Bull market or bait? Arca CIO Jeff Dorman on the cycle and token fundamentals

Transcript

GM, good morning. Welcome to the Milk Road Show, the daily crypto show where the cycle's changed, the players are bigger, and the dumb money isn't just retail anymore. I'm your host, Jay Hamilton. It's Tuesday, May the 6, and today we are joined by Jeff Dorman, CIO and co-founder of Arca, a digital asset investment firm. Today, we are going to discuss is this a bare market rally or a bull market trap. We're going to look at who are the buyers right now and the difference between retail versus institutional sentiment. We're also going to talk with Jeff about what segments within crypto he is most excited about, where he sees the biggest upside, and which tokens he is paying attention to. I'll give you a hint,

guys. It's on the fundamental and the buyback side of crypto. We're going to get into that and so much more today with Jeff. Before we jump in, tomorrow we'll be going live with Matt Crosby from Bitcoin Magazine Pro talking all about Bitcoin for this cycle and predictions there. So, if you want to tune in to learn about Bitcoin and where we think it might go, tune in tomorrow, 12:05 p.m. Eastern on YouTube and on X. Today's episode is brought to you by Letin Get Cash without selling your Bitcoin. It's also brought to you by Coin Shift, powering top crypto treasuries with their yield bearing stable coin, CSUSDL. Without further ado, Jeff, welcome to the Milk Road Show. Thank you for having me. How are you? Absolute pleasure. Doing great, my man. Doing

great. Things are things are things are good right now. You know, vibes. We're uh we're in a we're in a little bit of a uh a green run right now. It feels nice after uh several down months. Let's let's before we jump into the specifics of where we are right now in this week and what we're noticing, let's just zoom out for a second. I always like when we get somebody on the show for the first time to get your what's your base case right now for where we are in the market cycle. When you say market cycle, I assume you mean crypto cycle. Let's stick with crypto overall. Okay. I don't believe in I don't believe in crypto cycles, so we'll start there. Um I think uh you know n equals two, right? We've

only seen two of them and everyone just assumes that means these fourear cycles happen forever. Um, you know, I think ultimately we're probably getting to a point now where almost everything that's happened in the past in crypto is completely irrelevant and the next, you know, 40, 50 years will look similar to the equity market where you have incredibly long periods of bull markets and then very short fast draw downs. You know, there's a reason the mentality of buy the dip exists so much in equities is because the data tells you to do that, right? you get seven-year bull markets where you make four, five, 600% and then you get, you know, half a year to one year bare markets where you lose 20% then it repeats again. Um, you know, that's more typical of what markets should look like because uh if you have investment vehicles that people actually

want to buy that produce real revenues and cash flows and have real fundamental earnings. So, in terms of where we're headed, I think it's a little binary right now, uh, in the sense that either everything that Trump and the administration is doing here in the US from a tariff standpoint just immediately gets rolled back and becomes a complete non-factor and we move forward and move ahead as if none of that ever happened. And you know, you look at the the you know, six week sell-off from, you know, call it midFebruary to to early April as just a blip, no different than kind of like the COVID blip in March of 20120 or, you know, the the last Trump administration towards the end of 2018, or we're heading towards some sort of real recession, but we won't know if that's

actually happening for at least 6 to 12 months because these things don't happen overnight. Either way, we're probably going higher in the next four to six months while we figure that out, right? either going higher because this is much to do about nothing or we're going higher because you can't stay short forever when there's absolutely no new news and no information happening until we ultimately do hit recession. Like even if you look back at 2008 for example, one of the worst recessions we've had, the markets that that that recession really probably started, call it like middle of '07 um and the markets, you know, you had all kinds of news happening from middle of 07 till the end of '08, but the end of '08 is really when the recession happened when markets really tanked. In fact, from the day Mark Bear Sterns went down in March

of 2008 until basically Lehman went down in September of08, the market screamed higher, you know, even though it was pretty obvious that we were heading towards some bad things. So I think I think either way you're probably going higher in the near term, but it's incredibly binary in terms of what happens thereafter. What what probability would you assign to each of those outcomes, each of those scenarios? Right now, I'd probably say 80% much to do about nothing and 20% heading towards a recession. Um, only in the sense that if you look at all of the hard data, everything's fine, right? Earnings have been fine. Uh, manufacturing data has been fine, jobs reports have been fine.

There's really nothing that we've seen in the actual data that suggests that there's any real slowdown in consumer spending or in in in in GDP. When you look at all of the bad bad data, it's all survey data. It's all expectations, right? It's it's business confidence. It's it's, you know, inflation outlooks. So, as a result, I mean, there, you know, there's a finite window for how long this game of chicken can go on between the US and other countries on the tariffs before it ultimately does start to seep into the real numbers. but it hasn't yet. Um because again all of this could just be unwound with a magic wand overnight if you roll back these tariffs. So it's a 8020 and probably each day it's kind of like a decaying option. you know, each day that goes by

that we don't really get any resolution makes it, you know, 79,21 78 22. When when you look at who's buying right now, there's a real there's a real separation between retail and institutional, right? Institutional is extremely bearish and retail is clearly piling in and buying buying the dip as you said. How do you how do you think through those two sentiments? Well, it's h I mean the retail is buying the dip in equities for sure. I don't think that's happening yet in crypto. In fact, it's probably You don't think so? But like look at all the altcoins that are like like there's some real rips in the altcoins that I mean not not like not the major altcoins. Not the not so much the fundamental base.

I'm talking like down the risk curve altcoins. We're seeing some returns that I just I wouldn't expect to see. But those also are cryptocasino crowds. So those guys don't go away. Yeah. Well, let's start on the equity side. On the equity side, you know, again, the a lot of the macro doomsayers that have been out there calling, you know, 25 of the last one recessions, you know, that's what they get paid to do, right? These macro guys, they don't make money actually in their funds. They make money selling newsletters because fear sells. So, you have all of these, you know, uh, doomsday guys out there selling newsletters talking about how the world is ending. Um, it's bearing people up.

It's getting uh uh investors to to think about, you know, worst case scenarios. And again, that could happen. There is some probability that that happens. But in my opinion, it's just unlikely. Uh and then you saw the you look at the way Wall Street strategists have been predicting things for the last couple of decades, they've never been more wrong than they have been in the last four years. I mean, they they were, you know, they were all calling for a complete depression after COVID that never happened. Then they were calling for, you know, 50 bips of rate hikes in in 22 and we ultimately got what, 450 basis points. I mean, they completely whiffed on that. Then they were calling for massive rate cuts and a recession in 23 that we never got. Then they were all bared up in 24 and we hit all-time highs

again. Then they were all bowled up ahead of 25 and now they're all cutting their their estimates. So, you know, the institutional uh money has just been wrong. I think I think a lot of that is is systemic in the sense that, you know, these guys used to run all of investing because there was limited access from retail, right? It was hard to get a brokerage account. Most people poured their money into real estate rather than stocks. Now you got 247 trading on Robin Hood. Everybody owns a brokerage account. It's easy to get a crypto account. Like the retail just drives more of the flows now than ever before.

And retail is conditioned, rightly or wrongly, to buy the dip. And it has been working for you know the better part of a decade and a half. And more likely than not they will be right again because again the data shows that you know these selloffs uh even if it does lead to a recession are tend to be quick and shallow and these periods of prosperity seem are long and and prosperous. So, um I think retail's probably right again here and you probably have this institutional macro crowd just you know panicking some uh purposely because they actually are looking ahead and think that the world is ending some just because they were overlevered and were for sellers. But either way, we we've seen the fastest move from bullish to bearish in terms of

sentiment on Wall Street um that we've seen again since co. So um we'll see. But but on the crypto side, I do think it's different. And you know that chart that you're showing there from from my latest writeup like that's the equity market. I think that is what crypto will look like again in the future here even though it doesn't look like that right now. Right. Crypto is probably the opposite of that right now. The sell the selloffs are long and painful and then the the the the periods of prosperity are are incredibly fast and and and high but but they don't last very long. But I think in crypto we're not seeing that retail bid yet. Um you know Coinbase rankings and and Robin Hood volumes on crypto are still way lower than they were in 2021.

you know, you're certainly not seeing a massive rush of capital coming into No, no new capital. Yeah. No new capital coming in. So, I don't I don't think retail is rushing to buy the dip. And also, I think we have to use the word retail probably a little carefully. Like there's actually, you know, when you talk about institutional investors in crypto, you're talking about funds like mine, like couple hundred million to a billion dollar hedge funds that are actually managing outside capital. When you talk about retail, there's really two types of retail crypto. There's the true retail kind of, you know, weekend warriors that show up on Coinbase or Robin Hood and place a trade here and there, but then you have like, you know, the super wealthy cryptonative retail that don't have jobs, but they're pushing around hundreds of millions of

dollars of capital in the same size that funds are. Um, you know, doing all kinds of onchain farming and things like that. So, I think I think the cryptonative retail um is starting to come back. I don't think the true kind of you know place a few trades here and there retail has has really come back in and we just aren't seeing it in the numbers and you mentioned some of the high flyers recently. I mean you know some of those things were like you know some of the AI coins for example that were down 90% year to date. Yeah they just rallied 100% but they're still down 80% year to date. I mean it's like you know these are this is not inst indicative necessarily of money coming back in.

It's more indicative of just how oversold some of these just a regression regression to the mean basically. Yeah. Yeah. Yeah. How much of a the crypto sentiment do you think is still affected by the FTX crash of 2022 and the hangover from the last market? Because as you said, the the the crypto market does not look like that S&P 500 chart yet. You know, we are still a early asset class, an innovative asset class. You're investing in early tech. There is there is going to be massive volatility.

Do you think that we're still affected by that? And do you think that that there's going to be a shift and a change? Oh, for sure. I I think the PTSD from 2022 is is very real and and again, it's not unique to crypto. I mean, if you go back to 20201 in the equity market and or if you go back to 2008 2009 in the equity and credit markets, it took it takes a long time. I mean, I, you know, I started my career in 2000 and, you know, had an eight-year career before the 2008 wipeout, and I lost half my net worth in, you know, a matter of a couple of months. Um, which obviously was not a lot at the time. I was still young, but but, you know, lost half my net worth, lost my job. You know, I got fired from Meil Lynch. I would say, you

know, even though the markets bottomed in March of 2009, it was probably end of 2011, mid 2012 before I even really started investing seriously again in equities because I just didn't believe it. Um, you know, it takes a long, in fact, even if you look at the the chart, right? I mean, you know, most people look at an equity chart from March of09 and be like, "Oh, we've gone straight up for 15 years." The reality is we went straight up from March of09 to September of09 and then we went nowhere from September of09 until like middle of 2012 because you know people were beaten up by that. They weren't in a rush to put money back. People still if you go back to that 2009 2010 2011 period like at the time you had European banks and governments blowing up. You know you had the the acronym the pigs

you know Portugal, Ireland, Italy, Greece and Spain you know blowing up. People thought we were headed towards a double dip recession you know massive calamity. And of course, it didn't happen partly, if not mostly because of government intervention, you know, and ultimately it led to a 15-year bull market with a few blips here and there. I think that's probably similar to what we're seeing in crypto right now, which is that, you know, 2023 was kind of that fast move off the lows and then we've pretty much gone nowhere from, you know, called mid 2023 till now. Um, because people don't trust it. Uh but it's going to come back and it will come back and it will be led by real projects and real tok real tokens that have good tokconomics with buybacks and dividends and things that actually return capital

to token holders and ultimately you'll look back 10 years from now and be like I was too hesitant. I should have just been allin because this is the future of investing in the future of finance. But people are still expecting these 80 90% draw downs because they're anchoring to 2022 which was like a once in a-lifetime storm. I mean that was not a typical sell-off. every single counterparty was failing at the exact same time. Um, you didn't know where to put your money because, you know, Genesis was imploding and BlockFi was imploding and Celsius was imploding and FTX was imploding. Like that that's not a typical sell-off.

That was very 2008 like where, you know, Bear Sterns and Lehman and MF Global were failing. Like that's that's not the norm, but it but it is the norm to take a couple of years to feel past that. And as you said, when we only have uh a very limited number of years to look at for history, there's there's not a lot of historical data. We've only been around for a few I mean a few cycles. I know you don't believe in the four year cycle, but we've only been around for less than, you know, 10 years really. A lot of these assets are quite new. So, uh there's there's going to be a lot of volatility in that. I want to I want to talk about some tokens that you've been writing a lot about recently. Hyperlid

and radium. Uh but first I just want to talk about a few you have a great post uh pinned on on your ex about the hills that you are going to die on and you some beliefs that you really hold. Uh and one of those beliefs is that we should ditch the term altcoin and give a better terminology to all of the various crypto assets that we have. How do you which categories within crypto are you focused on and do you believe are going to outperform? Yeah. Yeah. I mean I think the altco the term altcoin needs to be deprecated immediately. Like it makes no sense and and and it really it goes down to the fact that ultimately what crypto is is just a

rapper just like the ETF is a wrapper, right? You can put anything inside of an ETF now. You can put stocks, bonds, real estate commodities currencies actively managed funds, short 2x levered funds, right? It's a rapper and anything can be put inside of it. But the first ETF was SPY, right? The spikers. And you know, just because that was the first one doesn't mean that that's where it stopped. And you know, if you asked anybody right now like, hey, do you and you know, are you an ETF investor? They'd be like, what are you talking about? Like what what kind of ETFs I'm do I buy bonds? Do I buy stocks? Like the ETF itself means nothing. It's just physically a vehicle that you put things inside of. Like that's ultimately what crypto is now too, right? The first type of crypto was Bitcoin, a cryptocurrency.

But now a token is just a wrapper that you can put equity like tokens inside of. You can put debt-like tokens, currencies, commodities, you know, utility coins, meme coins, all kinds of things can fit inside of this, right? And the idea that all of this stuff should just be mentioned in one breath as altcoins because they're not the first is insanity. I mean it will sound as stupid as saying you know did ETFs go up or down today like that that makes no sense right and that's what it will sound like when we talk about altcoins in the future so when you look at the types of tok first of all you have different issuer types now right you have people and and celebrities issuing tokens you have actual companies you have decentralized entities um soon you'll probably have governments and munis you'll probably have universities

one day um you know that so you have all kinds of issuer types then you have all kinds of sectors right you have uh uh you know cryptocurrency, you've got DeFi, you've got DPIN, you've got gaming and AI and stable coins. I mean, these are all incredibly different. And again, packaging them all together is just nonsense. And then within that, you know, you have different token tokconomics, right? I mean, some of these are just completely inflationary. Um some of them are the opposite. They're they're buybacks. They're am they're advertising. And you know when you look at all the nuances, crypto looks a lot more like fixed income than it does anything else, right? You know, you have all thing with the fixed income market. You have government issuers, municipal issuers, corporate issuers.

You have all kinds of coupons and maturities and covenants and callability structures and convertability features. I mean, that's ultimately the the nuances of the bond market is what we're now seeing in crypto. Even the Trumpcoin is a good example, right? I mean, the Trump coin started as a memecoin with no utility and then what did they do? They added utility by saying if you have a certain amount of tokens then you're eligible for a dinner with the president and independent of you know I know every time you mention Trump it it elicits a binary and uh you know pretty uh uh vivid response visceral response visceral response. Yeah. But the um the reality is like objectively without doubt regardless of what you thought the Trump coin may or may not have been worth before the

announcement of the dinner, it is worth more after the announcement of the dinner because that there is real value ascribed to that. And you can do that with any token. You can start a token that has no value and then you can all of a sudden add a revenue feature or a buyback feature or a utility feature. And you know I I always break down I I I always break down the value of something in three ways right it either has to have financial value meaning you have real revenues and cash flows and those are being used in some way shape or form to add value to the project right either in the form of you know reinvesting in the business or dividends or buybacks or something. Two is it has to have utility value, right? Something that that you it's useful for something, right? You

can use it for um you know, in the crypto world, paying gas or collateral or you know, in the case of a Trump dinner, something like that. There's some usage that you get in in the non-crypto world, you're talking about things like Starbucks or, you know, United or Delta Miles, things like that. And then there's a social factor, right? The cool factor. You know, is it cool to be a part of this? Whether that's a community or you know Tesla for example there's a cool factor to being a Tesla investor you know obviously you know so when you look at those three things ultimately financial value is the one that people understand the most and are and have a much easier way of identifying what that value is worth because we now have a hundred years of history of Graham and Dodd and Warren Buffett and you know

cash flow analysis you know you give 10 financial analysts the exact same inputs they're going to give you the same output because they all use the same methodology but that utility value and social value is where it gets a lot harder. They they absolutely have value, but nobody really knows how to value and that's where, you know, a lot of the alpha comes in is is is trying to figure that out. Okay, I want to shift uh over to a couple tokens that you've been doing a lot of research and looking into hype and radium. Uh before we do, we just need to take a quick moment to hear from our sponsors who make the show possible. Selling your Bitcoin should be a last resort when you need cash. That's why there's Lein, the trusted platform for Bitcoin backed loans. You can unlock cash in as little as 18 hours with no

monthly interest payments and no prepayment penalties. They've issued over 9 billion in loans and never lost a single Satoshi of client funds, even during the chaos of 2022. If you're a long-term hodler, this is the move. Get liquidity without selling at milkroad.com/letin spelled ledn. Meet CSUSDL, the stable coin built for institutions and dows. Don't just hold basic stable coins. Earn yield all without compromising security. Backed by regulated real world assets and secured with institutional grade risk management by our friends at stakehouse Financial.

Put your treasury cash to work, earning native yields and protocol rewards. Built by the team behind Coin Shift, which is trusted to manage over 1 billion in business treasuries on chain, including a Gitcoin, and hundreds of leading institutions, cycusl is gaining traction at milkroad.com/coinshift. All right, we're back. Jeff, let's talk about Hyperlid. Hyperlid has been a a star throughout uh the last uh throughout this cycle. And I mean if we I'm going to bring up the charts quick to show it's you look at the chart of how it's performed within perp trading and you know look at it

just take over this chart of you know it was nowhere to be seen earlier in the year before it launched and now it's you know it's leading the way right. So let's talk about Hyperlquid. What's what's your thesis on Hyperlquid? What are your thoughts here? Yeah, and Hyperlquid for those who don't know is is in the DeFi bucket. Uh you know, this is a perpetual exchange, a place where you can go trade uh futures on Bitcoin and ETH and and and a variet variety of other tokens as well. You know, similar to others that you've seen in the past. Um you know, things like obviously on the centralized side, you've got Binance and and and OKX and BBIT and others. FTX used to be a big player. On the decentralized side, it's been a lot a little bit of a game of hot potato until

Hyperlid came. You had, you know, you had DYDX leading for a long time. You know, there's other GMX and Drift and others, but Hyperlid, you know, really came out in the last year and a half and and and in in our opinion, probably one of the most exciting projects since the B&B token back in 2019, right? So if you go back to like Binance, why we were so excited about Binance six years ago was in my opinion they figured out the perfect use case for a token which is to become one of the greatest capital formation and customer bootstrapping mechanisms ever created. Right? They issued the token to their customers. And then they said we're going to use 20% or so of the profits of the business to buy back tokens. That's the financial value.

But they also said you could use the B&B token to get trading discounts on their platform and to use it as collateral for trading futures and trading options. That's your utility value. And then you know obviously CZ being a big character uh you know created some social value. So like that was a good example of a token that had all three. And obviously B&B went from you know what four bucks to 600 bucks or $700 at the at the peak because they did all those things right. You had a profitable entity with a good user experience that nailed the financial utility and social value. Hyperlid is basically doing the exact same thing but on the decentralized side. You know, first they nailed the user experience. People who really like to trade on there. Um it has a really high arpoo for those who are more, you

know, traditional financial guys, you know, average revenue per user, meaning you know they have sticky customers who like to trade there. And then after they started to build a good product, then they issued the token and they did an airdrop. I think it was like 30 or 33% of the tokens were just aird dropped to their customers and the rest were obviously held by the foundation and and and um they never did a VC deal. They never sold any private tokens to anyone. And then they they they built this the right way which is they immediately said that all the revenues of our business we're going to use to buy back tokens. Currently 93% of their revenue and they're making somewhere around$ one and a half million to $2 million a day in revenue is being used to buy back the tokens. So right there you've got your

financial value. They're now instituting the same Binance playbook of utility value. They're instituting a fee tier where depending on how many tokens you have and you stake, you get lower trading fees on the platform. There's your utility value and and you know, not to mention, they're also building this on their own layer 1 blockchain. So, there will be other opportunities to use the token in the future as you know, a launchpad for other apps and products that are built on the layer 1. Um, and then, you know, the social value. I mean you, you know, all you have to do is type in Hyperlquid on, you know, X Twitter and you can see that like, you know, people are talking about this and they end every tweet with hyperl, right, as as sort of like a, you know, no different than when CZ would pulled up

four or, you know, all the other things in in in in the past that when things go viral. So again, here's a project that is making, you know, run rating somewhere between 500 and a billion dollars a year. They're pouring it back into their own community because don't forget like they didn't sell tokens to people. They just air dropped them. They're they're if if you think about why tokens are so exciting in the first place, it's just the first vehicle that's ever fully aligned and incentivized all of your stakeholders at once. Meaning your founders, your employees, your customers, your investors. They're all incentivized in the same way, which is to make the product better and to grow the token, right? And that's why I say that tokens are the greatest capital formation and customer bootstrapping mechanism ever

created because they instantly align all of your parties. And that's that's a huge win, right? Because if you are a customer of Hyperlquid and you own the token, you're going to become not only a power user, but an evangelist. You're going to start telling others to use it and you're going to, you know, praise them and and you know, it's sort of the opposite of what traditional finance does. Like take imagine if you were, you know, look at like a ven diagram of McDonald's for example, like how many McDonald's shareholders do you think actually shop at McDonald's there, right? And and and vice versa, right? How many customers actually gain financially in any way? And you can go further. I mean, you know, take Door Dash, right? How many of the Door Do Door Dash delivery guys and, you know, customers actually benefited from Door

Dash's success? Or Amazon Prime. If you were the first Prime member and help build that, did you get any financial success? No. Unless you own the stock, you know, or or actually airlines are even the better one, for example. Like, if you are a massive flyer on Delta, but you don't own the stock, do you really care about Delta's success? No. You just care that they have enough flights for you to use. you could care less about Delta's success because you're not aligned in the right way. So, the tokens that are doing this right, when we use the term tokconomics, like that's what we're talking about. Can you find a way to align all of your stakeholders, meaning your founders, your employees, your customers, your shareholders, anyone else, you know, tangentially involved in the community? Can you align them with a single goal? And, you know,

Hyperlid is one of a handful of tokens that has figured that out. Yeah, I was just going to say that. Uh how many how many tokens do you think have figured that out? Because I I agree that it's it's a handful. It's not many. It's not a lot. It's not a lot. And and you know, probably in the 10 to 20 range and a lot of them unfortunately have been exchanges because those are the ones that are the most instantly profitable, right? So they are the you know again a lot of times these companies and projects can't do it because they haven't made any revenues yet. So it is generally going to be these service providers that that that can generate revenue off the bat. But it doesn't have to be. I mean you know there can be plenty of other businesses that do this

and if you you know like grass protocol for example is a good example like grass is a um you know for those who don't know they uh essentially are taking you know compute from you know everyday users who opt in um and using that for AI data generation and they sell that data to you know customers hivemapper you know in the dpin space another example hivemapper you know for those who don't know has a token called honey you Hivemapper, you physically buy a device, you put it in your windshield, and all of the customers drive around mapping a new version of Google Maps, and then they're selling that data to logistics companies and trucking companies. Like, there's real revenue coming in. So, and they've they've mapped 30 40% of the world already in in

a few years compared to how long it took Google to do it. It's it's I mean, there's an example of something that is working. We've had Hivemapper on the show before. So it's but but the difference is because because and we are as well but the difference is like you know deepin by definition is inflationary because they have to use the tokens to incentivize you to do the actions whereas these exchanges can be amvertisers right where they they can actually issue all the tokens up front and then buy them back over time. So there is a difference but but also this is why I think the future of crypto has nothing to do with most of the projects that exist today. Like the the analogy I've been using is if you go back to the dot days in the early 2000s, most of the dots don't exist anymore, right? They

were good ideas, but maybe too early or maybe, you know, didn't work for whatever reason. And a few of them, you know, lasted, right? Amazon and Price Line and things like that, but a majority of them went into business. But now, you wouldn't call anything a.com because everything's a dot, right? We lost the.com name because every single entity on earth uses the internet. You know, Domino's Pizza is now a dot, Walmart's a JP Morgan's a, right? Um, Harvard University is a do. Like, they're all oredu. You get the idea. The um the the growth of the internet had nothing really to do with the early internet native companies. It had to do with the fact that the existing companies that have been around for 100, 200 years figured out how to use the internet. And that's likely where we're

headed with crypto as well is the the we we we're exiting the crypto phaser. The only thing that has a token is this cryptonative company that would not have existed without crypto. But now you've got Trump issuing a token, right? And even though again there's it's a polarizing token and it led to things like the Libra token and other bad things. It it ultimately sets a precedent for what will likely come in the future, which is Netflix issuing a token, Disney issuing a token, New York City issuing a token, you know, uh, UCLA issuing a token. Like, you're going to see better projects. You know, your local bodega or local restaurant, your local barber shop, your local gym, like, you know, we're talking about ways to incentivize. Imagine a local gym says, "Hey, we're going to airdrop tokens to every single one of our customers, and

you get a discount on your gym membership if you pay with the token or stake it." um you know, we're going to give 10 or 20% of topline revenue back to our token holders. You know, it's the same concept. It's the exact same concept as hyperlquid, only you're taking a business that could have existed with or without crypto. So, I think that's where we're headed. That's where the better investment opportunities are going to be. It's not going to be in the 712th layer 1 blockchain with, you know, 10% inflation that has no usage. It's going to be real businesses that figure out that you can issue a token to align your stakeholders and to grow your business. Yeah. Yeah.

The L1 trade is a is a dangerous trade. It's it's a trade of past cycles in my mind. It's it's oversaturated. It's VC backed. The inflation is never ending. There's going to be token locks that continue forever. It's it's not the it's not the trade that I think you should make anymore. I want to chat about token buybacks for a second because you made this great chart and then I want to lead into Radium before we wrap up here. uh when you look at the the different token buyback programs that are out there right now and there's not a ton of them, but there's there's a handful that are doing great and are really doing meaningful things. What what stands out to you? Well, the first thing that stands out is that I think we would have been here three years earlier if it

wasn't for the Gensler SEC machine. I mean, it it's not rocket science to use your revenues and cash flows to buy back tokens or to do dividends. What had changed was that the fear in the crypto world of of retribution from the government especially in the SEC with you know jail time and fines basically made every lawyer in crypto say you can't do anything that you know is good for your token and as a result it led to the stupidity of the memecoin phase and everything else that we've seen now with you know projects like unis swap for example which you know makes a fortune and gives none of it back to its token holders because their lawyers and their VCs are telling them not to.

So now that that's passed, you know, and we are clearly kind of heading in a new direction in terms of government regulation and and and you know, specifically with the SEC, but not exclusively, you're seeing that these projects are like, oh yeah, the best thing we can do is take our revenues and plow them back into the business because guess what? That's going to lead to more users and it's going to lead to more token holders and it's going to lead to more business and thus more buy. I mean, it's just like it's common sense. It is just common sense that this is what you should be doing. and you're going to start seeing a lot more of it. Now, again, the beauty of crypto and why you need to really, you know, dive in or maybe have a 10person team like I have, you know, running a fund is that these

are all unique and, you know, again, it's not like one token fits all. Every one of these has a different buyback schedule, has a different cadence, has a different mechanism for doing it. And you have to really dive in and learn that and and read the white paper and be on their, you know, discords and figure it out. But you know all of these projects mentioned here have a completely different mechanism of buybacks and some of them have more revenues than others. But you know you can see on the list there that they're heading in the right direction that this is the way to do it. You want to depreciate the supply of your token. You don't want to inflate it away. When we look at this list we've got Hyperlid a Jupiter radium maker on this list. All of these tokens fit well into

the fundamental thesis of focus on the businesses with real revenue, real fundamentals. We've we've already talked about hyperlquid. Which other of these are you paying close attention to and do you like as potential investments? Yeah, I mean in general um you know we are certainly more geared up lately uh on DeFi for that for for a couple reasons. I mean we we have a pretty simple thesis. Let's just back up for a second. a pretty simple thesis right now in terms of where we're not not just that we're sort of leaving this.com world or whatever crypto world but that ultimately as every single entity in the world starts to use blockchains and they will right because we've just learned over time that

blockchains work layer one blockchains work DeFi works it's just a matter of time before you get assets on here that people care about if you think about what a blockchain is a blockchain is designed to move assets in the same way that the internet moves communication So, if a blockchain works and it's designed to move assets, the next step is well, what are the assets on a blockchain? And that's where you, you know, go crazy because you're like, actually, most of the assets on a blockchain are terrible and nobody cares about them. And the only ones that people care about are, you know, Bitcoin and stable coins. So, what are the assets people care about? Stocks, bonds, real estate, you know, hard assets like, you know, your your your your cars and your jewelry and things like that. Like ultimately that's the next step is we

need to get the world's assets on blockchains and once we do who the winners are going to be whichever layer 1 blockchains get chosen for that right so even though Ethereum and Salana have a big lead we still don't know who is actually going to win that race because we haven't seen the US government use blockchain yet in any meaningful way we haven't seen Walmart JP Morgan use blockchain in a meaningful way like ultimately whatever they choose that's going to be the winner because they have the majority of the world's assets and Then the secondary winner is going to be the DeFi applications built on those platforms because that's where ultimately you're going to see all of the movement of assets, the collateral, the lending, the partnering, etc. And then you know what else benefits? You know, maybe some gaming companies here and there, you know, a place where you

can, you know, uh, benefit from having NFTTS and onchain assets. Maybe things like AI which help you navigate onchain. you know, eventually you'll have AI agents that you just tell, hey, I want you to set up a wallet and send, you know, 20 grand to this entity and it just does it for you. So, there will be a fair amount of winners and that's sort of where we're focused, but there's a lot of tokens now within those that are doing things the right way. And again, most of them are in the DeFi space right now or in the centralized space, right? Your BNB tokens, your Leos, your radiums, Jupiters, a hypes, you know, Athens, Getos, Leos, things like that, a drone. But, you know, we will see more and more better designed tokens now that again there's just less fear of retribution from the government and and

you know quite frankly if there's any investment bankers listening like you know get off your ass and do something. I mean you guys are the most creative people on earth you guys you know I worked I worked for investment banks for a decade. You know there there's no shortage of creative people in investment banks coming up with structurings for you know preferred and convertibles and equities and debt. And you know, even one of the airlines a few years ago, they found a way to issue debt backed by their loyalty points, backed by their miles. Like that's incredible. Token tokens are just better capital formation tools. Like go pitch a Disney token and say, "Hey, Disney, like, you know, go give issue a token, give 10% of your topline revenue back to token holders through a buyback. let them use the Disney token to pay for

Disney Plus and to get fast pass at the parks and to get early access to IP and you know you'll have the greatest token on earth and it'll be you know it'll add a couple you know hundred billion dollars to your overall cap stack uh and you can still have your stock being a you know the asset that people buy if they want to have just you know direct access to your cash flows. You can still have your debt which is a claim on your you know your assets and then you can have your token which is a claim on your customer loyalty and your growth. Like there's, you know, that is where we're headed where tokens are the third part of a capital stack. Once these investment bankers figure this out and realize that there's no more retribution from the SEC and again where do these

tokens trade, what what blockchain are they issued on? Which DeFi applications are they used for collateral? Like that's who the winners are going to be. It's going to be stable coins, protocols, and DeFi and a few other ancillary sectors here and there. How do you decide between Salana DeFi versus Ethereum D5? Well, that's the problem right now, right? Is that it's so fragmented, you know? It would be a good example would be, you know, I I think I got my first iPhone in 2008 and I was I'm not much of a gamer, but you know, people were playing Angry Birds at the time. So, of course, I downloaded the Angry Birds app, right? Angry Birds became popular. Of course, there's an iOS version and an Android version, right? It's not like they just said, "Nope, we're only going to use this for iOS and that's it." Like, that's the

same thing's going to happen in crypto. Like, if my Disney token is a success, they're going to issue it on any chain where there's users. They're not going to be like, "Nope, we're just doing it on Ethereum because we have some pride in Ethereum." They don't care. They're going to say, "Okay, which chains have users? Oh, these ones. Okay, that's where we'll issue it." And you'll have, you know, every app will be in every app store. So, the apps will be the tokens and the applications and the app stores will be the blockchains. And, you know, there'll be a handful, three, four, five that ultimately win. So how do we think about it right now is again this is where it gets harder because you know Salana has a lead right now being you know second or third or fourth most used blockchain but almost everything

happening on Salana is complete nonsense. It's just memes and you know stuff that won't exist in five or 10 years that nobody cares about. So it's like it's a proof of concept but with the wrong assets. So if you're betting on a radium or a Jupiter, you know, a jetto or something on the Solana blockchain, you have to have a little bit of a forward analysis that eventually these same applications that you're betting on today that are being used for memes will eventually be used for stable coins and stocks and bonds and other assets people actually care about. Which uh last question, Jeff, this is such a great conversation. I want to keep asking you questions, but I we won't go too much longer because I know I'm taking up lots of your time.

uh with if we look at the rest of the cycle, what would you expect to outperform? Would you expect L1's to outperform or and and L2s in the infrastructure side or the DeFi side? Yeah, I'm definitely more partial to the DeFi, the application side. I think the fat protocol thesis probably did more damage to crypto than anything because it led to, you know, just infinite bid from venture capital investors on, you know, the 800th L1 that does the exact same thing. I I think it's impossible for a layer 1 to capture more of the value than the applications built on on top of. In fact, you're already seeing it. I mean, like Tron's a good example, right? Like why is Tron even a blockchain that anyone cares about? It's

because they have a massive amount of Tether, you know, the stable coin being issued and sent along that blockchain. So, you know, I think Tether is what 140 billion and I think, you know, almost half of it is on Tron and Tron has a $23 billion market cap. So, already the fat protocol thesis is dead right there. The value of the Tron protocol is less than the value of the assets on it, which is stable coins. And and the only reason I use Tron as an example is because it's cleancut because there's basically nothing happening on Tron besides Tether. Um but the same thing will be true of Salana and Ethereum and every anything else which is I just I think the layer 1 layer two investments will go higher if all of blockchain continues to succeed and grow but I think they will go higher at a

much lower rate and a much more binary outcome than the applications because like I said like Hyperlid's a good example if Hyperlid wins ultimately a version of Hyperlid will be on every chain and will be compatible with every chain you know if a continues to win as the lend borrow platform like they will vertically integrate and you'll have all kinds of trading and lendar and everything happening there and it will be across every chain in some way shape or form. So I think it's just a better bet and a more uh probabilistic bet to bet on things like gaming, AI, DeFi, things that that again can sort of exist across all chains rather than having to pick a winner.

Yeah, fantastic advice. Jeeoff, thank you so much for joining the show today. Really appreciate your time. Absolutely. Appreciate you having me. Thanks for listening in everybody. Have a wicked awesome day. We'll see you back tomorrow with Matt Crosby from Bitcoin Pro Magazine. Thanks for listening to today's episode, y'all. Before I let you go, we've lined up a partnership with OKX, one of our favorite exchanges in the space. And with this partnership, if you are trading on OKX and you use the link in our show notes, you could get an opportunity to win $60,000 USDT from a prize pool they have going right now. Why do we like OKX? A few simple reasons. Uh, it's got great trading options. It's it's costefficient. They've got great tools, security and trust most of all as well.

We really trust them. So, check it out. Click the link in the show notes and get yourself a chance to win 60,000 USDT today. As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one. There's also a link in the description to our free 5-minute daily newsletter where we simplify crypto for you while making you laugh. And if you're willing to step up your crypto investing game, we're going to also leave a link for Milk Road Pro. You get access to our portfolio where you can see exactly what we are buying. This is your number one resource to help you invest successfully in crypto. One final note, this show is for educational purposes only and nothing we say is

financial advice. Investing in crypto or any asset is risky and you should never invest more than you can afford to lose. Thanks so much for listening in my friends.