documentary. So, I really enjoyed that. The other one is the I read a Sam Walton's autobiography. Um, really really good just like obviously Walmart's like phenomenal company and what they've done and really interesting to see that just devolution and how he thought about building it and stuff. So, yeah, continuing on the autobiography train.

Uh, and that I really enjoyed that one. >> Cool. >> Cool. All right. July 30th. We'll be in August next time we record. Are you taking some time off? Are you are you going to be here or am I going to have to do this solo? >> I took some time off a couple of weeks ago. I'll be I'll be around for August. So, I'm okay. You know me. I'm like I get so much joy out of working. So, >> Truly. That's the yes. No one ever retires. Um, >> That's awesome. Okay.

Well, thanks everyone for listening. Have a great weekend. We'll see you in August. It's crazy. >> Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the companies, funds, or projects discussed.