Bell Curve X Empire | Prediction Markets, Crypto’s Mag 7 & Stablecoin Growth | Weekly Roundup

Transcript

The meta narrative that is forming is I maybe we don't have the max 7 quite yet but we will and that's moving in that direction but the meta narrative is tokens need to make money. Tokens need to have a business model. There needs to be a value acrruel to the token just in the same way that there is to Robin Hood and Coinbase or you know anything else that's publicly traded. This episode is brought to you by Geodet, the world's largest decentralized RTK network delivering real time centimeter accurate positioning around the globe. You'll hear more about them later in the episode. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial

advice or necessarily the views of Blockworks. Our hosts, guests, and the Block Works team may hold positions in the companies, funds, or projects discussed. How's it going, everybody? Yes. Thank you. Thank you. Thank you. Thank you. Um, can we get some cheers for Santiago's nice outfit today? Yeah. Fresh off a red eye. I've been dusting off. Santiago asked us to say that backstage. So, you're welcome. Wait a minute. Someone told me the dress code of permissionless was, you know, suit tie. I ditched the tie, but yeah, as it's always been. As it's always been.

All right. So, um, uh, we've got a really good conversation coming. We've got my better half. Um, we've got the better half of Framework Ventures. I'm hoping to send that to Nance afterwards. And uh, and we've got Santiago, obviously, who I co-host Empire with. Uh, lot lot of interesting topics to discuss. I thought we could start with prediction markets actually. Um, prediction markets obviously one of the feel like they're like two hot topics in crypto right now. It's stable coins. Um, stable coins and prediction markets. Maybe you could throw len borrow in there too. Um, prediction markets are obviously two players on the scene right now. It's uh Poly Market and Kalshi. Kali just announced a $2 billion raise yesterday led by Paradigm. I think Multicoin also participated. Uh, it's

rumored Poly Market is raising at a billion right now or somewhere a little bit above that. raising at raising at a billion, not raising a billion, raising at a billion. I would love to hear your guys' views on just where we're at with prediction markets, these new these new valuations. Um, yeah, I would love to guys get your guys' takes on prediction markets. Um, do you want to go first, Mike or? Well, I uh full disclosure, I led the round when I was at Parfy. We were one of the first investors in Poly Market and I think we're the largest holder in Poly Market. Um, we've sort of doubled down. Um, this was coming off of like people might remember like super early on when Ethereum was getting off the ground like there's a project called Augur and prediction markets are one of those

categories where like it's just fascinating. It can transform media surface truth like markets are arbiters of truth. Uh, of course like it's a classic example of revisiting something that didn't work because augur didn't work for a variety of reasons. Principally I think you just didn't have stable coins. Well, and the tech was too well. Yeah. like the team wasn't fully committed. Yeah. But you you didn't have a stable coin. And if you don't have a stable coin, how do you settle the bet in a in a volatile currency like ETH? And so it's just a reminder that I always think about, which is like you you it pays to revisit an idea that didn't work with a new kind of tech as the tech moves forward. But yeah, look, I mean, uh, prediction markets are fascinating. It's probably, in my opinion, the breakaway app, consumer app

in crypto. And you know, Poly Market now is integrated with X and it's just um it's also I'm curious to get your perspective, but like Poly Market, if you go talk to Shane, it's deployed on Polygon. And there's a lot of reasons why a crypto native would look at that and say what? Like why? But the conclusion that I think you draw is like most normie users don't care about it. They don't they don't have an affiliation for Polygon or your flavor L2 or Salana or whatever it is. They just want to care like can I use Apple Pay? Can I you know the political elections can I express a view? So it's just a good reminder that like the tech is kind of like commoditized in my opinion. Yeah. Could I get you guys to compare and contrast? Can I get a show

of hands? How many people know Poly Market? How many people know Khi? Okay. So these are sort of the two leading solutions for prediction markets and they have pretty different approaches both in terms of how they position themselves, their go to market etc. It seems like Poly Market has really le leaned into being a DTOC product. So they got a lot of page views. They said we're the news and actually very prominently they've kind of called some uh big events like strikes on Iran pre uh futures markets moving. Huh. The election. The election. Yeah. Very saliently. Um and so they have a very they have a large uh you know kind of relationship with people that are going to their site for content. Uh but they actually don't have as much liquidity as KSHI where KHI has

leaned into being a regulated exchange. So they're open to US users and they've leveraged the liquidity on uh with partners like Robin Hood. So how would you compare and contrast these two approaches? Well, I think the other element that's really important to note is that Khi actually does the full endtoend. So they have a license with the CFTC. They have their own kind of clearing house. Um their business model is very different from Poly Market in that they're the ones who are basically the liquidity provider for all of these markets. Whereas Polygon is kind of the opposite. they're they're sort of the front end and they've got, you know, an open market, an order book to be able to trade these markets. And so it's it's very very different in their approach.

It's sort of the full stack white label and distribute it as far and wide as you possibly can. We're going to be kind of the infrastructure provider which is the calc approach whereas Poly Market has the distribution, they have the users, the the direct consumer, the brand. But I think the most interesting part is if you look at Bloomberg, if you look at um any of the equity research uh publications, if you look at basically any of the news publications as well, they're actually quoting Poly Market and Poly Market odds for certain situations, whereas they're not doing that with Koshi. And so it is not just like a business model and a tech difference, but I think it's also a branding difference that is going to be important to note. And and people know Poly

Market. I I was just, you know, with a friend, you know, for the um primary um mayoral election and um his wife came home and it's like, well, what what are the polymarket odds? It's not what's the couchy odds and I think that that's a a I don't know something else to note. Do you have a sense on um so maybe maybe my view on this is uh where prediction markets are kind of where crypto exchanges were in 2013 where you had many different so 2013 it was like um Bitstamp and Kraken were really the two exchanges and then you Coinbase comes onto the scene a bunch of others blockchain.com bunch of others come onto the scene and Coinbase took this super regulated approach and it means they actually went a lot slower in some

angles right they couldn't do what like uh maybe a Binance could do or what some of the big Asian exchanges could do. But now you're seeing that those the slower approach, the regulated approach, the licensed approach ended up being the the better approach I think in the in the decade long time horizon. Um, so you could say, okay, Koshi's taking that approach even though they don't have the mind share today. Maybe that's a better approach. See Coinbase as an example. The other one's like, look, just own the distribution, own the audience, own the awareness. Do you have a Well, well, also there are two interesting examples there too, which is so Gemini took also that approach, but they didn't execute as well and they're not in the same position. True. And Binance actually is probably the largest exchange and they were famously the cowboys, maybe like

the Ubers, right, of uh of crypto exchanges. And so totally agree. I I one one other point is I think uh when you own the customer experience Coinbase has always owned the customer experience whereas Koshi maybe is the regulated approach but they are open to having Robin Hood you know use their powered prediction markets and Robin Hood will be kind of the the user experience. So there is a a difference there. It's like are you the user experience and the infra and the regulated approach or are you just the infra that anybody can use?

Yeah, I think uh well I mean poly market I mean user aggregation theory will continue to be a thing. I'd rather own the distribution. Uh although I do think your point around like Coinbase now is branding itself as like crypto as a service because it has a regulatory mode and so if I I think you're going to start seeing more and more businesses say I'm interested in leveraging some parts of crypto. Who can I go to to partner? and Coinbase I think has all the licenses and so but I I still think like if obviously I'm biased but I would much rather own the user experience.

Um now that's not to say that like Poly Market has won it or will be a winner take all. I actually think prediction markets most likely in the next 5 years there will be a larger prediction market and this is neither Poly Market or Khi. It might be someone that has just more distribution. Um, and you can because the biggest challenge that I think Poly Market and I think Khi has is there's sort of like a tail end of markets that don't have much liquidity. Um, but what you really need to focus on is what crypto is really good at for prediction markets is the market resolution needs to be transparent and needs to that that's where the regulation meets in. And I think both of them I think well poly markets using UMA as a sort of Oracle

infrastructure. I'm I'm not familiar with I don't know who uses this. This episode is brought to you by Geonet, the world's largest decentralized RTK network delivering real time centimeter accurate positioning around the globe. Powering technologies that enable precise navigation for drones, autonomous vehicles, first responders, farmers, and robotics. Geodet shows that blockchain can be a truly transformative force. By delivering real-time centimeter level accuracy, Geodet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out more, click the link in the show notes

or follow them on X. Hey everyone, Jason here. Earlier in today's episode, you heard me mention the weekly CIO memo from Bitwise. In an industry as hectic, fast, and complex as ours, it's incredibly hard to get an easy nononsense stream of what's actually moving crypto. The memo comes from Matt Hogan, Bitwise's chief investment officer. He's been on the show before, and he has this amazing ability to take the most complex topics and break them down with clarity. Trust me on this one. The Bitwise weekly CIO memo is really worth the 5 minutes of your time. Check it out at bitweisinvestments.com/ciio memo/mpire or just hit the link in the

description of today's episode to get started. Carefully consider the extreme risks associated with crypto before investing. As always, investments in blockchain technology involve risk terms and conditions apply. All right, maybe uh pivoting off of prediction markets for a sec. One of one of the interesting themes of this conference too is uh people don't know what tokens to buy. Uh there's a lack of uh just like contrasting with this this uh event with other block works events like DS and uh permission list. There's always like several narratives and ideas going around and it's like people are shilling different things on stage based on their bags. Uh I mean just in conversations like on stage and offstage it feels like the general consensus

right now is there's like the mag seven of crypto and some like it feels like people are basically own like the majors which I'd call like Bitcoin Ethan Soul Hyperlid Coinbase stock and Robin Hood stock uh and maybe the lending protocols like uh either Maker or Syrup or A or Oiler. I'd bucket those all as one kind of big thing. Um, and outside of that, I don't really think people know what to buy. So maybe Michael, I'm curious how you think about this as I mean, first and foremost, you know, disclaimer, not financial advice to financial advice when you talk. Come on, that's what took you so long.

How long do I give let you run on this? Uh I mean look I I think the the the meta narrative that is forming is I I maybe we don't have the mag seven quite yet but we will and that's moving in that direction but the meta narrative is tokens need to make money. Tokens need to have a business model. There needs to be a value acrruel to the token just in the same way that there is to Robin Hood and Coinbase or you know anything else that's publicly traded. And we don't have GAAP accounting. You guys put out the token transparency report which is I think a huge step in the direction of getting to a deeper understanding of what these assets are, who owns them, how how are they disclosing information that's important um to anyone who owns it. But the next step is going to be how

do we get gap accounting so that everybody can look at these things on a applesto apples comparison basis and if you're making money then you're you have a shot at being in the MAG 7. If you're not, you don't have a shot. And so you think there will be a mag seven of crypto and you think the mag seven will consist of tokens that figure out some sort of revenue generation and have a have a real business model? Fundamentally, yes. I I think, you know, the others that I would put in this camp potentially um when it launches is uh pump, you know, but pump, you know, as everybody can track on chain is making a million a million a half dollars a day.

Now, the the rumor is that they're going to be putting the bulk of that into the token, and so they understand that as well. But if you look at the MAX 7, what defines the MAG 7? Well, it's the seven assets in the S&P 500 that have driven the vast majority of the growth and the vast majority of the earnings per share growth and revenue growth and growth in the economy, capex spend, all the above. I think that will start to form, but it all is from a fundamental basis of, you know, business model. Can I ask can I want to unite um our discussion around prediction markets with you know maybe interesting tokens to buy that are overlooked. Um I would be curious how would you guys evaluate exchange tokens?

Um and actually this has been a really difficult time for altcoins in general and especially if you're a liquid manager you've been getting slammed. If you were to pull up the price of LEO or OKB or BNB they've actually done surprisingly well. And I think that there's a massive gap here in between uh investors in the western uh hemisphere versus what's happening in Asia. And you know the reason this is I I would connect this to prediction markets is people used to talk a long time ago in crypto about the creation of a a super app like they have in China like Alip Pay or WeChat or something like that.

And maybe with crypto you're, it hasn't happened in the US for a number of reasons, but now that there are new rails and you can more easily combine things like payments, uh, a more traditional brokerage experience, prediction markets, stuff like that. Do you think that I feel like at the beginning of new paradigm shifts in technology, people overthink it and try to chase things, but you know, if there's aggregation theory and that ends up being important here, Binance has 275 million users, Coinbase has over a hundred. It seems like they've got a really really they've got a big lead. So wait, so what are you you're getting at?

Just buy maybe exchange tokens or Coinbase stock is the better play here. Yeah. And you know, as one data point, here's a a model that's been tried in crypto a lot of times. Uh the original Atom tried this, Ethereum sort of tried this in a number of different ways, Polka Dot, but it's basically like buy my token and you'll get a bunch of airdrops um or yield on it. None of them have really worked except for BNB, which quietly has been taking the listing fees that tokens have to pay to list on Binance and giving it back to BNB users. They've been getting like 50 to 100% APY for 3 years and it's it's the best token model that exists and nobody's talking about it because you know as US persons we're not allowed to be Binance

customers and therefore nobody knows about it. But that is the fundamental basis of B&B. Not only is it, you know, 20 or 25% of the profits, which I don't think is actually the case anymore. That's how it started. Now BNB is if you st BNB within Binance, you get discounted fees, but you also get airdrops of any tokens that are listed on Binance, which you can sell and they do immediately. And so if you were to sell all of those assets on day one list, I think it's something like 75 or 85% APY over the last. Here here's maybe the counter to this is um uh where does value acrue the tokenity the token or the equity and I actually think we're at this like line in the sand moment where the industry is saying you got to pick

one right I don't know if you guys saw what Morpho did right so you're you're clearly saying you have to pick are we acrewing value to labs or to the token and so if I was thinking about investing in something like uni right I still don't know does does Hayden want to IPO unis swap labs or does he want to drive the value to the token and for me to make an investment in either I need to know that. Well, so okay, going back to what I just said, it all comes down to the business model. What is the business model of Uniswap Labs? Taking a fee on top of all the volume that flows to unis swap. What's the business model of unis swap the token? Is it taking a fee in all the swap volume that's happening on unis swap? If you choose both, you

inherently disadvantage one of them. And if you were to choose one and say all the volume, all the value goes to that fee that's just for swapping. We're going to take no fee in unis swap labs. We're going to send all the volume to unis swap. You need the token is where all the fe value occurs. And that's that's great. The opposite is also true. But if you choose both, then you fundamentally disadvantage one. And and it's it's I think we are at the crossing point um or we've maybe actually crossed it. You have to choose one valued role. Santi, what do you think about this? I mean uh to your point around like what people want to buy in this cycle, I think there is a meta obviously where people are looking at circle stock and saying god this thing just like 10xed

and like don't overthink it like the market wants to go along stable coins and this is are they reading into the contract and definitely not and so you have line of sight into like how many how many more companies are going to go public like crypto uh directly cryptonative like a chain analysis or crypto like adjacent. So the market for a while now has different ways to express a long crypto thesis. You have Coinbase Circle, then Robin Hood, New Banks of the world that, you know, are increasingly talking and and earning more revenue from crypto, and then you're going to have uh, you know, at least 5 10 more companies that are going to go public over the next month or I mean, over the next like six, 12 months.

And and I think investors, I mean, Michael, you know this, uh, from from raising capital, investors still don't want to touch tokens. And so, they'd much rather invest um, in an ETF or directly into these businesses. And so from a where's the liquidity going to come from? I would I I would I'd probably take the bet that more and more liquidity is going to go in the public markets that want to express along crypto view and maybe some into crypto funds that will do that for them. Um it's like the grayscale premium that in in a different manner. Now, this episode is brought to you by Geonet, the world's largest decentralized RTK network, delivering real time centimeter accurate

positioning around the globe. Powering technologies that enable precise navigation for drones, autonomous vehicles, first responders, farmers, and robotics. Geodet shows that blockchain can be a truly transformative force. By delivering real-time centimeter level accuracy, Geodet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out more, click the link in the show notes or follow them on X. Hey everyone, Jason here. Earlier in today's episode, you heard me mention the weekly CIO memo from Bitwise. In an industry as hectic, fast, and complex as ours, it's

incredibly hard to get an easy, nononsense stream of what's actually moving crypto. The memo comes from Matt Hogan, Bitwise's chief investment officer. He's been on the show before, and he has this amazing ability to take the most complex topics and break them down with clarity. Trust me on this one. The Bitwise weekly CIO memo is really worth the 5 minutes of your time. Check it out at bitweisinvestments.com/ciio memo/mpire or just hit the link in the description of today's episode to get started. Carefully consider the extreme risks associated with crypto before investing. As always, investments in blockchain technology involve risk terms and conditions apply.

How do you um Michael, how do you think so? 18 months ago there was actually probably a premium for having a token or actually just for the last couple years like if you had a token maybe you could say it was overvalued now I would say the opposite what the opposite now it's the opposite right now now now public markets have the premium and uh you can look at circle stock doing a 10x since the IPO as an example of that or any of these corporate treasury plays and there's I mean several more IPOs coming in the next couple months and they're all I mean my guess is that they all rip out of the gate well so I the the reason why so that is definitely the case but the reason why I think is important too which is most of the capital that is

accessing these public crypto vehicles or these ETFs or these IPOs is capital that's in funds that literally cannot come on chain or in institutions that you're you know for whatever reason regulatory or internal control um or risk or audit whatever purposes it cannot come on chain that's still the case we are still separated segregated capital pools And I think eventually if we were to get something like the Clarity Act or any sort of market structure bill, we have talked with a number of folks at banks, at institutions that are waiting, ready to go as soon as they have an understanding of okay, this is okay for us to invest in. This is not okay. Like we have the the rules of the road, let's go forward. But the reason why you're seeing such buildup is because you just

have latent capital that hasn't been able to access this industry. Yeah. And and that's that's what's holding you back. Now, with clarity, I think we can get there. But but that's the reason. And I think that's important. I think that the other thing that I want to draw attention to is yesterday you saw this this regulated entity called Republic allow investors like tokenizing private companies like SpaceX and allowing someone to buy the token. Um, I've always felt like like 2017 I I think a large part of why crypto has drawn a lot of liquidity from places outside the US is most people cannot invest in the US stock market and crypto allows you to take your money in a place where for instance if you're in China you can only

invest in like that local market and Chinese government bonds and that's the case in many other places around the world. So crypto like has tapped into like trap pools of capital and expressing a view in Ethereum is the closest analog that you have to going long technology and like and like I think for a while crypto's just been that asset class for many people around the world. What happens when you now have tokenized stocks on chain? I feel like to me that that's where a lot of the capital that has historically invested in memecoins or your next flavor of an L1. I mean now what's interesting is you have also tokenized stocks on chain and so the question is where does value crew is that going to go to like an Ethereum like a L1 kind of

like thesis is it going to go to unis swap equity is it going to go to unis swap token so um I don't know I think of it from a flows perspective it's uh I think a lot of the capital that used to invest in funds or on chain is now going to think more deeply about where they want to express views. Institutional likely stays in traditional markets for now. Uh crypto native DJ capital that is a hot ball of money likely will like invest in like some of these new products that are emerging like tokenized stocks. So So maybe to extend that out a little. I think I know what you'd say here, but I'm curious if So, I saw this Republic thing, right, where they give you access to like

Anderal stock or StockX or something like that, but really what you're saying is now it's now people internationally can access the secondaries in StockX. Yeah, I think that draws so much liquidity. That's great. But really what you're saying is that's just that's a it's trapped money because of regulatory because of regulatory reasons. So then our onchain markets only for this regulatory arbitrage. Wait, can I add one thing there too? Actually it might not be regulatory but the divi private markets are under strain this division in between private and public markets in the US is and on the allocator like VC like we've talked about this Michael a lot on bell curve and Santi I think we have too on uh you know mashups like this but um VC is really underperformed and a huge part of that is not due to

you know venture capitalist fault but the fact that companies are staying private longer and longer and longer and so if you just think about that from a return perspective you literally need to do twice as well to achieve the same result. And so I wonder if this is actually some sort of breakage in well maybe it is regulatory, right? Because the onus of being public for whatever reason is too much. Um but this crypto feels like a way of between public right where you actually have these you have these companies now that are be like you might have trillion dollar private companies with SpaceX and Stripe pretty soon be the first trillion private company SpaceX open AI and Stripe will all probably be trillion dollar private companies and you guys probably get the same emails I do where the secondary in these things trades like a liquid

market. I was going to say the secondary market for these assets is actually pretty robust if you and you know if you're a 10% holder of open AI stock you can't sell 10%. But you can probably sell, you know, hundreds of millions of dollars a year if you're accredited though, right? I mean, well, and so that's the thing there there are rules and regs around who can buy this. And so, uh, depending on the structure, depending on many things, accredited investors only, there's sometimes limitations on size, sometimes it's institutional qualified purchasers only. like there there's a lot of controls and I think you know to kind of combine a little bit of what we were saying it's going to be interesting how they would structure tokenized equity because it if it actually is equity like the SEC is

not going to let you just like run away with that and let people anywhere in the world buy that 24/7 like they want to have control over the markets but if you if it is just like a representation on chain and it's a oracle token price feed you know model then then that's totally different and I I would imagine that it's probably somewhere in between where maybe you have a KYC element where they actually know who the holders are. Like if you're if you're a shareholder of your company, the company needs to know who you are in the first point. So like how do you solve that problem with tokenization? But I do think providing access to what has become this like growth equity realm of the capital market structure is is what we should be solving and and I think you know Kraken has talked about doing this. There's a

number of others that Republic that want to do this as well. Um it's interesting. Michael, can you give us um a look behind the scenes at what's the dynamic with the institutions specifically the endowments and the pensions y maybe and uh and how this like staying private for longers played out over supply of maybe venture like how you think about this? Yeah, I mean just as context uh a large institution um uh endowment venture portfolio manager told us recently that 60 plus% of the venture portfolios at US endowments are cash flow negative over the last 5 years which I mean if you think about it they're committing capital to new successive funds in Sequoia Founders Fund Excel whoever and

they're th those funds are investing in companies the companies are staying private longer where they expected their 2020 their 2014 vintage will be distributing capital so that they can make commitments for the 2024 funds. Those 24 vintage 2014 vintages are not actually distributing because the companies are staying private. And so what it's created is this denominator effect as as it's called where the allocations to venture capital within these asset pools is just way too large. And so that's pulling back commitments to new funds. It's pulling back re-ups to the existing funds that they're in.

and they're just kind of re-evaluating everything and and historically the Yale endowment has been the first to kind of move into privates. They're kind of the first to do things on the endowment front. And a couple months ago, they announced that they're selling their entire private equity portfolio, $6 billion. And I we've talked about this on Belurve a bit, but it's um I mean, if as soon as they started doing that, everybody else in the endowment world goes, uhoh, what do they know? And I think that's obviously been an interesting kind of effect throughout the industry. But then also with, you know, the current tax bill, there's a there's a new tax and it goes from 1% I think to 21% max. Um, and that that is a huge hit to how you manage the endowments. And so we'll see where that lands in terms of what's final, but I I

do believe that the endowment landscape is in a very troubled position right now because of this effect, no liquidity. And what does this mean? So a lot of the big venture funds in crypto, you guys, I mean, a lot a lot of the big ones raised in 22, I think it was. What does this mean for crypto venture fundraising which then obviously trickles down to you know all the founders in this room and and the folks fundraising it it's it's coming back shorter you know when you remove the endowment uh or pension I mean pensions have a similar effect what is also happening is foundations and so maybe it's you know pensions foundations endowments altogether um uh it's called ENFS but uh the the idea is that if they're not a large participant in this ecosystem or the venture ecosystem at

large all the funds that were raised in 2122 are probably going to be smaller when they come back in 24 and 25 and I think that that will obviously have downstream effects on who's able to raise capital how much capital the terms of those deals um and it takes a couple years for all of this to cycle through because it takes a couple years to raise your next fund and it takes a couple years for the the next fund raise to happen with startups um so we're we're working our way through that process but I I think you know we've talked about this on belt curve but like belt tightening season is upon us. Yeah. Can I actually I would love to get back to a Santia point that you were making about when there's money moving into the space, people are going to be choosier

about where they decide to allocate. I was looking at I know this is a you know a little bit of an imperfect metric, but Bitcoin dominance is getting back to about 70%. Um, so it actually, if you were to do a a layman's TA on that chart, you know, it's kind of like, you know, higher, it's reversed basically a seven or eight year trend. And it's looking less and less obvious what is going to reverse that trend. And so historically, I think that's a massive commentary on the major L1's, right?

Like ETH uh is kind of the only thing that has a large enough market cap to really change or turn that ratio around. It's been really struggling. But same with Salana right now. It's being challenged by hyperlquid. And I'm curious, you know, when you look at that ratio, is it destined to just crew back with the Bitcoin maxis, right? Or what would change that sort of inexurable rise up? No, I mean I think this happens every cycle where Bitcoin dominance rises and then subdues. Like if flows stay, then naturally people like there's a lot of things that don't change in markets. human psychology and how markets respond will never change. So, and the catch-up trade is very real where people miss

Bitcoin, then they say, I'm going to extend further out in the risk curve to go and find gems because new capital comes in. There's wealth creation in Bitcoin and then flows into other in other sectors. where it flows is I think the more interesting thing that will change this cycle because there are different ways where you can express a thesis for the space increasingly so in traditional markets and private markets and venture funds. So it's um I think that's where the nuance is. But I think Bitcoin dominance probably comes down um over time. That's not to say that Bitcoin can't continue to go like we could be in a place where Bitcoin's at 250,000 and I won't flinch. I mean it's the best meme, the ultimate meme and and I think that continues to like there's a lot of momentum in Bitcoin. Um but um

but yeah, I think like what do you need to believe for Ethereum to catch a bid or Salana or Hyperl to catch a bid? Um I mean the reality of things is like now think about what's very different this cycle. You have stable coin bill. You have increasing clarity on the regulatory front. you have a total 180 on the US like what the US the policy in the US put Europe aside the the rest of the world will follow maybe Singapore is a rare example but that like just bodess incredibly well again going back to how we open up this panel was like like poly market you'd be sitting there and saying I'm going to pass on poly market because Aubber didn't get off the ground now imagine you're sitting here and saying all of these regulatory hurdles have gone away and you're

telling me that L1's are not going to catch bid yeah maybe go maybe maybe this industry is not for you. Um because like we've been like in a state of the world where like finally it's going to happen. I want to go back to something Michael said like from our standpoint like I think I think Vance had a good tweet which is like private equity as an asset class is kind of broken. Venture is kind of broken because pension funds that need to manage like distributions to their bases like they're really sensitive to that. uh financial engineering doesn't work anymore in a world where rates are high. So like if you're in the mind of an allocator, you're sitting there saying this crypto thing is now more real. You're going to have more and more public companies that

legitimize this space. Um assuming they don't go to zero. But like the incremental crypto company in the public markets is extremely positive to legitimize this asset class. And like I mean it doesn't take much liquidity to drive crypto asset prices higher. I mean we are a drop in the bucket of traditional allocators. It's it's a big industry when you think about it, but it's actually not in the grand scheme of things. Circle IPOed at 6 billion. It went to 200 bucks because it doesn't take that much liquidity. And so it's almost 300. Yeah. Exactly. So I I think um it we'll start to see more and more different business businesses that are crypto enabled. We're going to see more

and more um you know Vlad talking about crypto very publicly. I mean you got to believe like crypto is now a very real industry and a lot of boards that have been thinking about doing this like how how many LPs you talk to in the fundraising trail and they say listen we've been paying attention. I have an analyst who's been pounding the table for crypto for the last 10 years. Come back to me when Gary like just changes his tune. Well, guess what? Now you're raising a fund. Now Gary's not there probabilistically. What's it going to do for allocators?

More excited. Of course, it takes time, right? Like an allocator like you got to warm them up. It takes a quarter or six months or a year for them to allocate. But like, you know, maybe we should talk about where we are in the cycle when we have Pomp raising a $700 million vehicle to buy Bitcoin, like I'm more concerned about that, but like assuming like the macro doesn't take a [ __ ] in two, three years time, we're probably going to go way higher and way higher. And just to touch on that, you know, the sales cycles for institutional LPS is not even in months, it's in quarters and years. It takes a really long time for the stuff to change. But I I do fundamentally agree. I mean, we are at the start of the process. And maybe if you want to talk about where we are in

the cycle, I I think we're at the very beginning. I don't think the four-year cycle exists anymore. You think no, no more fouryear cycle. We're at the beginning. This is early early stages. I mean, look, the institutionalization, the ETFs, the productization of all of these, you know, just Bitcoin, but now extending into other assets. It's basically like a global T-W and that last years. And, you know, I don't know where the price of Bitcoin will be at the end of this year. Uh, I would assume that it'll be higher at the end of next year. Earlier in today's episode, I mentioned Ledger's latest products, the Stacks and Flex, and I wanted to take a few seconds to tell you more about them. These wallets feature the world's first secure touchcreens, which don't just simplify

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would connect that to another idea which is I've seen verifiable apps. So they don't need necessarily need to be decentralized, they just need to be verifiable. And you know, I wonder if part of the reason why it's taken so long outside of just the infrastructure and the talent and all those natural reasons why it takes a long time to build stuff is because we've been trying to build businesses with like not one but two hands tied behind our back in terms of how Dows have historically worked. They don't work. Um, even the ones that work today are much more centralized under the hood or centralized maybe a negative connotation. There's more traditional hierarchy and structure that's involved with them than there used to be. And I'm curious if we were to all accept that as an industry that we can take some

components or properties of crypto that we like. It's verifiable. Everything is on chain. It's transparent. It's enforceable. Maybe that is part of the reason why like the governance of the governance of companies isn't broken. We don't need to fix it. How how much would you attribute how slow it's been to build lasting products to to that? Well, I'll give you a good example. I mean, obviously in version, this this is a reason of existence because I like deepen as a category broken tokconomics. You have equity and helium. You have a token. Put that aside for a second. Deepen as a category is fascinating.

Why? Because you have networks that are producing hive mappers mapped like a a third of the world's roads with a fraction of the capital. The data is updated in real time because the community has an incentive to update that. Helium again does interesting things for telos. You have Fortune 500, Fortune50 companies say this is interesting. We can actually leverage these networks to cut costs in our operation. Now, who benefits there? I would express a view like I'm going to go buy anyone like a telco that all of a sudden is going to save 20 30% because they're going to use crypto infrastructure.

Does that mean on a relative basis like what outperforms or would you rather buy Verizon or AT&T stock or would you rather buy Helium H&T? I don't know. It's a good question like because a lot of these tokconomics are codified. Could you change them? My my framework is super simple which is a network that catches a lot of demand is in a good place to then change the tokconomics and ultimately acrue value. And I think time and time again investors have made this mistake which is like they're too focused on that. Like when Facebook went public, how many investors faded Facebook because like oh we don't really know their monetization's not there. I'm like wait a minute like how many users are engaged in this app? Like you best believe that

there like no amount of financial engineering solves for a crappy product but like crypto as a category is really interesting. It's very real. More and more businesses are going to use that. The question is what's going to acrue value and and I my takeaway in all this is I'm not sure the token will outperform perhaps Robin Hood stock. Yeah. Yeah. Um the last thing we haven't talked about is is stable coins and um so so Bessant just increased their prediction for stable coins couple I mean this is like a month ago they came out and said $2 trillion stablecoin market cap by 2028. He just sent a tweet last week calling for what, 3.7

trillion, I think. So, obviously that shows up in the circle stock. That's one place it shows up. I'm curious to get your guys' take on the second order impact of this and where else this will show up in the crypto markets. Um, and almost like for people in this room, like how how to Okay, we we've got the Treasury Secretary calling for a 10x in stable coins in five years, less than five years. How do we in this room play that? Can I You can buy also houses with crypto now. So you can use fartcoin. Okay. Wait, that Okay, that's not actually how it works. Can I add one because I haven't What do you think this does to stripe equity? So Stripe uh about maybe nine months ago purchased Bridge and they recently acquired Privy.

Y this is something that doesn't trade publicly, I'm sure. You know, but I'm just curious, have they done enough? I would imagine their stock is ripping. So there's no Stripe's not public. Yeah, in private markets. Oh, private. Yeah. Um, so how does this translate into crypto markets? Well, okay, we talked about the future MAG 7. Um, I think the way that at least we break down kind of the world of uh coins in terms of stable coins is you've got payment stable coins on one end. This is USDT, USDC. And then you've got yield coins on the other end. This is USDS created by Sky. This is USD created by Athena. And this syrup USD created by Syrup Maple Finance. Now they have fundamentally different use cases.

The payment stable coins are for transacting a medium of exchange. The yield coins are for generating yield and asset, you know, allocation. Where this translates directly is the $3.7 trillion that is about to come on chain is going to go into both of those. Now, how much goes into each? Well, one of the unique aspects of yield coins is there's a lot of USDC. There's a lot of USDT in those assets. And so, I think you start to see the the dispersion. You know, one thing that we talked about a bit or we have talked about a bit is, you know, in 2021 you could throw a blind dart and, you know, hit a 3x, you know, minimum. And now you really have to know which assets are the ones that are going to outperform and you have to be in those assets if you want to perform at all.

And I think one of the ways of doing that is okay, assume that there's this massive title wave of flows coming on chain. Well, who's the benefit who's the beneficiary? anybody that's generating yield because going back to it anything that's generating yield there's a re business model there's revenue there's token buybacks I mean imagine if every single asset on chain had 10x 100x more TVL tomorrow what would happen everything rerates and maybe this means that there's more speculation maybe this means that there's more meme coins maybe this means you know etc etc but the best beneficiaries are the ones that are already generating that yield and can 10x that revenue and you know to the to the point on um you know being able to use assets you know for mortgages. I

mean look we we are we're going to take this back to the traditional markets as well where you're going to be able to say okay now I have these assets on chain I can use them as not collateral but I can use them in in asset uh understandings for a mortgage. I can use them. I can actually have Janice Henderson and we haven't talked about this, but like actually having CLOS's AAA rated CLOS's onchain in a billion size. Like that type of real world activity is where we're going to start to marry both worlds. But it all starts with liquidity and you know 3.7 trillion would be a great number to start with.

Michael, I want to get your thoughts. Uh like like let's use Circle as a comp for Maker Sky. Yep. Or Uniswap and you comp it it against Coinbase, right? like crypto businesses like crypto like a hyperlquid has 10 engineers it prints yep uh unis swap has a tenth or 100th of the employee cost structure variable fix of coinbase maker is interesting in the sense of like it's it's like the backbone of defi in many ways uh it's not catching a bid uh my part former partner Benifi we would all this discussion because he loves maker now sky but you know it's it helped me understand like at what point it's like like markets can stay rational longer than you can stay solvent kind of

thing but like how do you feel about like how do you explain this dynamic where like if you comp it like left side Coinbase or sorry Circle and right side Maker Sky pound-for-pound it's just like a it's a far better business model but it's a fraction of the valuation it's not trading like it should be what's it going to take for that like what gives you've got about one minute I have a 30 second answer. Uh, look what happened. So, Maker, you're still calling it Maker. It's now called Sky. The token is Sky. And and this transition is literally like trying to turn a a cruise liner. It takes a while. And I think the best comp that we can think about where things reerate is actually the transition that Maple Finance just did to Surup. And Maple Finance was MPL

token, now it's Syrup token. Uh, once they finally transitioned, I think it's gone up four or 5x since. And you know, Sky trades at I think a 2 billion FTV uh circle. Who knows what the real number is, but my guess is that the rerate will happen when the transition is done. Folks, that's all the time we have. Please, thank you very much. Thank you all.