Analyzing the Crypto Majors: From ETF Inflows to Solana REV

Transcript

What was interesting to me is like you know double clicking on the treasury codes um let's look at micro strategy like people you know you we even on this pod we've talked about how much leverage is coming in because of these treasury cores and you know when is the ball going to drop and then I look at the number one you know strategy I look at the number one you know this the the person who started it all Michael Sailor and based on their enterprise value which is just market cap plus debt. And if you look at how much debt that they've issued to purchase these these bitcoin and even include their preferred shares. I know a lot of analysts don't like to you know include preferred shares in their debt

but at the end of the day preferred shares most of them at least are obligations to shareholders. They're like a higher tier. So it come it does come like if it's an obligation it is debt and I I do treat it as such. And even with the preferred shares and the amount of debt that they've raised and purchased BTC, that's about 11 billion. And we're looking at strategies 125 billion market cap 120 thereabouts. So we're looking at a debt to enterprise value of like of 10% or less, which really isn't that levered. A quick shout out to today's sponsor, Katana. We'll hear more about Katana and their ongoing pre-eposit campaign later today, but for now, let's get into the episode.

Nothing said on Xerox Research is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and any views expressed by anyone on the show are solely our opinions, not financial advice. Pocachio Ryan and our guests may hold positions in the company's funds or projects discussed. All right, welcome back to another episode of Zerx Research, guys. Today I'm joined by Carlos and Mark Arjun. Uh bit of a research team special today. Uh Bacio could not make it. He he felt he didn't have any strong enough takes to share on the podcast this week, which is unfortunate, but um glad to have Carlos and Mark on. How are you guys doing today?

All good. How about you guys? Yeah, all good on my end. Can't complain. Uh I think could be doing better. Uh you know, the pump the pump sale and the activities there leave are leaving a little bit of a bad taste in my mouth. Certain exchanges, I think, dropped the ball there. Um, but that's okay. We move on. I think in other news, the market has really been, well, I guess at least hot for a few assets. Bitcoin has just been like trudging up to new highs. I think what touched 123K, I want to say, uh, if not a little higher.

And I guess the other big one is hype. Uh, that's really the only other alt unless you guys think of some others, um, that's really been like outperforming as of late. Salana's kind of been struggling. ETH, I think, has been doing a little bit better than Soul, but you know, still relative to Bitcoin, not not crazy. So, um, and actually some of the like boomer altcoins uh caught a bit of a pop recently. I saw XRP and like XLM, some of those uh moved again. So, we're in kind of like an interesting time in the market. I don't know if there's anything like catching your guys eye right now or if it's just like, you know, crazy season right now.

Yeah, I think the other sector that has been outperforming as of late, like not necessarily the past week, but like in the past months has been lending. Um, just uh looking at Maple Oiler, uh, some of the big outperformers. Um I think one of the characteristics that's interesting from both of these protocols is that they are not like launches of D cycle but they were launched uh in the previous cycle and they they just like fixed their old model uh grinded up like and then recover back their TVL uh their borrows and now they're back at alltime

highs. I just think it speaks to the resilience of both teams. Uh it's definitely one of the outperformers of of this last few months. Yeah, for me it's more like same old same old. BTC keeps going up. Everything else is experiencing some diversion. I feel like BTC hitting all-time highs is has been getting less and less exciting every time it does it. um it's just almost become like the new norm which in my opinion is kind of a good thing. It's maybe a sign of a maturing a maturing asset. Um especially with all you know with the institutions and ETFs and whatnot. And then again hype I mean you know probably hype and pump probably the

two most popular apps in the space right now. Um you know you got to love it. Um and hype is just I mean it's it's done better than I thought over over the past two months to be honest. I'm not going to lie, but then it has the fundamentals to back it up. You see open interest hitting all-time highs. You, you know, if you comparing it to the other centralized exchanges that have um per as an offering, you see their market share relative to them continue to grow like month over month, quarter over quarter. So like this, you know, it's good to see an example of at least like even Carlos's u mention of lending protocols recovering their TVL, recovering their boring rates. It's just good to see instances of these like core DeFi protocols increasing in price because of their fundamentals increasing

as well. Yeah, I like that. I think um maybe one of the painful things for for people in this market, I guess if you're, you know, sticking specifically to tokens is that um it's been very concentrated, right? If you're not a BTC holder or a a hype holder or a you know oiler syrup holder, um there's not a lot going on. You know, most other tokens look pretty devastated. But meanwhile, on the equity side of things, both both real businesses and treasury strategy codes um have seem seemingly been where like a lot of the kind of fast and hot price action has been at. Um I think in some cases that's been positive, right? like Coinbase and Robin Hood have been doing

well on the back of you know some announcements, new product rollouts like favorable you know regulation. Circle circle obviously doing very well following their IPO um in sort of in light of the regulatory climate and like you know Tradfi seemingly wanting some kind of exposure to that or maybe trading it on the momentum you know what have you there. Um and then the Treasury codes have kind of just continued going down the line. So, you know, we've gone from strategy focusing solely on Bitcoin to now there's ETH Co, Salon Co, Hype, you know, XRP, there's tons of them. Um, and they keep moving on down that line.

But regardless, it's like you mentioned like Bitcoin has kind of just been inching up. Um, and a lot of other things I think have struggled to keep up. I guess Mark, you you wrote about um Bitcoin recently, like an updated monthly note. curious if there's any like big takeaways on just the market for Bitcoin, what we're seeing there. Um, some key kind of ideas that we're thinking about right now. Yeah, I mean, when I when I wrote the note, it was recapping June. Um, and I'm going to say some metrics that were down, but these metrics don't really matter for BTC that much. Like REV was down, um, fees were down, monthly, uh, you know, daily active users, monthly active users, that was down. But then

there's never really a strong correlation with that in price anyway except maybe during the ordinal you know rune season that we had a while back and that activity is also down too. Um but what was also down um which I started to cover in last June's report was um like BTC held on centralized exchanges and also probably and also BTC held by overthe-counter exchanges as well. So I I brought this up because there's some you know if you you know BTC on exchanges has been trending down for some while now like maybe over a year year and a half and you know it's just a natural progression of things as as the instrument has become more popular and

being taken up by ETFs and these treasury cores and even like Wales and individual investors but it's now getting close to the limit where we can start to see a squeeze a little bit on it like the amount of BTC that these these exchanges hold are getting eaten up, you know, on a percentage relative basis very quickly. So, I thought that was something interesting of note. I think right now we're around, you know, we're hitting nearly 2 million uh BTC on exchanges. You know, I've heard, you know, that from, you know, whispers that some market makers talking that if this comes down to like sub like 1.8 million, 1.7, we can start to see a little bit

more squeeze on BTC. So that's why I thought it was worth a mention. But then this on the flip side, something that was up was um Bitcoin ETF inflows, net inflows. And it was three straight months of like multi-billion dollars of straight net inflows. Of course, Black Rockck's iBit was the, you know, dominant factor behind this. I mean, I think I they have a ridiculous amount. I think they have like I can't even remember how much BTC they have right now off hand, but they're they're the largest by some margin. And this combined with the reduction of BTC held on exchanges made me write that if this I mean this data here is from June,

right? Um and I wrote that if this momentum continued into July that we would see, you know, there's a chance we would see Bitcoin hit all-time highs. And you know, guess what? We did. Um, and then even like very, you know, this is this is just a model I have work that I've been keeping track of in my back. But even like very rudimentary, if you look at this chart here, and then for the listeners at home, we just have uh a chart showing BTC monthly um flows by month um US ETF flows by month. And if you see the Jan the first period when it started the January, February, March, that's when you know Bitcoin ramped past 7 hit its new all-time high for the first time. Then it came back down and

then we see again in October, November, December another, you know, few months of 2 billion, 3 billion, 6 billion plus U flows and then again BTC hit I think that's when it hit its 100k mark for the first time and then we had a little period again after you know liberation day, Trumpo um you know Trump memecoin all of this stuff and then again from April uh we've started to see Bitcoin price recover as well as again three months at least three months of multi billion at $3 billion or more of inflows and like even like this rudimentary chart you can see that you know maybe another all-time high was due especially with some consolidation open interests for Bitcoin remain near all-time high

across all exchanges including all-time highs on Hyperlid as well. So just you know just the amalgamation of these different concepts it you know it almost maybe wasn't surprising uh maybe I should have been a little bit more vocal with this but uh yeah strong strong month for Bitcoin and you know the ETF flows continue to come in and the amount of BTC on exchanges continue to fall and we're starting to see a little bit more um we're starting to see a little bit more interest and leverage starting to creep back in. Whether that's good or bad, you know, remains to be seen, but it looks healthy.

Do you have any idea, Mark? Something I was thinking about while you were talking about the And I'll just jump back the forward jump back the exchange reserves of BTC versus like ETF holdings as well as like thinking about all these treasury companies. Uh do like I know for example that many of the ETFs do have agreements with like Coinbase for example to custody and hold that Bitcoin. Is is that being included in these exchange reserve balances? No it's not.

Okay. Yeah. Treasury codes ETFs um none of those are included in exchange reserves. And also, and this may be to the flip side of it, OTC's OTC desks also aren't considered in it. So, that's also an So, that's an extra supply that needs to be considered, but you know, those are also running low. Okay. I I just checked I bids AUM. It's 80 almost 86 billion, which is it's ridiculous. It's almost it's literally higher than the market cap of Sana, I think. Like yeah, the uh the interesting thing here is like the I just I pulled the the ETF BTC holdings and they're sitting at like

across the board something like 1.3 million units. Um, which could explain probably a lot of this maybe move is if a bunch of if if a ton of supply is maybe moving off of exchanges and just into sort of like storage for those ETF holdings to be then be traded probably regulated custodians. But it'd be great, maybe this is something we need as like a follow-up is to track exchange reserves plus ETF holdings plus, you know, Treasury co- holdings and see where that like broader balance is trending over time.

Yeah, definitely. And I I also think another contributing contributing factor to it too is that because BTC is hitting these all-time highs, the miners are holding on to more of their Bitcoin right now, you know, in anticipation of bigger moves. So that's also giving it a bit of a stretch. This episode is sponsored by Katana. If your assets are sitting idly, they're dead. Katana is built from the ground up to bring your bags back to life. Get started with Katana by joining their pre-eposit campaign before mainet launches at the end of this month. Follow the links in today's show notes to get started. This episode is brought to you by Ledger, the global leader in digital asset security.

Celebrating 10 years of innovation, Ledger remains the most secure hardware wallet for your crypto and login. Trusted by 7 million users and securing 20% of the world's digital assets. Follow the link in today's show notes to grab your ledger. Now, as always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research. How does um I guess is there anything big in regards to we talk treasury co like how strategy is playing in and mentioned that the ETFs are holding like I mean they're holding a few percent now of supply in total amount of Bitcoin and I know uh Sailor and Strategy are also a very large contributor um and he's still putting in pretty massive buys.

Yeah. Um, Strategy has 600,000 Bitcoin on their on their balance sheet. Um, it's an actually crazy amount. I think that's like nearly 3% of of of all the Bitcoin if I say 21 million. But in reality, I you know, it's hard to say for sure, but based on how long Bitcoin's been around and how many wallets are probably been lost and how many haven't been moved, it's you know, there probably is around 16 million in total. So like 5 million Bitcoin probably lost over the years.

Over the past, I don't know what has it been 17 years. That's crazy. Feel old. Um so so I mean if if I look at it like that you know strategy has probably close to 5% of all like let's quote unquote available um BTC and I yeah I recently did a report it just actually just dropped today um on different ways to get exposures to Bitcoin not just directly holding it or through synthetics like per or whatever more like treasury codes ETFs the miners even like preferred stocks, convertible bonds, just like a few different ways.

But what was interesting to me is like you know double clicking on the treasury codes. Um let's look at micro strategy like people you know you we even on this part we've talked about how much leverage is coming in because of these treasury cores and you know when is the ball going to drop but then I look at the number one you know strategy I look at the number one you know this the the person who started it all Michael Sailor and based on their enterprise value which is just market cap plus debt and if you look at how much debt that they've issued to purchase these these Bitcoin and even include their preferred shares. I know a lot of analysts don't like to, you know, include preferred shares in their debt,

but at the end of the day, preferred shares, most of them at least are obligations to shareholders. They're like a higher tier. So, it come it does come like if it's an obligation, it is debt. And I I do treat it as such. And even with the preferred shares and the amount of debt that they've raised and purchased BTC, that's about 11 billion. And we're looking at uh you know strategies $125 billion market cap 120 or thereabouts. So we're looking at a debt to enterprise value of like of 10% or less which really isn't that levered. Like if you if I did this if I did the analogy of a homeowner um if the homeowner had paid off this much debt, they would be in year 27 of

their 30-year mortgage, right? So, and that doesn't seem very risky. They have, you know, three years left to pay it off. Like I don't think, well, only talking about micro strategy or strategy. I don't think it's as risky as many people are make have made it out to be in the past. Um so you know and once it continues to trade above NAV um I think it's about 1.8 right now. Um I think once it continues to trade above NAV and they continue with these preferred shared offerings the different tiers they continue with their at the money market offerings I think I mean it seems relatively sustainable at these levels.

Yeah, I think where the question marks come in are these smaller companies that we keep seeing doing raises from outside investors um and then diluting their shares and kind of running up that playbook a little bit. Um I haven't done as deep of a dive here as you mentioned on strategy, but I know Dan Smith, this is something he's digging into is getting some data on more of these like there's a there's a bit of a strategy here, right? No pun intended. You take a you take a failing company that's worth very little, maybe even a few million market cap, like maybe at risk of being delisted from, you know, primary exchanges. Um, you know, you get an outside investor with a ton of capital and then, you know, commit some some funding money to buy Bitcoin or other crypto and then dilute shares and give

that investor, you know, a decent price for the the shares that they're being offered for, you know, some of the funding that they're providing. Um, from what I've seen, like often times that the debt that they're raising, the the market cap that then these things trade to is is nearly like one to one of the debt that they've just raised to buy um that asset, which is interesting. Um, it it seems there's there's maybe a bit more of like a FOMO kind of retail, you know, buy the, you know, buy the the news kind of excitement going on there. Um, and I think we've seen it with some of the larger ones um lately, right? Like if you look at ESB or BMR, which I think are ETHbased treasury codes, but either way, you see a pretty strong like pump

off of the news of, hey, we just raised 500 million or we just raised a billion to buy this asset and then you know a few days later and you see the price kind of recorrect a significant amount. So, uh it does seem like that's where the more concerning kind of piece of the pie is. Is it the volatility or is it the risk of these companies crashing and then being forced to sell Bitcoin into the market or whatever asset it is? Yeah. I mean, I don't I don't think there's necessarily a problem for the companies, right? They're um they're getting to tr to potentially sell out shares at, you know, inflated valuations from, you know, these announcements.

It's really just like a little bit of like a retail trap. uh it seems um the the risk concerns, it's hard to say. I mean, I get I think if you maybe if you get far enough down the line where you've got enough of these spread out and that retail bid kind of dissipates, um but but you keep launching new new initiatives to do that. Uh maybe then you have to kind of give up and start dumping the crypto that you've been trying to purchase this whole time. Um but it's hard to say. it right now. It doesn't feel like that's that doesn't seem like a a near-term outcome anyway.

Yeah, I I agree. But and I think maybe one way we we can get some insight into this is look at the miners from the 2017 2021 cycle. These things used to trade at crazy premium scenar treasury cores and they also did um share they also participated in share dilution and you know one prime example of this is Riot um Riot platforms it's one of the largest publicly traded miners they have like 20% of the hash rate market share among publicly traded miners and they have you know they probably are the biggest holder ers of all of the BTC miners. So they really

try not to sell their Bitcoin and in and as a consequence of such they have they're forced to basically pay the operating costs and the price of their mining rigs through um sales of their own shares. So, you know, between 2017 and now, like Riot used to trade, I think in 2017 they hit um $46 in 2017 and then they ran up in the next cycle in 2021 to $79. But now they're trading at around $10 um per share. And that's because between 2017 and now they have diluted shareholders by 60x, right? So, you know, and and unless unless Bitcoin has gone up 60x between

now and then, it wouldn't have worked out and Bitcoin did not. Um, so it's an example. And so these shareholders, they own a company that's continues to take good, you know, continues to take sizable market share, continues to hold um, Bitcoin on their treasury sheet. They're actually trading at a nav of like 1.1 right nowish. So they're basically they're almost like an ETF with a little bit of a mining kicker, you know, that if that's a way to view them. And shareholders have, you know, just be, you know, degraded over the years from from the longerterm consequences of this dilution. So I think that is one risk that we could see um with some of these other treasury

cores because it I mean at the end of the day it's really going to depend on the how what kind of debt you you get as in what kind of ratings you receive as well as um the timings of your market buys. Yeah. Yeah. Speaking of the timings of the market buys, one thing that I find interesting about Strategy is just how their average Bitcoin price has gone up over the past uh year or so and it's now around $71,000.

Um it used to be, if I recall correctly, like $30,000 a year from a year ago. Um curious if you guys think like strategy is going to eventually like um like Bitcoin is going to eventually trade below a strategies uh average price because it's only going to get out go up from here like the the average uh buy price like curious how you think about uh Bitcoin trading eventually below strategies price.

Um, I don't know in in the near term. I don't see it. I'm I'm mainly going off of this. I I mean, you know, past performance isn't any kind of way to judge future returns, but I'm going off of this anecdote that any every successful ETF always has a better second year. So, I'm expecting the Bitcoin ETFs in terms of net in net inflows to surpass 2024. And then, you know, with all of these treasury cores pumping, you know, going up and and also I don't believe in cycles anymore. I haven't since I've started to lose my faith in cycles since January 20 since the ETFs, since the Bitcoin ETFs came out, I've started to

lose my my belief in cycles. And as the years as the two years have one and a half years have gone on, we haven't even seen a real altcoin season, no NFT season. you know, we've had a meme coin season, but none none of the same none of the same experiences from the 2017 and 2021 cycles that I lived in. So, you know, because of that too, I I just see more of a steady increase in Bitcoin. And, you know, Bitcoin's volatility is has also dampened. It's less than like 50 companies in the S&P in the S&P 500. So, like I just think it's changed. So, I don't I don't know if if the average cost will get higher than the BTC price in the near term, but you know, maybe, you know, I mean, it's Bitcoin. You

know, this thing is volatile still, so it could crash. Um, but even then, I think I think if it does, I think Michael S will probably raise even more money and just buy even more. Yeah, it it's really hard to reason about. I think even in the scenario where you saw a s you a significant pullback in Bitcoin. I'm just uh you know I I think it would open some question marks at that point, right? like, you know, if you can't if people aren't willing to uh provide more funding for more raises, for more purchases, then like maybe you get a maybe that's what the next bare market looks like is kind of everyone looking around and going like, well, who's who's going to buy Bitcoin when uh Sailor

can't slam the infinite bid into the market. Um, and I think that'll be a question mark, but at current time it feels like, you know, he can keep slamming bid and as long as the market keeps going up, like he'll be fine. Although his execution continues, I think, to baffle people. This is the first time in a while where um the recent like average price that was posted was lower than the market price when the announcement was posted. But I think it's far too often where you see, yeah, we just purchased, you know, 100 million worth of Bitcoin at a price that is above, you know, the price for the last 5 days, and you sit there wondering like where, when, why, and how did you buy above like clearing price for the

past week. Um, so I think maybe that's something that he could improve on, but it almost kind of goes in favor of his like legacy of just like topless the thing and it works out. So yeah. Yeah. I mean I don't expect it to trade below his average price in the near term as well, but like we're going to have a bare market eventually, right? Like I don't believe like we have like a super cycle. I don't know if you guys believe that, but eventually we we're going to have a big pullback. And when that happens, like it's entirely possible that Bitcoin trades like near or below sailor's average like buy price. I think it it's going to be like an interesting

level, maybe a a good support level for Bitcoin. Yeah, it probably would become like something of a of a major support to look at. Um where people see like continued funding coming into to strategy to to continue to buy. Um I think that does make some kind of there's like some psychological sense there I think that the market might have to process. Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR. Katana is launching with a notable ecosystem of primitives, assets and partners like Morpho, Chainlink, and more. Be early to Katana by joining the pre-eposit campaign for mainet opens at

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we've we've done some good coverage on Bitcoin. Let's maybe try to get to the other majors. Um, still talking about Treasury Co related though. Um, ETH has actually had some good times here lately. Um Tom Lee has been going around on the news um and media coverage tour talking about uh BMR um which is the one the uh Treasury Co that he's involved with. Um SBET is another major one, but it ETH has had a bit of a turnaround in the past few months I want to say. Um I think potentially even outperforming Salana as of late. Um I don't know. Mark Carlos, any big thoughts? I feel like not much has necessarily changed with the fundamental story for ETH. Like I

think we're still waiting to see improvements, but I don't know. What do we think? I mean, personally, I don't think fundamentals have changed drastically. There's have been like a like a change in direction from the Ethereum Foundation and then more of a focus towards the applications and the developers. But fundamentally I don't see anything change besides like the narrative like spun out by this um treasury companies like it is going to be the preferred layer for tokenization and for institutions and whatnot and thus it should be valued higher but I don't I don't see it play out like at a fundamental level.

Yeah, I'm going to second that. Um not much in fundamentals more narrative shift. Um, I mean I don't know. I mean, Bitcoin did the same thing, right? Bitcoin, they tried to be better money than the US dollar and then that didn't really work out because of scaling and then they tried to be better gold and then that worked out. And I think right now, you know, I mean, not right now, but you know, Ethereum, ETH, the asset is just trying, you know, Ethereums are trying to shill it as the better Bitcoin. Um, and you know, I wouldn't put it I wouldn't say that's going to happen, but I wouldn't put a 0% probability on it either. I'm not betting big, but like you know, I've seen people I've seen people I've seen prominent investors hate on gold. I've

seen prominent investors hate on Bitcoin and and I've see I see prominent investors hate on hate on ETH. I know when these things pull back, they you know, they dance in the graves and when these things go up, you know, they're flabbergasted. Um I mean ETH ETH also had some some good ETF flows in June and and is has been continuing on trend. So that's something positive. I think I think we were talking about how you know some some investors may think that they have missed the wave with Bitcoin and they just want to go to ETH as well. I also think another factor is that, you know, if if you're an institutional investor and you're going to you've started to invest on asset class, you know, investing 101 for these

institutions is diversification. So, you're going to at least throw some of your flows into into ETH. Um, I think I'll do this chart for my next report, but if we did the ETF flows market cap weighted, I think the difference between the BTC flows and the ETH flows look a lot less large than they do now. So, um I I'm I'm I'm looking forward to like putting that out. But then also I think with ETH, you know, the narrative of tokenization, um you know, it's it's really more happening is is you know, it's with Robin Hood on Arbitum and then, you know, like Kraken has their ink chain and you know, Coinbase has their chain, Sony has their chain. These are really L2s. I think these things maybe help

more for narrative than actually like E RV or fundamentals. But I think that's what Ethereums are trying to do now, change the narrative at least. But one thing I do like is that they are changing the they are the narrative is actually making them scale the L1 a little bit more. There's this push for validators to get the scaling up from 36 million to 45 million. And I think about 40% of Yeah, thanks. And this chart here shows that 48% of the validators on the network are signaling for that um for that 45 you know that increase that gas limit increase to 45 million. And you know, the nethermind's new default um client is going to have the 45 million um on it if it already doesn't have. And

I think they want to get this this gas limit to 100 million by the end of the year, which would be great to see. I mean, like I might, you know, if we could move from 30 million this year to 100 million by the end of the year. I might even start to use Ethereum again. You know, if it starts to cost cents instead of dollars, um we'll see. And then it can open up more applications. But you know apart from that I don't think much else tangible happening in the net too. Yeah I think that's fair. One of the other big um you mentioned tokenization. It seems like one of the big kind of narratives going around at least within media and like some trady names speaking around ETH seems to be about this idea of being like the stable coin chain. Um which

kind of relates to tokenization tokenization of the US dollar. that um either way that it seems to be like something that people are running with more so than than anything else in the past. I I would I would mirror your comment about, you know, some of these like Coinbase having, you know, base chain and Kraken having Inkchain and Arbitum landing Robin Hood. I I feel like these are probably pretty immaterial to the bottom line of Ethereum. um and and maybe more so just a maybe you get a marketing bump, but I think the value in those types of operations really go to the like brand name at the front. So like Coinbase is getting the value from having base and Robin Hood is going to get the value

from you know deploying whatever they deploy um on arbitum. So, I guess we'll kind of see what comes of that, but at least for the time being, um, he's been having a good go and maybe the maybe the Treasury CO are contributing to that as well. I don't know. Slamming, you know, if you if you raise a couple billion from, uh, private investors and if they're slamming bid into the asset or at least taking away some sell pressure that maybe was previously on the market, uh, maybe it gives it some free air that that it hasn't had in a while.

Yeah, because for the past year since ETFs came out, um, every every quarter grayscale, you know, the old trust has been net negative. So, you know, it's had this constant sell pressure every single quarter to the tunes of billions, tens of billions of dollars over the past year. So, maybe taking away some of that sell pressure, as you said, has contributed towards some upside. Yeah, an equal waiting approach is interesting as well. I feel like that is also another makes sense argument. you know, if you're a boomer or whoever really getting into the market first time or, you know, financial adviser or a larger, you know, fund and maybe allocating client uh client funds like rather, you know, there's not really

necessarily a need to take a super opinionated approach about the assets themselves rather than just a market weighted approach to the category, especially if you're taking maybe an opinionated approach on like what the fund uh kind of allocation looks like, right? like if you're going 10% to crypto versus broadly the market is allocating you know close to nothing um you know you can sort of win by measure of being early on that lens versus trying to like be early in altcoins. Um, all right. So, we're still I think we're still sort of waiting to see uh what this new sort of pivot from ETH foundation and ETH kind of community looks like going forward, but at the very least the gas increase signaling

like that looks positive. Um, we're seeing some kind of relative movement in the right direction. Uh, and I think we'll just have to see some more execution from from, you know, the the guys, the foundation, the team, the community members uh within within the Ethereum ecosystem. This episode is brought to you by Marinade. Marinade is focused on developing staking technology that strengthens the Salana network and connects soulholders with the best staking rates available with solutions for both DeFi and Trady, including liquid and native staking, as well as direct enterprise integrations. Marinade's high performance staking delegation platform brings billions in liquidity and security to the sole market. To learn more, follow the link in today's show notes. And thanks again to Marinade for sponsoring today's episode. As always, investments in

blockchain technology involve risk. Terms and conditions apply. Do your own research. Let's move on to our last maybe big major um to discuss. Uh maybe someday Hype will become part of that majors list, but uh for now it's just one of the big the bigger apps. Um Salana is the other big one I think top of mind having not as great of a run lately. Um, and instead of ETF flows, although they do have the Rex Osprey, um, one that just launched with I think some maybe relatively exciting flows early on. I don't know if those have continued in like recent days and weeks, but um REV has been uh sort of struggling to maintain a lower level

ever since falling off at the beginning of the year kind of following the you know election and then the Trump token kind of weekend which was a major sort of um pop off kind of blowoff moment for like meme trading activity on the chain. um it's been sitting at this like new or maybe revisiting this low that we had you know back in 2024. Uh I guess Carlos you have any big takeaways on how Salana is looking recent recent price action how the market's thinking about Salana?

Yeah I mean like clearly REV is down like 90% from its peak in January when Trump launched uh the Trump memecoin. Um I think like the majority of RB is originated like from contentious transactions and that originates mainly like from trading. Um and what you have seen since March is basically a shift um in contentious transactions that had led to a decrease in RB like you have seen like trading applications like hyperlquid have maintained that high like watermark of like trading activity and then you have like the high fees and then on Salena you have seen like the

secular decline in like mecoin trading for the past like uh six months. I do think like in July you can see an increase due to mainly the pump uh TGE. I think we'll see an increase in RV but like let's see what happens right. Um another thing that I find interesting is what you were mentioning earlier regarding like the ETF um the d the Rex Osprey soul ETF went live and it gives exposure to staking rewards as well. uh what they did was a legal workaround where they where they didn't launch like with the traditional 33 act but they launched a curb under the 1940 act and thus um the staking

rewards that the ETF uh has like they're a taxable event so it's a more expensive ETF but then it's the first to go to market and it has seen like stronger than expected inflows it has seen like uh right now I It has like 73 million in AUM. Like for context, the Soul Futures ETF that was live only had like $22 million in AUM like three months after launching. So, it's definitely having like a stronger uh Inflows and the Futures ETF. And then once the Fidelities Black Rocks of the world launch a soul staking ETF or like a spot ETF, I think we'll see like strong

demand relative to the market cap of the assets such that uh in the same vein that Mark was saying like you're not going to see the same inflows as BTC and ETH but maybe on a market cap adjusted basis you do see like uh inflows that are strong relative to the size of the asset. And then the other thing that I find interesting in June uh in regards to tokenization was the launch of X stocks um by back finance. I think um despite soul being dubbed as a memecoin chain, you you are seeing some progress like in DeFi and in interest from institutional

participants and that has been reflected like in private credit coming on chain like with Apollo markets and sacred like tokenization via X stocks uh Camino hitting an all-time high in $4 billion in deposit. So, I think you're seeing traction like on the DeFi side. It's just not as advertised as like the memecoin side of the of the chain. I think that makes sense. Something I wanted to pull up really quickly now that we have the data is we do have some limited data on sole ETF flows.

Um, but we can see what you mentioned like it's it's had a couple of good days in the kind of eight figure range to this Osprey ETF. Obviously, I think like you said, the big question mark there is going to be if the larger issues issuers come to market. Um maybe some more trusted names. Uh that's potentially where you would see maybe a more consistent uh activity to um you know, one of these instruments. And then I think again we don't have a ton of data, but we do now have flows as percent of market cap. So we can look at this chart for example and I'll take soul and ethof for a sec. Um but we

actually see like the the Bitcoin ETFs uh ranging in like this you know 002 to 005% um kind of flow as percent of market cap range. And you can see this like recent growth that I think Mark was highlighting where the ETH ETFs have actually had some pretty impressive months or days and weeks. Um as of late there's been some some growth here. um up into the you know higher higher percent you know flows relative to market cap than than Bitcoin as of late. So um yeah it seems there's a little bit more excitement there and I think we'll have to kind of wait and see for soul.

Not enough data yet but um at least in the same relative ballpark right we're looking at these like low um couple of bips uh relative to market cap uh flows into these instruments. So, it does seem to be at least relatively consistent from from that rough kind of metric comparison so far. Yeah, I agree. And it's it's a good sign uh because this ETF like the Rex Osprey ETF has a relatively expensive uh management fee due to the staking uh tax situation and then it's not as like well known as you were saying as some of the big names. So if you get a traditional spot ETF approved then maybe you see

demand pick up uh more than you have. How do we feel uh maybe just gauging your guys thoughts generally about Salana? I think you know 2024 was kind of like and maybe even back the tail half of 2023 was sort of like the story of Salana um kind of like making its comeback and then sort of becoming the like onchain kind of like trading front runner. uh relative to Ethereum in the Ethereum ecosystem at that time. Uh it seems like that viewpoint has maybe recently shifted over to hyperl now that's like become like the venue to watch for like onchain trading. Um, not to say that Soul is not iterating, but

uh, it does seem like the momentum there uh, is struggling a little bit and maybe like the very exciting parts about Soul are maybe more so on the application side, right? Pump just did their ICO and now token launch. Um, and application revenues like still look great, right? If you look around at trading apps, if you look at, you know, the comminos, if you look at the the trading bots, right? the axioms and the f photons like these are businesses that are printing. Um but I don't know what are our thoughts here just generally on Salana as we look forward. uh are we kind of setting a new low for Rev that's, you know, tuned to pick up when we get, you know, maybe

greater enhancements to throughput um and potentially drive some more demand on chain or are we headed lower? I mean, RB doesn't look uh great like just following the trend, it has been decreasing since January. What I will say is that I feel confident saying that the ratio between application revenue and reb will keep increasing. Uh meaning that applications will increasingly earn more uh than what validators and stakers make on the chain. And I think this is great. I think it like the ultimate sign of a business of an ecosystem success is just like can businesses launch there

and be successful and I think like Solena is clearly yes that is the case. You have seen the pumps of the world like the axioms of the world like um and you have se and you can see in this chart right like uh if you go back to beginning of 2024 applications were for every dollar that applications made on Solena Sena was making like a dollar as well in like RB like today for every $2.4 that applications make like Sena makes $1. So like it's it has just been trending up and I think that is like if you're a developer and you have to launch on any given chain today or if you have to build out your own infrastructure

unless you're like a Robin Hood and like have the you know the capabilities to build out your own chain or whatever like think about like 80% 90% of uh businesses that want to come on chain like I think Sena is clearly like the best choice to do it. Uh I don't know if you guys have the same takes, but I don't think like like we like people have been talking about Robin Hood and Arbitum and like institutions are going to build out their own chains, but I don't think like they don't like I don't think all businesses have the same capabilities that Robin Hood has. So I think like many businesses will just choose to launch like an application on an existing like chain like Sena.

Yeah, I'm going to second that. Unless you're a large institution who has the capabilities to like you know create your own chain or have you know pay for an L2 use an L2 provider or you have enough distribution then or some regulatory issues then I think like the easiest way is to probably launch on a chain like Solana and you get that distribution on the flip side though it's it's like you know the number of developers in crypto is so small compared to traditional developers and then you know the you know they need to take a risk when they're doing these applications and then it's like career risk it's maybe it's a little bit less risky to go with a larger company go with an L2 and

who's going to do their own L2 and you're a developer there for them um but then when we see trends like this as as Carlos Chart points out I think this is this needs to trend a lot higher so we can get those entrepreneurs and those developers more comfortable with this kind of business model. Yeah, I mean I think it makes sense from this perspective of well as well Carlos around app revenues just continuing to grow. I mean, I think if you're potentially a founder or a developer and you see, you know, apps making running at, you know, hundreds of millions of annual run rate, uh, with trading apps on Salana, um, you look at that and you, you feel like you look at that and you

just think opportunity, like there's money to be made here if you can offer a better product or if you if there's another niche within that market that's not being tapped quite yet. Um and so I think from that perspective like it makes a ton of sense. Um so yeah and I I would echo the other point around distribution like you know I think Coinbase and Bass have been successful because of the distribution that that Coinbase has in this scenario and not because of the fact that like they built a chain and and they were able to do so. Um simply spinning out a chain is like not going is not the winning formula here.

It's having the distribution, getting people to operate there and and turn, you know, revenues and RV and cash flows out of the operation of that thing. Um, and I think the same goes for, you know, when you look at a Robin Hood, it's they could have realistically probably launched anywhere. Um, and maybe there's some incentives at play, um, that help determine where that location was going to be or maybe just, you know, successful BD operations. But yeah, I think either way it's kind of like they they can be successful anywhere, but you know, small first-time devs or new entrance to the markets. Uh I feel like you got to flow to where the money is and clearly there's a ton of money uh at least within within trading on Salana.

Now maybe you could make the case for some DeFi applications to go to like Ethereum for example, but that that's a pretty like locked in market at this place. It's much harder to I think kind of enter in. But we see it here and there. Morpho and maybe Oiler are kind of having a a bit of a good run lately. Um but yeah, I think it's really about where you see the opportunities and Soul has been that place um for a while now. When it comes to trading, I think on Ethereum, the Pers market, it maybe isn't so locked in and that one is like ripe for a little bit more competition, especially as they increase the gas limit. I mean I I think there's opportunities in a lot a lot of spaces and you know BNB has been dominating in

trading activity for the past few months of all chains and and you know even in REV some months and some weeks. So I think there's a few good options for developers out there and and that same REV to that app revenue to REV trend is not Solana specific. It's it's on other chains as well. So it's a it's a welcome sign across the entire industry. Yeah, great points. And I think the other like open question mark is going to be hyperlquid. And I think what we're seeing more so now is rather than these like chain affiliations, we're seeing just like, you know, integrating the best product for the right purpose. So like Phantom integrating Hyperlid Purpose into their product. It's like, you know, maybe maybe they grew up in this whole ecosystem, but like they've added more chains, right? You know, you

can use Bass, you can use SU in Phantom, and now they've got Hyperlquid purpose. Like I think it's really just for them about offering the right product to their customers. And I I think more and more as the like app revenue data is kind of highlighting that like building a good app like sort of successful business is the most important part here. Catering to you know the the customer the users of today um that are willing to you know spend fees on your thing uh is kind of the winning formula and there's no sense being you know tied to a particular e ecosystem if there's money to be made elsewhere. Um, and I think that's what we're we're kind of continuing to see that that trend play out. Awesome. Well, uh, I think this was a good good overview of the it kind of

turned into a majors episode. It wasn't really meant to be. I think we were originally intending to cover some recent research, but, uh, turned out this way. There was plenty to talk about. Um, the market has just been a little bit crazy with, uh, the Treasury CO miners, you know, buying up a bunch of crypto and putting it behind an equity. So, uh, I think we centered around that, but glad to have you guys on. Any, uh, any big takeaways maybe in regards to maybe we'll do a takeaway on Pump. Like, what are your guys thoughts here? We I think we've been doing this on a lot of pods. Uh, it's priced at like five and a half billion FTV right now, I want to say. So, it's still above that ICO sale price. Uh, what do we think end of the year? Um, so

December 31st, 2025, higher or lower than 4 billion FTV? I just want to say like before the price prediction that um I am now an onchain maximalist and I will be deactivating my buy bit account. Um, and I think above four billion. Yeah. Yeah. I mean I I think it's going to be above. I mean right now I think Danny and I you were talking we were talking about this earlier pump is the most valuable app in terms of FDV of of all of all apps that don't have their own chain you know like unis swap has their own chain you

know excluding those cuz I think sometimes they get a little bit of a premium a pump is the is the highest but I think I think I think most things are higher end of the year I think regular you know we'll have hopefully two bills passed hopefully lower interest rates um hopefully less wars So, um I'm I'm very constructive on Q4 this year. I mean, I I think the most interesting question is like if you think Bomb does really well, like what are the implications of that? Like the second order effects, like do you expect more ICOs? Do you expect like other launchpads to do well? Like what do you guys think? Like if Bomb does really well?

Yeah, this is what I'm excited about. I I think I mean I think it depends if the climate stays the same, right? if there's still a ton of interest if if the market kind of maintains its positive sort of um excitement around assets. But, uh it seems like we're in maybe the the innings of like the ICO revival potentially. Um that's where I kind of see things going and I think part of that has just been this shift away from the prior kind of administration's strangle hold over launching coins uh in that method. Uh I think pump I don't think there are any others as of late that have done like a traditional ICO sale outside of maybe like echo rounds things of that nature

where you need to be where it's not quite like an open permissionless well I guess in this case it wasn't really an open permissionless sale in that from that perspective either US participants could not um get involved but yeah I don't know echo echko has been doing well I think people like echko and then the pump one that like that's a very big token to have done um a sale of this nature. So, I think it speaks to the market more broadly and I would expect more to follow assuming things continue to look good. The the most recent IC I remember was cloud um the Solana ETF um not ETF the Solana the staking um Yes. Yeah. Yeah. And but unfortunately

unfortunately that one didn't do that well. So I was hoping that would be the revival of ICOs but okay. So here's the pump. Yeah. I like it. I like it. I I think higher. Um and maybe on a similar vein, like I don't know how it will play out with with regulation, whatnot, but I'm still relatively excited by this internet capital markets idea. Um I think startups kind of like raising there's a question there, right? Are these just meme coins? Are they commemorative? like can you give some kind of assurances to the purchasers of those if your startup actually makes money and returns some kind of revenue to them. Um or is that towing the line to or is that getting like too far over the line um to like equity status? But I

I still think there's something interesting there. Um I think retail is like has some latent demand for that type of product if if the right startups or businesses like are involved. If it's just, you know, the next guy launching a memecoin, pretending uh it's a startup, then it's not quite the same. Are we bull posting believe as well? I'm not sure. I I'm I'm uh I'm going to go with Bacio's f famous statement, uh Gen 2 is always better than Gen One. Uh we'll see. I don't know if Believe is Gen two or if Gen two is the next iteration. We'll have to see.

Let's see. Cool. All right, we'll close it out there. Uh, thanks for coming on, guys. Appreciate the chat. And, uh, we will see you all next time. Uh, and we'll find out, I think, in a few days, whether some pro pump predictions from earlier in the week turn out correct. Uh, and we'll have to set a reminder for what, five, six months from now to see if pump predictions for the end of the year turn out correct. Um, so we'll see you all then. Thanks for watching.