Dan Matuszewski's (CMS) Trading Playbook

Transcript

the whole industry is just starved for Action in such a way that they're like as soon as it gets a little momentum it's just fine all right everyone welcome back to another app of Empire we have Dan from CMS joining today Dan what's going on man nothing um like we were talking a little bit before this Market's still up so everybody's pretty happy about that um on hopefully it'll be spring soon so I'm happy about it all no complaints off for Bostonian who's uh freezing his ass off over there I know it was like 65 degrees like a week ago and then it went to like I don't know like 10 or something like that so it was a real emotional swing yeah well before we jump into the Pod man I feel like uh congrats is in order uh you you survived when a

lot of your your comrades did not so I know yeah pretty happy so far I've gone this recently with you were I don't know that's probably six months now um I think the really the only reason like we made it out the other side um is I lived sorry trading Bitcoin forever ago now but in the beginning exchanges it changes didn't like rob you but they would just get hacked like catastrophically sort of every six months um like Gods everybody remembers but even before that like um fifth floor is really big like they died like crushed um before that it was the one that bitfinex turned into and the business

that hacked as well exciting like the whole point was like you you sort of had to mitigate your kind of product exploded on exchanges um because like you could never trust that your sort of capital would be preserved there and it was like a very like high race right like you sort of like made the assumption that want to change would rob you if you were using like five in any given year um and you like had to sort of expect the catastrophic loss of funds for stuff that like you were parking at so like we while we like used FCX and like we were very involved um like we were investors in them and like we had Capital Park there at the time like when it went down like we we had an amount of like balance that we were able to like eat right so like we

it was never in our thought that that was completely saved uh we didn't think you would end up being a case of like fraud but we we did think that there was like a potential like security risk right like the cold wallets get compromised from some random thing and be like well they're supposed to be cold but like [ __ ] happens right so like like there's always the possibility that like the funds are lost because of seizure hack we're most likely hack anyway so that was like why we were able to sort of cut out the other side of it even though we got ding sort of just like everybody else did so we we self-custody a lot when we can um let me do something because that is but that was the the big Learning lesson I think a lot of people got from this um

there were people from the past sort of had just like archaically kept around yeah how badly did you guys get dinged if you can if you can talk about that um I think it was about 15 or AUM um it's hard right because like what do you mark everything to and actually to be fair that we're not even entirely sure how the claim is gonna work um because like we had it was weird the last 48 hours um you kind of had like in this weird period where you knew you weren't getting your money out like withdrawals were not happening but you could still trade so like you had this odd incentive where you were trying to lose as much money on a few ox and like make it away right so like the the one that like I really like popping on Twitter at the

time was like it was like buy Solana on FDX and like selling on binance and like try to get it like we were doing all sort of like weird pair trades wherever we could get borrow um that we could like sort of do delta neutral so we ended up with like a really weird grab bag of stuff like on there and we don't know how that's going to be marked or like you're gonna be on all that so I don't know like 15 sort of like our best guess like where it falls I'm curious Dan uh we learned that gallowish uh I think yeah yeah weird name French you know my friend's terrible even though anyways he sold his steak for 16 cents to the dollar he said look uh they're smarter people might take forever what do you think of that do you think that's fair would you take

it yeah it's a good question um so you got to remember that there's a time value of money right so like let's let's assume like you're looking at five years um for like a process which is probably ballpark sort of estimate I mean docs for instance is still going right like we're 10 years on that um the the what I've heard from people that do this sort of for a living on the bankruptcy side is like the fastest scenario you'd ever be looking at is two years so anyway let's say let's say five years for like Simplicity you say but if you think you could make 10 a year in the market sort of on your money right like that's sort of a 50 return that you have to like take into taking the cash today um versus like whatever you potentially get if you like bring it to the end so

like I I don't know like it turns with like a trade like maybe what I think Kevin can like sort of make on the money otherwise it's probably like I do actually tend to be the assistant like that money is probably mostly going to come back so like if you were to like make a market on like where it's gonna land in five years I'd probably be like in the 75 cent to like 80 cent Mark if I did like make something um but like you can use the money for Stuff differently today and and you don't know how like the treatment of stuff is going to be like I think what we've sort of like found since like the dust is settled on this stuff is uh there was more money than they thought um and some of the assets like aren't as terrible as they thought uh and so and

that that seems to be like good chapters in front of it like this is like a colossal amount of like Venture bets that are made Matt so you sort of just have this broadbasket exposure for the stuff like as it plays out over time but it it's just gonna be a long time I think Kevin like wants to move on which I totally understand right like I don't think he wants to be managing a bankruptcy claim for I don't know however many LPs he's got for five years like I don't think that's like a great use of anybody's time and I I'm not even like entirely sure I don't know because I haven't spoken to BLTs but I guess like they're okay with you look like we're just gonna like put the Bandit on this and like move up so I I think like it's like less an

economic sort of decision um than it was just like the sleep and rational sort of way to do it but I've heard they traded up to like 22 signs I actually don't know how people are training the claims um because we don't like we don't even know how the treatment I mean I guess if you have dollars a TV because you have a dollar claim but like if you have any other basket of stuff like it's like I've heard like weird scenarios from like people that are legitimate like players outside of crypto that do like bankruptcy stuff but like the composition of the assets so it gives an example but a scenario we've heard which we don't know if it's going to be true but it came from a very reputable like person who was saying that because of the way that the the agreement was struck and effectively

like you owned your assets like on FTX um the way like your user agreement was written that there's a world that like let's say you had a hundred thousand Solana on FTX and like the bankruptcy goes through like all their stuff and they go oh look we have five million Solana but you may get all your Solana back because they just pay out all the Solana Pro rata to all the depositaries and then the rest of the stuff gets handled so we don't know if that scenario would play out the Netflix need to be a little more like of a weirder attack that it might take but anyway there's just open risks on this stuff which is also why these claims are trading cheaper than like necessarily with the implied value of them would be if you held them to expiry because there's a lot of unknown stuff that

could come up in the bankruptcy stereos like that or like yeah look I mean there's still like there's been job of Club X on like withdrawals that went out over like I mean like the 90-day period seems crazy time for customer activity on the thing but who knows like maybe they're like the last 48 hours like we're gonna change stuff so I there's a lot of unknowns in this stuff it's like just beyond like will they have x-axis like they have X dollars of like stuff and they have like why liabilities like how does like the claim work there's like weirder things that had to be thought through so I I'm very curious how people are actually trading these unless they're just like pricing them surgery they're like we can eat yeah I heard you correctly there so there could be a scenario where they might

recoup like 90 of the Solana but 20 of another coin and so if you had Solana then you're gonna recoup a higher amount versus the other person that has the other Bitcoin or something yeah ethereum and you know it could be a weird waterfall that each investor gets a different amount that scenario got flooded to us is like a potential um like that being said the person who stated it was like this would we have no idea but this is like a like a viable legal strategy that could like be sort of like right out there so because like we we have like talk to people about the potential of like selling our claim but again like because of the unknowns and like the haircut on it and like we also just like because we're managing our own Capital we'll just like sort of sit on

it like we don't we don't have as much of a necessity I think to like get I've been on it we were looking though to see if there was anything interesting but it's just gotten like haircut too much that we're sort of taking the attack now in the beginning I think we were more likely to have like hit a bid but I don't know as I said I was coming out we're like might as well wait yeah so I was in a Twitter space with you earlier this year um where I think you had mentioned that you had gone up a lot to stable coins or actually you went to save coins and you went to Fiat when there was this whole kind of um situation with silvergate and you know there's and then you said no we actually are now fully deployed into the

market so I'm curious um maybe transitioning a little bit into just what your general take is on the market uh you know we rallied quite a bit I think uh 100 uh you know East for the bottom that 800 now it's at 1600 all other assets have performed similarly so I'm curious like what's your current thinking on the market um you know narratives or themes you're excited about just general open-ended question yeah so I think if I had to say that movie into like someone I was just like I agree with price action for like the last three months I mean you had you had a lot of four Sellers and you had like basically 100 the sort of margin Aid of the ecosystem right like if you had any

leverage on like you had to take it off um enemy like Leverage like um on the way down like we just like we touched every potential like liquidation for sort of everybody um so all that for selling had to go through and like that abated that pretty much abated like when FTX blew up like that was sort of like all right like everything's gotten like that could get licked um so that like like sort of the floor in it and then absent that like you sort of like steady state of demand and like people who are looking for sort of like lower levels like step in um and we Baseline higher right and then like we were covered in some assets like double like Bitcoin put in I don't know what is it from the lows like 40 or give or take anyway and and now you're at a

point where there's like this like this rebalance of like splining in but I think the bigger thing of like why you can be cautious about this being like a whole new blue Market is there doesn't really seem to be like a ton of like new participation sort of in the ecosystem right like you're you're definitely not seeing like a ton of retail participation like you're not seeing sort of that behavior like flowing through um and you're not I think seeing much like institutional interest sort of been like moving things going forward if anything you've seen like an abatement but crypto became a little toxic um for anybody to sort of like optically be involved in especially like on the institutional side especially right now with like all the regulatory stuff sort of like swirling and Landing every other day so that's like definitely slowed so I think you've got

the end of four selling but no real new demand that's moved in um so like I don't I don't think we're gonna like go test the lows and like move like materially lower but like I I think it's the same pool of capital largely like swirling around different things sort of now um so I don't know like if you had to like make me put a price Target like I'm going to eat like during the summer like I I'd wager it saves like pretty close to where it is and then you'll just like keep playing this like merry go round with like other assets that like people just get excited about randomly like I don't know like stuff like people are doing like there's very much activity right like there's there's assets like flying around and like doubling over the period of like a couple weeks and like

stuff like that so like people are here and they're interested like and it says they sort of the people that survived the a sort of last six months to a year um they're like very much like in it and sort of playing the game but I don't see like material new money moving the needle anywhere anything they do have good inflation skill right like they're still like assets that like these things do like throw-off emissions do you think that for selling is over I do I think there's I think Voyage is still working out of some stuff um there's the world that like somebody's here's the thing so the bankruptcy has like a weird caveat to it right it locks up a lot of bad sets effectively right like a lot of this stuff just gets stuck in these like core things but like it

doesn't mean it's stuck there forever but it will be like sort of broadcast and like slowed down so I do think like I don't know how the bankruptcies will play out for these guys but like some of these assets are slowly gonna be like worked out over the next years and like that will happen and there's a bunch of stuff like randomly still held by like the government that's got to get sold um but anyway like Bill so those will be like big slugs of Supply that sort of come out there but I think the idea that like people are like meeting Margin Call and like they're all getting licked and like they owe Capital elsewhere like I think that's like gone I I mean yes people have gotten themselves into like hot water again potentially but like I don't know like if you if you made it

out of that sort of ShakeOut you should be okay now you're definitely better than wherever you were three months ago yeah what do you think uh what Catalyst are you looking for um as an investor like when you like we've seen some like pockets of the market and narratives really be very hot like you know like what's taking derivatives like Lido and whatnot like it's just you know pretty hot and and then you know part of nft infrastructure like the whole wideo sorry the whole blur situation I'm curious like as an investor what Catalyst do you get excited about are you looking for um to maybe put on more size or kind of trade around that yeah uh I I guess I get I think of it pretty simple still where if you've got

like a sustained like repricing of risk assets outside of crypto higher um and then retail participating or even just like the existing people in the ecosystem like getting wealthier and like which has been I think like that's like the big Catalyst you're looking for like do you like with the stock markets I was making new highs we're getting close to them right like I think it'll be game on for like Risk assets and like specifically crypto on the back of that um or if there's suddenly like here's the thing it's always something you never know right like defy summer kind of like sort of just was born out of nothing and then people went berserk over it and it sort of brought us into this whole new wave uh like hey things I guess are like sort of like known broadcast events that like do stuff but

then even like nfcs kind of just like it's it's very hard it's it's not unknown but it's very hard to know what will be like that thing in six to eight months that suddenly like drives a whole new way of people sort of interested and my God will be like there's not a ton of Reason like guessing what it is it's more just knowing that there will be at some point well you could argue defy summer didn't come out of nowhere it came out of I mean it was just macro right it was like covid money pumping Bitcoin starts to rip and then and then that turns over into D5 right but I don't think you'd order the time like it ended up like in hindsight it looks like very simple but like I don't think when you're in it you're like oh like this is like compound

launches and you're like wow this is gonna be like wild and you kind of like At first like this game was stupid right remember they launched them they're like this is the dumbest thing ever and like right yeah like and then suddenly three months later you're like everybody in their grandma is talking about yield farming and you've got like people putting dedicated 100 million dollar funds into like I don't know it can happen very quickly yeah where so where are you looking for Value right now yeah so I think a lot of things just like this Capital rotation game that's like being played um I don't know like you you see it somewhat like I don't want to like look at anything true in particular but like right in this exact moment like STX is like right like block sex and suddenly like the rage again and it's like

semi-related to word nose or whatever but it kind of doesn't even matter so like the whole industry is just starved for Action in such a way that they're like as soon as it gets a little momentum it's just fine uh like we so you said with Aptos before that right like and a lot of it isn't necessarily driven by any underlying economic sort of activity it's more just like people want to speculate and they haven't had like a great thing to do it on and like as soon as they get the opportunity they're just like it so it's like happening very quickly it's like rotating through so just figuring out where that is like going next is like and not even necessarily like being first which is like catching it as a source to happen feel like we've gone from uh from this like hot ball of money to like this nice

lukewarm yeah it's like yeah it's like a lot of food like black is that from it like you know there's obviously this like call it a cognitive bias or like this phenomenon where if you've lost and you you know you're more inclined to take out size kind of stupid risk to make it back like Revenge trading or whatever make it all the me make it all back in one trade is this the phenomenon we're seeing like if there are no New Market participants are these folks just like willing to rotate money much faster to make sure they're catching these narratives um there's probably some of that there's probably some people that are looking to like sort of Revenge trade so they're

bad I I also just do think this is like the default of the industry is like if you just like let the participants sit there long enough like they'll find something like I think they were buying testing 80 right like I mean they're just like real fine with name like and even gonna be like it's still like I don't know like there's definitely a demand for it yeah you um so for context you know you to my understanding CMS you guys invest both in the public and private markets um talk to us a little bit about kind of the relative value you're seeing in both of those markets how are you deploying the incremental dollar um do you see more opportunities in the liquid stuff um or you know private opportunities yeah the liquids are still cheaper um like especially given like to

liquidity you get with it um and just like the base sort of like nominal value that this stuff is traded to historically like if you look at it from like Peak to trot like like yeah like I mean the highs are not like what you should like Benchmark everything to but like that it seem like relative cheapness to like I don't know some trailing crypto total market cap um in the public side of things things like much more still drawn down than like privates at least from what we've seen like that versions never like they never really have like this like crash like they they've come down and like I think you see less people raising like opportunistically but like stuff's still not like sort of arguably cheap relative to where it trades um on a comp like in the public market

that would be like yes I still think public stuff is a much cheaper relative yeah what about the secondary market like a lot of going back to this idea of for selling you know people that need a like FTX Ventures for instance yeah I don't know I just haven't heard about too much of the trading um like we we've actually reached out to a couple things and like there isn't like sellable it's like not structurally easy or like the foundation doesn't want to do it um so I don't know I I think there's probably opportunity there it's just you probably are gonna like if you wanted to deploy like a hundred million dollars into like buying cheap stuff and secondary and you probably need like a really good lawyer and like sort of a lot of ties to like making sure that so

I don't know we've just seen like a structure doesn't like trade enough um I don't know either the projects don't want it no to endorse it or like the sellers like have so much tape that they don't do it the video being said like it does happen sometimes like I think you guys as a liquid fund like more of a hedge fund trading around things that then got into Venture as the market was pumping in 2021 like are you do you rethink your Venture strategy at all are you gonna just do the same strategy going into the next cycle we'll probably just do the same thing same thing yeah I mean like we look we sell the same trap that a lot of people did where especially if you like it was sort of like for our situation in particular which like I think a lot of like

individuals sort of have like a good corollary too is like if like as you make money right like I said the Market's like going up and like you have like assets and like necessarily like you're like making like in general like most people's like you know it's pretty tight it's just like the aggregate price um and you're like investing Adventure at like the same time if you run into like a situation where like let's say you make a million dollars and you put 500 000 in adventure you still like owe 500 000 attacking at the end of the year so you like effectively have like made nothing that's like liquid by the end of it so you gotta like and like especially with the market pulls around like suddenly you're like losing money and like you have less like wait like you you gotta like

you very much like you have to be cautious of like how much you're sort of shipping out the door like as like the market is going I think a lot of people fell into this trap and like ended up entirely illiquid by the end of it just because they had like burned like they call it like sort of those good times we keep rolling I'm like we all did and they did roll for a lot but you end up like very much like with an illiquid asset computers like what you own by the time it's all done like the dust settles yeah so you gotta like watch it like that doesn't happen yeah because like a lot of a lot of the problems that you do see right like element is like problems are ignoring like what they did on the customer side and like the sort of like

issues there but like they're they ended up with a basket of assets that were illiquid against like liquid liabilities and like that was the story of sort of everybody like dcg genesis had the same problem three hours had the same problem it was like a lot of this like really bad bucketing of like what you needed liquid like this is like the less crashes as much like a credit problem as it was a like mortgage problem like price yeah let's talk Macro for a sec um six months ago or whenever you were on Empire last I don't remember the exact let's call like six months ago you said that the midterms were a really interesting factor to watch is that like what are you watching right now in macro

like is it more inflation is it are you thinking about the midterms like are you like what do you think you are right now well we're on the back right of the election cycle so like that excuse me sorry not midterms uh are you starting to think about like the next presidential cycle no it's too far too early yeah yeah and like you're they're really like I that's like this time next year probably like that conversation I think we started doing I mean they think the bigger thing is just like what are like the the larger risk assets like what do you what are equities doing like in the states like what are sort of like raid expectations going through that being said like we do not tend to like have any Edge there or no like what's going on like those are like driving a lot of

like yeah decisions like of what crypto beta is to just like equities like at any given point so I mean like there's there's like random one-off stuff coming right like you've got this like get ceiling fight coming at the end of the summer like that's like a thing like we'll probably like cause other risk assets to like move so it's like good to know it's on the horizon but do you guys Trader like something like the debt ceiling fight are you guys gonna trade around that or like how do you position yourself going into that um we like well probably if anything like we'll just take some risk off into it just in case like we want optionality into it but like I don't know like we don't like I said like we don't we don't think we have any Edge in any of this

stuff so we just like know it's there and like we can like sort of take like we can aggregately like cut back our risk or add to it we like think maybe we have some upside on it but like in general like we're not doing a ton yeah but like also it dominates the conversation right so like if that's like every that's going on in the market put on like it doesn't matter like what's going on in some like random obscure part of crypto you know like you very quickly lose focus what about just like the landscape for and Santi you probably know this much better than I do as well but like the land the like investing and or like the trading landscape like where who where's the flow of money right now like who's still lending like who are the big OTC desks is it is it the exact same as it

was a year ago or it's like it's flipped on its head or it's just like same thing but some players have removed themselves um so I mean like I'd say the larger OTC sort of like Market is like kind of the same except like the people we lost like Galaxy is still like running like cumberland's still running like jump is still running winter mute's still up there like the the like you lost you lost players for sure but like in general I think like actually like the spot like Falcon is still there too right like that it's kind of the same um amber made it out the other side like the that seems to be there's nobody lending though like the lending Market's dead like I don't that's gonna be a bit um it's just like everybody's got a bad taste in their mouth for good reason

like it was I don't I don't think you could have run a lending book through the last 18 months and like not lost a considerable amount of money and if you didn't go bankrupt like you're just like happy um it's like that's not great and like air a lot of the problem there is like so much of that is tied up in chords now for like a very long time like there's just there's probably a very good opportunity for somebody right like there there is clearly like if you think of all the things that had five Market bid in crypto on the training side well like the market side it's like like trading obviously and then like lending and like staking like those are the three things that like make money that like clear businesses and like one of them just has an insatiable demand

for it and like nobody's doing it right now like I get yourself a D5 stuff like the bilateral sort of like model yeah like I've been thinking a lot about this like if you're a Founder out there some of the best opportunities are like you pick up some of these ashes and build it's not to say that like the the business wasn't bad it was just that they had terrible like risk management practices and it was just the founder of the team was not the right one but these businesses actually like work and can work extremely well there's like void voids in the market from liquidity standpoint that need to be filled and addressed and I think the common denominator of block five Voyager like so like a lot of these players just went down not because the business there

wasn't product Market fifth year point it was just like they didn't have risk management yeah they died they die by the wrong reasons they didn't die from like apathy of the market for sure right yeah look I mean FTX like obviously massive issues but like still they raised two billion dollars of inch Capital like and they were throwing off hundreds of millions of dollars a quarter and like see you know from like somebody exchange like that that was a business and like the lending ones you could like argue or I guess remember like less sustainable but there there definitely is like a nugget of like a real sort of business there um yeah two points so like all right somebody will somebody will get it right and I hope they do because like it was just these were these were businesses

that really not a lot like it's like made our lives like a lot harder yeah absolutely yeah and like the concentration risk is pretty bad right now um in terms of like service providers for this stuff like you kind of have to use binance and coinbase like that's it like that's not great yeah speaking of uh coinbasic what do you think about their base uh launch and I don't know if you have an opinion there I think it's great I I'm probably I mean I don't know where it's gonna go I think everybody's like I think people are drawn too far out of the future on the whole thing I think it's a cool project I think it's smart and like worst case scenario they burnt a bunch of time like I don't know I'm super private I like I'm like I don't know where to go I'm very curious so

here's the thing that I'm very curious about is like they say they want to like eventually drive it to like Community ownership sort of thing right so like I want to see how they do that as as a public company under massive scrutiny how they like actually move something towards like decentralization with like everybody's eyeballs on them right right I think that'll be like a very good tell and I think it'd be great if they can set some presses forward yeah yeah it's almost crazy that the day they announce this the like the stock was down and look there there's obviously noise but for seems like there was a big like disconnect here where everyone in crypto was like okay this could meaningfully bring a lot of an entirely new line

revenue line for them and the way they could monetize their user base and being the Skateway to web3 and and then Wall Street kind of just didn't appreciate it was like meh like yeah I think I just looked for like the coinbase is just so driven by its short-term ability to like generate Revenue right now like I don't think anybody that's like serious like training that stock and a like size like gives a [ __ ] about anything years out right now like I think they're just like very much like a solvency concern for like the 18 to 24 months like sort of thing yeah I guess you look at the bonds you'll get it's very good like look at it from like there's people who aren't giving them a ton of rope no not at all sure I am curious if if there is a trade there

like I've always asked um like over time when I look at a new investment opportunity it's always like you know you go to you look at minors or you look at exchanges like coinbases does it outperform eth you'll get a private company like does it outperform the underlying which is Bitcoin or ethereum and then I'm curious like um if you had like a new pool of capital would you buy coinbase stock would you buy ethereum or Bitcoin or like maybe just like the start there yeah like what do you think I'll performs that's a good question I I would wager that coinbase would outperform even Bitcoin in a rally at this point um I mean I also by the way I don't coin

this just like it's full disclosure um it's been terrible but uh like I would wager that would sort because if you think about like how self performs in like a rally right it's like and and this well I have a ton of data points to this but it's like Bitcoin does well and throws a little bit better and then like the long tail the ad sets just goes berserk and stuff like goes up a hundred thousand eggs sort of stuff like that right like the the further you've got the risk curve but like more stuff sort of like moves out and like coinbase is further at the risk core that so that would just be like my guess is like it has positive beta like over one to bitcoin youth which is sort of like the index at this point Nothing Like Us on it I'm about to

mention if you're a us-based investor you can do much more with coinbase stock yeah yeah you know like it's it's more useful you can you know borrow against it you could do more stuff that presumably has less counterparty risk than if you want to do some exotic stuff with your eat or Bitcoin well you think coinbase is using coinbase stock is further out on the risk Spectrum than eth yeah was that your crypto nativeness philosophical that's like a film I'm not even like the girl I think that should I mean like Court base can go bankrupt you can't like I mean like that's like the difference Dan I think is is this the is this your your the correct answer or is this the

Family Feud answer I this is the great answer I'm this is like a very few things I don't think I get like definitively saying but like the actual part of the of the episode no it's it's like when you're like I think traditional investors would disagree with that I that's fine I mean that that probably would look when coinbase was 4X that probably wasn't a realistic argument but like where it's trading now I think so yeah huh I don't know would you buy the stock or the bonds I'd write a stock yep I like sell plots or whatever and they clip a coupon on it I seem to have better if I'm in a minute to win it longer Dan does this this basically all the L2 announcements like so you like

arbitrums ripping uh like optimism stuff is interesting like coinbase's base announcement and then like you know do you like all the just basically like the l2s uh change your view on whether or not people will just like pun gig Along on l1s in the next cycle or you think that's just something that happens in cycle um that's a good question so this has been like the the big one on The Hangover is like will when demand for like smart contract space heats up right like if we Face chain fees or 200 for a swap again do people fall over opting is an arbitrum or do they fall over to like salon and egg X um I am still of the opinion that it will flow to the other l1s like as like

people sort of move out the risk curve but I do think that the other LTE will eat a good chunk of like what that volume would have been historically that's just how I feel right now um I will see how this like actually plays out um but like I just like I sort of view the other Bell twos as like l1's as like far as a trade like I don't know I just like kind of like treat them very like similar um that's why like my thought on it I I don't know I feel less strongly about that I did historically yeah do you have a take on like an ecosystem that you really like out outside of eth like are you do you really like what's happening in Solana or like Cosmos or arbitrum yeah I mean like we have a lot of bets

in Solana and Apex like that's like definitely like where like we parked and like we do a good amount of work um so like those are sort of where we've got the most like best in interest and like where we spent the most time that being said like we we've done a lot in sort of arbitrary and optimism now like as a function of our time it's like more so I don't know that's probably why I feel less strongly about it yeah when you uh so from a portfolio construction standpoint are you sitting on a cache or are you fully deployed we do we've got we've got like a probably I'd say about 15 cash like certified comment yeah 15.

yeah are you holding are you comfortable holding that unstable coins or no we haven't like we've been in the bank bank right now yeah like this yeah I'll tell you I I check every day to make sure I was I'll leave on it uh but yeah like that's like we I mean we do keep stopping like tables like we're just like I don't know if we don't have to have it at risk we just like don't have it yeah especially because to me it's still fascinating the yields on D5 like if you wanted to clip a yield on your stable coin you're again right treasuries like you're it's it's crazy you're absolutely not being paid for the rest but definitely not it's not a um so when we talk about risks one of

the things that has been percolating much is is this idea of a regulatory clamp down and more pressure and so I am curious if if what you think about that what is kind of your different scenarios and kind of timelines of how this evolves yeah um I don't think we're done like I think there's probably still some in the works there's probably some like I I hope it doesn't but I'd be like shocked if like coinbase comes out this whole thing and like didn't get an action of some sort right like that game's a little strange like um like they're doing a lot of the same activity that a lot of other people are being sort of criticized for um and like I don't know the specifics of like the legal and like weather setups and all that jazz but like I don't know like Kraken as a saving

program and they're getting hit about it and like coinbase said a saving program and it's not like I I just I'm like let's play that like everybody I don't think like the best of Seattle then like all right like we're on the back cap of this like I think this is still an ongoing conversation with a lot of different um sort of parties and like government agencies uh that being saying I think what you're seeing right now is there is there's a lot of weakness in crypto right like everybody's lost a lot of balance sheet like everybody's like doing much worse like financially um and Regulators are not happy about what's going on which is fair like there's been a lot of outright like criminal activity and like if not criminal activity like a lot of losses for like a lot of people um in their jurisdictions and they're

coming in and they're like taking off everybody where they can with things that they know like they either can't fly people like won't fight um and it's not a terrible strategy from their point of view um I don't like it but like I understand sort of like how they're using this to like establish precedent and to like get their hooks into everybody um and make it seem like they're policing what they're supposed to be policing so um yeah it's probably going to be bad for a bit but just like I don't know it's tough like it gave very hard to operate um in the United States like I don't I don't think it's going to get any easier for the foreseeable future I mean there's like rumors of like a mess binance settlement sort of hearing about that's like sort of out there like

there's clearly a lot of smoke going on with like a lot of these like different things but um the stablecoin stuff is probably the most egregious like overreach I think that you're seeing out there um but um like that'll hopefully go to court I I do hope that like some of the well capitalized players fight this stuff right like that's like the only way like you can like slow it down like make your face because if you just keep like rolling over and paying the fines as an industry like you just then you're beholden or whatever they like sort of like thing right yeah exactly so I do think I do hope a lot of this stuff like which is why I think do it's good to see coinbase in particular has like the likes to find a lot of this stuff so like I do hope

Services yeah yeah well like like what is circle if they have a stable coin that's like a security like it's nothing right they did have to like their their entire like their existing Spike rests on the concept that that's not true so they're gonna have to take that scored I told you well yeah definitely yeah it feels to me like I've heard multiple takes here one of them is like the SEC really doesn't want to deem all these things Securities as much as like guns are out saying that you know only Bitcoin is kind of not a security because you know if you force someone to be a token like a security issuer I guess every token issuer registers security like it's a massive like operational headache overhead that they have to then

embark on and they probably are just better off clipping on off these like operating under this not providing guidance tends to be a good strategy because then you're you just go to pick a player you go to them and then you get like 20 million and then you fund like the operating budget for an entire division then and there and you keep doing that over and over and it's you know it's like oh I think you want an incentive standpoint like it's not a bad strategy like is would it be the question is would it be terrible if everything was deemed a security but if you do that then and then do you provide like very clear guidance and procedures

for these token issuers to register as securities would that be so terrible yes and here's why because I think the NAT benefits are like the problem right it's like you you can't you can't just like be moving them around like as like Bearer instruments then right like that it kind of like fundamentally like destroys like the value prop in my opinion like unless they like carve it out and they're like all right like this is the thing right like if you force them into the existing box of like what securities are it doesn't like work but if you like move your car back and you're like all right these are securities but they're crypto Securities and we're gonna let like this so like these like things not apply to it like that would be potentially a good outcome um I don't know but like I think if you

try to shoehorn them into the existing box when like I think that's actually like a real problem I definitely agree with you and there are great kind of threads about token issuers that have gone through this path and it's like when you try to shoot one it it just doesn't work and it becomes entirely problematic but yeah in a hybrid approach where you like do some modifications yeah so in my mind would it be that bad of it an outcome just to get clarity like how many LP potential LP conversations have you been on over the years like how much Capital gonna get sidelined because they're like we at this point probably a vast majority of players believe in this technology in the asset class but are on the sidelines for this

particular reason I think it's great I think it's a good amount of money for sure anything like that like leads us into somebody like open compliance holes I mean like realistically I think we're at like a point where like I think you kind of need Congress to like weigh in like it's kind of got to like be their decision there's just like not a lot of appetite to do that and there's a like it's not an issue frankly um but you were talking about how important midterms would be like in a next election cycle like if your constituent base is really like young folks that really like this stuff it becomes like very good political currency to go out and be like pro-crypto when is does that happen like how far away are are we from that I think we'll see how yeah it's it's just

not but it's just like it's just right now in industry for like enough people you know it's like it and it it's definitely like you could come and just be like on Pro crypto and then like like it's okay that doesn't mean anything right like you're not like the guy said something like that down anything else because they conversation this it's just like in the like tiered ranking order of things that like they care about like that is like the general public like wants to see like action on it's like so low and it's even lower now because now it's just like why are we gonna like wade into this thing that's just like a tire fire right it's like like it's worse now than it was six months ago yeah you know I don't know I I I I think that's like the the draw down to

like the aggregate priced me now but I've also just like the industry like sort of like cannibalizing itself is like there's less like political will to get something done yeah perhaps uh shifting gear is more of a personal question but if you were to like start a fun today would you do it no given given all the complexity even all like most people think crypto is easy like oh God like you know it's really not it's very hard you have to think about and learn about a lot of things and we don't learn quick enough you get slapped in the face over and over and so yeah you just answer the question like you wouldn't yeah I mean what would you do oh I think I'm doing like the same way I do it now but like I mean like I enjoy what I do like there's no

like doubt about that right like I very much like this is like the most fun thing you can do in your life but if you're gonna like get in a situation where like you're raising at style Capital like is it is a different thing that I think most people sort of take and it gives attack why we have it like on that way it's like if you're managing other people's money and like not only like the you obviously have like a dedication to like doing that and you like have like a compliance parent and you like have like rules that you have to follow and like like girls are just like you're taking out all the emotional like issues that come with like managing sort of external like people's money so and it also like only makes scale sense it like scale it could be a raise a lot

I think like people like they said you have like oh I'm gonna go raise like a 15 million dollar fund because like I do I think that's like the most misguided thing in the world where it's like no you're gonna you're gonna need a police for any 100 to 150 million it's such a bad dream and people like continually go out and like try and do it and I I don't want to like knock anybody but I want I want to like have them just sit there and like do them at them well the problem is because they go like well they're like yeah well like it's just saying it like then like there's not able to can't be your base or something [ __ ] like oh this is kind of like great but people do it continuously so yeah I didn't fully follow that can you explain

why that's such a bad idea well because like the overhead of it's just like it's not like a traditional Venture fund the amount of complexity and fees that you're gonna have to pay service provider lawyers is much it's like a multiple and yeah employees you're gonna what's that threshold of what of when it becomes a good idea to have a fund I didn't say anything less than 50 doesn't make sense and even then you're probably look you get like if you're really it touches me like if you like have like a 50 million dollar fund and like you're like you're making no money like it makes like soda like you can pay yourself like you made like a wage but like it's a job and like that's fine but like it's not like this like and like yeah you've got like upside on the whole thing but I don't

know like I'm less convinced that and it's only if like things like go well right like it may you can head to a situation where you got a 10 million sitting on FDX and now you're going to bank managed five years right like that's just like a situation like people sort of there's there's a lot of unknown unknowns that are all hates you and like your light just becomes imagining those headaches hey everyone quick break from Empire to tell you about another blockworks Channel that I know you're gonna love I've been doing crypto full time for five years and have always struggled with one thing which is keeping up with the next big Trend as soon as I wrap my head around MVB Rhonda aptreens as soon as I wrap my head around options we're on to liquid staking derivatives I'm sure you've been there blockworks

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subscribe to the platform today you can subscribe to the research teams free newsletter uh you can follow their Twitter handles today links in the show notes trust me once you do that you're going to want to subscribe to the platform if you are already to subscribe right now I got you guys with a little hookup Empire listeners get a 10 discount for the first 50 people who use the code Empire 10 got you back check out the links in this in the description to find out more now let's get back to the show what about uh you talked about like this so historically I think a lot of folks from traditional Finance racial fonts have said oh wow like I can do a 10x you know you look at if you're a venture

fund if you look at mvca data National Venture Capital Association data like if you click if you perform like you would have been in the top quartile of a venture fund if you returned like 3x to your investors something like this yeah it does obviously like as an as a class matures like it gets more competitive and you know Returns come down if you were the first private Equity Fund you know you did a 10x Plus where do you think crypto is in that trajectory like for the new cohort of funds it raised like last year huge fonts like you know these are billion dollar funds on Venture like Katie Hans font a16z a lot of these funds are sitting on billions of dollars you talk about scale

and size but like what is like um if you're been in the space for such a long time like you're sort of in like precondition that anything less than a 10x is like a mediocre return which is crazy right do you ever like adjust your mental Frameworks where do you think like the next five ten years like what is the actual return potential of this asset class if you're just indexing it like I don't know probably like four to five x like I'd have that probably like I mean if you're putting in like free coin to eat it's probably then like two yeah it's a three ounce like I think you just like keep like chopping it like I don't know like I don't like Baseline assumptions of like the major assets anymore so around 10x like if you're out there like

firing into like The Cutting Edge or stuff and like you're willing to like take massive drawdowns like yeah um but like I don't know just like I said index like sort of product of like I don't know because it's like kind of like what a16.com right like they're yeah they're they're getting crypto exposure to everything in anything um I don't know I think that would be sort of my like if they were an ETF like you're better off putting a [ __ ] ETF than just uh paying 220. oh on a fair two billion dollar fund you're gonna end it yeah Market business yeah right that's the thing correct correct which is their scarcity value and those so people get pushed to these vehicles Yeah so basically you're saying so crypto a lot of what we talk about on the podcast is

like the aggregate market cap as a NASA class you know you're at a trillion you've been hovering around that level for a bit chopping around that you know you're fundamentally saying that like you're getting to like maybe 5 trillion over the next three to five years you know assuming like yeah the Bitcoin E2 like two and a half three x and then and then the ratio of altcoins at some point grows over time maybe new verticals nfts whatever nft the next thing that is not nfts encompasses some share so is that is that a fair kind of mental model that you have like five trillion yeah I think you go higher than the previous high but like let's hide each time in percentage terms which by the way would still be a huge

[ __ ] it's a tight yeah that's funny it's funny you say that because like when I tell people like the bullish cases like 5 trillion is a speck of dust for a NASA class like the internet like I get it right like I know you're laughing but it's still a lot of money but Global M2 GDP figure that like people put in like yeah it's a pretty big it's like it's a massive number but I guess it forces you to invert and say like which is where a lot of a lot of people are really questioning it especially in Bear markets is what's the whole point of this movement like what's the killer use case what's

the enduring lasting value here that you're delivering the pictures always been are you building a financial system outside the financial system yeah that's programmable money minimizing counterparty risk transferring value on the internet without counterparty it seems like a killer use case to me and it seems like a far bigger Market than 5 trillion all right so here I just looked up because I was like the the current so naisy has 23 trillion of assets at the end of the year like that's the market cap of it would you rather own crypto or a quarter of all the stocks not all the stocks but all the 90 stocks I don't know that's like

a lot of companies making a lot of things I I would crank I would take the stocks because of the correlation risk why attack you know but yeah 50 years on anybody anybody's game the other the other argument you could make is so a lot of you have a lot of tokens now so like I was having this discussion with another person like it was like and a lot of the best investors would tell you like the best strategy is just buy the index like buy the s p because like the s p the composition of the s p is constantly rebalancing and so you didn't have to be right about AI you don't have to be right about technology

software as a service none of this stuff but if you just had like a broad-based exposure you would have captured that growth right because it moves in the question is are you gonna get that crypto the same phenomenon that have Tech becoming a much larger slice of the index is that going to happen for crypto or is crypto going to continue to operate outside of because you know right now the only kind of exposure you can get to Crypt on the public side is coinbase and a few other names but it's not a lot yeah no it's there you it is like outside of it a lot more yeah if you think it ever like how many public crypto companies do you think

we're going to see in the next five years Anchorage yeah there's I mean realistically there should be like a dozen now but like that that's a whole other conversation but yeah I think you're looking like I don't know four to five trillion dollars there's 25 public companies that have value yeah yeah but it's kind of wild if you think about how clear there are and how big some of these businesses are but it almost seems to me like if if that scenario doesn't play out I think crypto is not going anywhere probably not yeah it's definitely makes it slower for sure yeah so so um for Mike I guess I'm not as familiar but so you're just managing your own

like prop capital or do you have outside investors right we're just acknowledging our own okay so it's like I mean it's a partnership effectively like in which that is the partners sort of funds yeah that makes sense I'm curious if you like talking to other managers like what's the sentiment out there any any of these like bankruptcies you are um I think a lot there's a lot of guys out here in a situation where like I think they're the so look there's two worlds there's some people that launched and like just didn't deploy a ton and like are in a really good spot where they have like a lot of like effectively like Capital that they can still deploy over the next year they'll feel great about things right because they can like average in much lower into sort of

everything and that's either venture or liquid but like that's that's the conversation mostly for like more um The Venture guys um so the pace of like how they deployed like very much so people that have money in the player feel great they're like this is awesome like we're getting old effectively like evaluations third um worse half of what we were like thinking like we would be getting the minute things people feel great about certain stuff um people that are like to deployed and they're like down a pretty good drawdown are like in a weird spot where like I think they have to start thinking about whether or not the econ makes sense to continue doing it um so I think those people are like in like a rough spot um I would say there's probably like a quarter of like all the funds that are

sort of out there right now where like you definitely get to a point where you look and you're like all right if you just for using that you raise 100 million you're down 75 you're at 25 like you've got a 4X that thing to get flat like you're not making any money until you for exit and like if you're like a rational person you're like it's just really like is this like really what I should be doing like so I think like some of those probably they they those funds are kind of dead whether or not they know it or not um and like they're figuring out what they do sort of on that side but a lot of people like drive out of that can and are like doing things over time like they feel great about sort of stuff so it it really is a conversation you know

it's the whole span of stuff because what you said I think is really important that I perhaps some people don't appreciate but like this High Watermark concept like if you added down and like if you're like a new allocator into the space so so say you want to put on risk we're in this environment again and you have two managers one is a new fund the other one is a fund that has a huge high water mark who are you going to give money to part of course there's other variables but a big part of me if I'm if I'm in that seat I'm just thinking through the psychology and the pressure of that manager that has a huge High Watermark another Capital that needs to clear the bar on he's probably going to be more inclined to take stupid outsized risk versus the other manager that has like a

clean slate and so it's it becomes like this like death spiral of a fund that is in a in a tight spot and you saw in traditional markets it's fairly common like what was that guy that was uh bet against like the meme stocks uh yeah Maverick was it Maverick Capital Melvin Melvin Melvin Melvin so the guy closed shop because the incentive you just kind of realize to your point it's really hard and somehow like the market has like a short-term memory and the guy's probably going to raise Capital at some other point but I think he did but it's a long only fun and ended up banged on meta I actually think that is life and he's like a one two but you know you're right the math like it doesn't it starts and especially in crypto because

like the funds are so small like you're working on a razor thin for like margins as it is uh and and attack on top of that that if you actually don't believe that we're gonna have another of you know 10x plus outcome for something like ethereum then it becomes extremely hard to clear the high watermark for many funds out there right yeah I mean that seven to five you're 10x to find you like effectively made like 2.5 extra money or something like that right yeah because in the last it's like yeah because in the last cycle there was a few funds that kind of were able to survive this this like Watermark High Watermark despair like things like blocked off yeah there's like anything came out of it with multi-coin you know

and like for multicoms like Solana was a huge like kind of like Saving Grace helium a few other bets but the graph but nonetheless um yeah it's interesting Dynamic do you have you seen yeah it's hard it's just it's harder now because the numbers have to get actually so big right like like you're not going from like 100 billion to a trillion American Cab you're going from one trillion to 10 trillion like this I don't know like those Rick it's just a lot of large numbers right yeah what do you think is the just on this point what do you think is just sweet spot for a fund yeah in traditional Venture like Benchmark in my estimation probably has been the best performing Venture fund out there but

they've always kept their font size the same 250 million I think they've never raised more than that and then you have an address and who's become more of a you know asset aggregator raising billions and billions of dollars you're wondering if they're playing a two percent game or a 20 game at that point yeah I mean the 50 to 100 range seems kind of if you keep the team small if you're going to do stuff in liquid though I'd raise a ton because I don't know you can just like you can see out a lot of it yeah yeah you could buy like easily a couple hundred million dollars Ethan Bitcoin just yeah top 10 people have done it yeah and then being on the liquid side of things how are you guys thinking about

the LSD trade right now and like Shanghai and merch Yes actually there's a guy who works here at quote um named Eric but he's Twitter to CMS Perry who wrote like a really long thing up about ums Perry yeah um he he's got a sub stack where he wrote a really good thing about like a whole a thesis that I would say here I'll say like CMS and species on it is like what he wrote so I would like deferred and sort of Hinds them on it but I mean he's been very built up on Lido and Rocket pull I think that artificness about wreckable I am for third a bit now I mean they said one of the few things where you can like see like clear like product Market fit and like the real like in the generation of actual like revenue or p l or whatever

you want to call it right like there's actual like economic like activity occurring back so I think it's like a very easy one to like get to logically So my answer is I don't know enough about what our answer is yeah Fair we'll we'll link to this article do you have any take on like how how you expect withdrawals or like price action to play out around around Shanghai yeah I I I'm of the opinion that Supply is probably not good to try so I don't know there's there's probably some like you'll jump on it yeah I didn't agree all right like it's not gonna be the end of the world but like I yeah and you're like boys I'm just like wow I love it then just make it's like super simple like responses to a lot of like things

that people over intellectualize that's like how much of that's actually priced in already but fair yeah yeah like fair but still like I don't know do you do you generally think that crypto markets are becoming more efficient or like things like are just not PRI like they're just not priced in or they're fully priced in like I don't think this keeps coming up in like the the Bitcoin happening events like it's always like no like it's like never price saying like right three months later it doubles yeah uh I don't [ __ ] the assumption that like it's the least efficient market still on the planet I don't know what I mean like you

generally have uh primarily retail driven worldwide Market that treats a lot of us like a casino and like you get sort of irrational activity through that I think like one of the big things that like people who come from chat by that like come into this like market like make the mistake of is like they're overly rational sort of in their expectations of what things do and they leave like a lot of money on the table um I don't know you think you have a great uh like I will always attribute yeah I'll always attribute with one of the greatest quotes I've heard I mean you guys produce some of the best memes out there um but someone perhaps the best quote is do you want to be right or do you want to make money

the whole idea is like don't don't like I don't know the mortgage said in something like don't fight it like it yeah you probably even if you don't understand what's going on like you're it is momentum or reflexivity or whatever you want to call it it's worked well for you in crypto this is also why we don't go short anything for the most part I was gonna ask you yeah yeah it's just because like it's just he became plus there's no borrower well now now it's now it's like super hard all right yeah now I like you can't actually then like structurally good if you want to but just like also just he tells like things will act with like such irrationality to the upside and just like you can't have that tail wrist sitting around forever like no I don't know like how many people blow

themselves up because they're like short something they're considered has no value and it's like like why you can take the bet the idol maybe some people do some people are much better at it and I leave it up to them I don't I don't parlay in it well it's been a fascinating discussion I don't know if there's anything else you want to cover um that is on your mind or that your team is kind of actively looking at and share what I want to share some Alpha with the listeners no well I'll plug the plug-in substance yeah we'll link to that sub stack article yeah Daniel who makes your end of Your Meme video about Kevin does the intelligent yeah he's great how you like must take him a

month to put that thing together I think it's not especially rides around uh like early December and like sort of but he leaves it open in case like stuff happened this one was tough because a lot of the activity was like cramped yeah so you had to like actually get it in so first if you ever let go this individual please tell them to open and get coin Grand because we as industry should never lose the prowess that your organization produces which is a fundamentally important for this industry he's never had a real job he won't there's no way don't worry all right yeah appreciate you sharing your thoughts on the market and uh funds and all that kind of good stuff with us

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