Ethereum Is Running Away With DeFi | Roundup

Transcript

And I think that Salana has proved itself to be much cheaper and much easier to use and it has gravitated towards you know the consumer application category because you know arguably the most successful consumer application that exists on crypto is memecoins and pump fun that um has just pulled that user base into Salana. It's their first blockchain in many cases. I mean the number of people who first time you know opening up a Salana wallet with Trump memecoin I can't remember what that stat is but it it's it's staggering and at the same time the first people that are touching a decentralized financial services product was probably in DeFi summer with Ethereum and and the narratives kind of compound over time.

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Nothing said on Bell Curve is a recommendation to buy or sell securities or tokens. This podcast is forformational purposes only and the views expressed by anyone on the show are solely our opinions, not financial advice. Our guests and I may hold positions in the companies, funds or projects discussed. All right, everyone. Welcome back to another round of bell curve. You got Michael's one and two. Vance fellas, how we doing? Doing great. Doing good. surviving with hopefully no data compromised uh so to speak of I'm sure data has been compromised and apparently it's been compromised since January which is nice bueno bad yeah see everyone at con eth let's go

the event organizer in me I just have my heart goes out because I I felt like this too when remember when token 2049 Dubai happened and the floods happened in the I was just like, "Oh man, that's completely out of your control." But have you heard much about con this year? I've never been to con. I don't know if you guys have, but never been. Yeah, it's a it's a fun place. South France is great. I've heard good things. Yeah. And it feels like it's a good time because ETH is sort of catching a uh a little bit of a bid here for the first time in well I mean it's been doing all right but the ETH BTC trend feels like it's at a pretty sharp reversal for the first time in over two and a half years which is great. Um we've got Tomas who's I

think leading like a very you know there are kind of whispers about this change. Is it real? Is it not? But I think he's just done a phenomenal job. I see him all over my Twitter saying all of the right stuff, channeling the right energy. I think it's the stuff that investors want to see. Um, and it's very reassuring. There's a great tweet by dog uh yesterday. I can't remember who said it, but it was some conversation of like, hey, we're talking about like these are the top priorities. Oh, I think it was Matt Hogan from Bitwise and he uh he replied to the tweet and he was like, "If you ever need help with the conversation, let me know." It's like, you know, uh what's his name? Uh Suarez from Miami being like, "How can I help?"

That type of energy just it reinvigorates you the ecosystem and community um which is exactly what everybody was looking for when there were you know organizational changes a few months ago. Um so stepping into that otherwise void um I think is huge. Um yeah the I look I think a lot of this stuff was Peterra uh originated. If you looked at the price chart, it basically once Petra went live, it it kind of rerated. Um I think there was just an absurd amount of shorts on on ETH. Um that had to cover and that I I think now rerates it to kind of where it should have been probably for a while. Um and

the the fundamentals have improved. I mean, I I've been listening to some podcasts of pretty negative ETH people for the last week or so. um talking about how the fundamentals haven't changed and it's still a dog shitcoin and blah blah blah. It's like actually the fundamentals have improved drastically and if you look at the changes from when pro went live, it's net deflationary. So things are good um at least in in the Ethereum world. Um and Zero Hedge had a great article too kind of just like trying to rationalize the move and you know it was all about institutionalization and stable coins.

So I think the fundamentals have improved, the narrative has improved and and just the attitude has improved. And um I I think one interesting thing with the move in general is one thing that we monitor is funding rates for perpetuals. And our intuition kind of going into this year after the past couple of years is that the perpetual market and for those of you who don't trade perpetuals, basically it's a perpetual future that you don't need to roll over monthto month or quarter to quarter. you have to pay a funding rate. You know, in the case of Binance, I think it's every eight hours. In the case of OKX, I think it changes hourly.

But um this is the main source of leverage and funding and financing of leverage positions within crypto. And you know, they used to spike these rates when whenever a move like this would happen. Uh it would spike to, you know, 70 80% like when when Athena first launched, I think it was at 30 to 50%. Um, you know, the last big bounce we saw like end of last year, these things went to like 20 to to 30%. Uh, and so the bounces on these funding rates and how high they spike are getting lower and lower. And, you know, it's the biggest move for ETH since 2021. And the funding rates only spiked to I mean, they're back down to kind of like 7% for ETH and like 3% for Bitcoin. Um, but it seems like that market has got become so much

more efficient. uh maybe the presence of CME capital has has kind of changed those dynamics. Maybe the presence of just like more crypto mobile capital on chain, you know, going in and out of Athena has changed that dynamic. But um personally, I think the days of the funding rates going to 50% plus are pretty much over. the the other element that I think contributes to this um and it's hard to get a sense of what this looks like but just from having conversations with some of our counterparties it seems like the options market is getting actually pretty robust and options are just another type of you know way of um a structured product around ETH but that won't translate into the funding rate because you know if you want to hedge

you buy a put um and if you want to you know go long you buy a call or sell them conversely um that doesn't translate into into funding rate changes whereas uh perpetual futures will have direct relation to the funding rate and that's how you can kind of identify where you know the the market is net long net short etc. Um but if you're you know the seller of a bunch of calls or the seller of a bunch of puts you're going to have to hedge that and and that's where I think the translation comes in. So just the the advent of a more robust options market will probably mute the funding rate in addition to to the stuff Vance was just saying.

Yeah. Sorry, Vance. Go. No, I I I think there not to argue against myself, but uh and sorry I sound so nasely I have a cold, but um I think there's a chance that this funding rates do spike towards 20 to 40% again actually. But I think right now this is just a spot-led move, right? like that's kind of all you can really assign it to. I don't think this is really the leveraged apes going for it. It feels like this is uh just people buying spot. The the other thing um maybe jumping the shark a bit here on on other news, but um the the other thing that just came out which I I maybe people kind of forgot about, but we we've been tracking is May 30th FTX is

distributing to all of the larger creditors. Um, and I think the the threshold was maybe 50K or 100K in terms of claims. This is the larger one. The the previous one, I think most of that has already gone out a few months ago, but May 30th over5 billion dollars will be distributed to large creditors on on that single day. um which if we and who knows where that where that goes um in terms of you know how much cash is held, how much cash goes back into crypto, what crypto assets are bought, but I would imagine that that will be kind of a day uh of just significant buying.

People trying to catch up because you know all the FTX creditors had had crypto on FTX when it went bankrupt. All of those claims got dollarized the day after the bankruptcy. And so what everybody gets back is cash. But what they wish that they had was crypto over the period of the bankruptcy on, you know, November 10th, 2022 until now. So there will probably be, you know, some significant buying right around the end of the month. Um, so all in all, I would imagine, um, you know, there there will probably be more catching up. Um, the other vector here is there was a lot of ETH in Bitcoin on the FTX balance sheet.

So customers put in ETH in BTC. Um but what happened behind the scenes was a lot of buying of Salana. Um and so maybe um Salana has a bit of a catch-up but you know if the customers are are expecting that they want to rebuild those positions it's probably going to be more ETH and BTC. Uh one note by the way since we missed last week uh we should mention on just on options in general is that we had the largest crypto M&A to date. So Coinbase closed the acquisition for Darabit for 1.9 billion. Seems like 700 million of that was cash, I believe. 2.9 billion.

Oh, 2.9. Yeah. So, pretty pretty excellent. I mean, can Coinbase continues to kind of build out their um we'll talk about Coinbase. It's been a maybe two steps forward, one step back. A week for our boys at Coinbase. But, uh yeah, we had S&P 500 entry for them, but also we had a data breach. And I I saw as well that there was a investigation uh from the SEC into potentially misstating the amount of customers that they had uh that Coinbase had, but still interesting for Coinbase. I want to just also return to Ethereum and I I have a question for you guys. Um it has to do not to divert us too much here, but uh it has to do with this kind of like internet capital markets meme which is taking off and believe um and maybe it should set the context. I'm curious to

what you guys think about this. I don't know. It seems like there are there are um launchpad wars that are happening on Salana which I find somewhat interesting. But the thing that I do find very interesting I feel like another bull case for Ethereum that people aren't really talking about is it seems like Ethereum is kind of running away with the DeFi as a use case. Like basically everyone that's building from Black Rockck to Coinbase etc. They're all building on Ethereum and it doesn't seem like Salana uh has been able to get the amount of traction especially on the RWA front that they would have liked and Salana DeFi is you know pretty quiet especially compared to Ethereum. The the irony of this is um they all where Salana is winning is consumer and it feels like even the consumer stuff that

starts off in on base uh it it kind of takes off but can't really get the momentum and then like everything from like virtual like compare virtuals versus AI uh you know 16Z um and the the last I love the last like kind of ironic thing to me is you know the EF has historically been kind of lukewarm on DeFi and Sal the Salana Foundation's like laser focused on RWAS And it's almost like against, you know, the best they both ended up with the use case the other wanted, which is kind of interesting. Uh, but what do you guys think about that? I think, uh, somebody tweeted that like Ethereum is debt capital markets and Salana is equity capital markets. And, um, I still think if I were going to launch, you know, a

token today, it would be on ETH1. Um, just because that's where most of the stable coins are and like the exchange support is pretty seamless. Um but you are right like consumer is definitely orienting towards Salana. Uh I do think abstract chain and I you know like other L2s that I can't think like Bass you know they're trying to do it but it's just like it doesn't seem to have that that that recipe and like like it's kind of like the mirror version of the argument. It's like well you know why can't ETH have like the consumer stuff? It's like well it hasn't really had it historically like there's phantom like there's all this path dependence. there's all this history and lore. Um, and then Salana says like, well, why can't we have RWAS?

It's like, well, it's like cuz like, you know, really it's like 5 years ago, DeFi summer happened that brought all these staples on chain. People love ETH. There's yield. You know, it's a positive carry trade which they can finance against RWA. It's like it doesn't really matter why it is happening, just more so the fact that it is happening. And I don't think they're going to disrupt each other necessarily. But I will say with consumer um the narratives are happening so fast at this point that like we're we're like Michael and I are missing them. Like Rejieve was like you know check out believe like it's like it's like really and I think that was like two days ago and then today at IC he was like I think believe might already have kind of like ran the narrative through it's like I like I really want consumer to work and

I'm glad that there's people and funds and ecosystem focusing on it. I think the higher probability shot that institutionalization really takes shape and grows a lot and I'd rather ETH own that at the end of the day. Deep capital markets versus kind of like broad ones. I I'm Yeah, look, they they they can both win and and still be extremely successful. Um I I think if you think about, you know, if we're to exposefacto the the reasons why, um I think it comes down to the tech stack. um you know being World War III um uh um pervasive as a as a base layer um means that financial services can run on you with

full trust and never going down. Being able to have that um up uptime is just like crucial for being able to have any sort of payments or assets or liquidations or leverage like all of those things are are just like table states requirements that you can't have uh if you if you have any sort of downtime. Whereas uh and what you sacrifice in doing that is potentially cost um and and throughput. And if you want to have a consumer application product, that consumer application product can have moments of downtime. You know, you can be down for an hour or two so long as it's really cheap and easy to use. And I think that Salana has proved itself to be much cheaper and much easier to use. and it has gravitated towards you know the consumer

application category because you know arguably the most successful consumer application that exists on crypto is memecoins and pump fun that um has just pulled that user base into Salana that's their first blockchain in many cases I mean the number of people who first time you know opening up a salana wallet with Trump memecoin I can't remember what that stat is but it it's it's staggering and at the same time the first people that are touching a decentralized financial services product was probably in DeFi summer with Ethereum and and the narratives kind of compound over time.

Um yeah, do you think that it's the technology and the user experience that helps to further cement those narratives? Um just because they they have different trade-offs and in talking with um and there will be financial services and and things on on Salana um you know like the soul strategies um uh with superstate is launching on Salana. It's it's Salana, you know, originated uh equity and it'll it'll have, you know, Salana presence. I'll be curious to know whether or not there's other tokenized equities. I know just did their first transaction um settled with JP Morgan and Chainlink um a few days ago. Um but I I would imagine that RWA's financial services, especially Mission

Cris mission critical financial services will will continue to live on Ethereum. And yeah, I if if you're building a consumer application and your goal is to find the most users possible for your consumer application, I think it only makes sense to build on Salana. And and I would say also with Hyperlid owning per like I think Salana people believe that they're going after Ethereum, but I think really their competition is Hyperlid. Okay, I've got one for you on this. So I I agree with so uh interviewed Jeff. Uh I found it to be a very thoughtful founder super interesting perspective kind of built um like a general purpose L1 in the opposite direction at least that Ethereum and Salana did. Uh the go

to market is hey we're you know Ethereum that said credibly neutral uh but Salana also was like hey we're general purpose platform come build whatever you want here. Um you know to your guys point path dependence and there there's there's an element of brand by the way which matters a lot here. So for Bitcoin the reason I've always liked store of value is it's very simple and easy to understand. And it's like the one thing Bitcoin is known for. Uh but Ethereum actually has that too. I just think of it as finance. It's onchain finance. Like Ethereum's really won that as a brand. And Salana's probably honestly they're going to have look they I think they've won this market. Um and I think they will decide whether or not like here let me just show you guys some charts here. Um so like you can see

basically everything from you know the amount of uh you know originations that are happening to new launchpad tokens to the aggregate market cap uh by launchpad all these look like pretty healthy charts. So all of this to say like I think memes are going to be more durable here than people thought but there definitely is an enduring brand here. Um, and I think yeah, this is kind of like Salana is going to be known kind of as the consumer and meme brand. Um, and I think that's really powerful. I think there's going to be a lot of interesting experimentation, but I do think Ethereum has um, you know, a brand to it, which is uh, more finance. Um, and I think for finance, you need like safety and security. That's kind of what you're

selling at the end of the day. Uh, and I think Ethereum has that for all the criticism that it doesn't move fast enough. I don't hate that if I'm h if I have hold a lot of assets on ETH1. I've always thought that. Uh so yeah, how often are you interacting with let's say I don't know Twitter or Instagram versus your you know mobile banking application? Which which one matters more in terms of mission critical versus like ease of use and and speed? Arkham was created to make blockchains human readable and simplify blockchain data so that it is meaningful and useful to the average crypto user. With their new exchange, users can see what the top traders are buying and selling with Arkham Intel and then trade on that

information with Arkham Exchange. To get started, follow the link in the show notes below. This episode is brought to you by Marinade. Marinade is a high performance staking delegation platform that brings both liquidity and security to the Salana network by connecting soul holders with the best staking rates on Salana. Follow the link in today's show notes to learn more. Yeah. I mean, and also I have no idea um you know on the believe by the way. believe just to explain that because it did kind of take off on it's a I think there's okay buried within this I think there's something interesting I'd like to get your guys' opinion on and we were talking about the Philippe Lefant interview before this podcast and he brought up some interesting points about the challenges that Venture is going through that you guys have been

highlighting on this podcast for a while now but believe is basically it's a launchpad uh where if you tweet something out and you tweet if you comment the believe app underneath if it reaches a certain amount of engagement it launches automatically on this launch pad had um there's slight improvements to the bonding curve. So unlike with pump, you basically built in sniper protection. So there's a heavy tax um on the early buying so it doesn't just get immediately sniped up. Uh there's some amount of support around 100k, but it's basically like you tweet something and it launches memecoin. And the idea is that it provides funding for um apps which might not be venture scale. And I'm curious to get your guys' opinion on that. I I got to be honest, look, I don't I haven't looked into believe

enough. I don't believe that believe solves that problem. But there is uh there is an element of truth which is there might be a gap in the funding model here where some of these applications maybe they're not venture scale businesses actually. Um maybe these are but like Fentex is actually kind of an interesting example. They they rugged but look they took over um they didn't really do anything but they did generate like 50 or 60 million in fees. They clearly weren't venture fundable. Also the founder walked Okay. This is a bad example but they got funded. Okay. Yeah. Yeah. It did get funded not endorsed. Okay, let's let's say that there are but there are lots of examples of this on um like let's just say especially with AI it's becoming cheaper and cheaper to like start a company uh and on chain it's easier to

build more scalable businesses. So, I don't know, let's say there is a, you know, you can build something with four or five people that does 10 or 20 million kind of max. It's cash flow positive, but it's not a venture outcome. Are tokens a good funding mechanism for that? I I don't know. But Block Works was like this for the first five years, right? Like we're kind of in between um you know, venture scale and you know, like a small business loan and yeah, it's a really awkward place to be for a business. Well, so, so a couple of things there that maybe just to level set on like what venture steel actually means. When you are accepting money from a venture firm, what they are implicitly doing is they are underwriting that investment to return whatever you know

fund size they have. And so maybe they're buying, you know, 20% of your company, 15% of your company and they have and they're writing a $10 million check, let's say, but they have a couple hundred million dollar fund. So they are expecting that you will get to a multi-billion dollar valuation and they will maintain their you know 10 or 15% ownership and then you will sell for a for a multi-billion dollar amount of money. And that's basically the game. And if you're if you are pitching VCs just expect that that's how they're going to have to view you for them to write that size check. Now is every business that gets you know started and is successful going to be a multi-billion dollar outcome? Of course

not. And there will always be alternative means of, you know, fundraising. But if you're raising at $100 million and you're like, this business taps out at 250, like that is not a venture scale outcome. It's an amazing outcome for the founders, but that's not going to be something that you can necessarily have a venture firm underwrite and expect it, you know, to to work for you, right? At the same time, you know, you mentioned, well, maybe tokens is a better way of doing this. The problem with that is if you are a token founder just you know it is a lot more like being a publicly traded CEO than being a founder of a private tech company in that you have a community of people who you know may own your token

maybe shorting your token maybe you know lever your token you have no idea and I think um just like the answer isn't just launch a token the the answer is there are certain things that need to be protocols and are better in a decentralized manner and provide you know transparency and compliance and things that you know uh just go much better than a work much better in an open and you know tech forward tech uh um tech first perspective. Um but it it's not like you know the selection bias of oh well you're not going to become a venture steal outcome so therefore we're going to do a token and like sell this thing like that also that also doesn't work because also you know

at least crypto venture investors will look at that the exact same they'll be like okay well this can't be a multi-billion dollar protocol so therefore we're not going to invest. Yeah. So, I think um there's probably some meeting in the middle, but I I agree. You know, maybe it's memecoins that you're not like selling a bunch to venture investors and the community gives you some liquidity and there's use cases and like maybe that works, but but it's not like we're going to go raise money for this thing from a bunch of venture investors and whether it's equity or tokens and expect that they're going to, you know, write big checks. I I will say the the other side of this is kind of like the fund landscape at the moment. Um, yeah, right. There are like a bunch of funds now, maybe not a bunch,

but there's like three or four or maybe more that are looking for kind of like these like 50 to like $200 million market cap, pretty narrow DeFi primitives that uh they think have the right teams, they think can scale, they think have like momentum. And um, a lot of these DeFi teams are like one example is Syrup, like you've seen Modular Capital put out a thesis on them. I think Thea did as well. Um, but like the thesis is like, you know, it goes from like 150 to 200 million to like a billion FTV or maybe two or three billion FTV. I think that is like within the realm of possibility for the quantum of capital that exists within crypto.

Um, then you have kind of the coins that are like 1 to three billion, call it like Maker or like A or like you know like Morpho, like the bigger kind of more hypersructure style DeFi protocols. And I think for funds like us, it's like betting on, you know, can it get from 1 to two billion to like 20 to 30 billion, like a true venture style like 10x outcome. And I also think we have the quantum of capital and probably like the future inflows from more traditional investors for them to value these things on a PE basis with a lot of forward growth and say like, okay, that can happen. And so I think like those two are kind of like where the internet capital markets like thesis rubber meets

the road. Um, and then you have like kind of like the big game hunting which is like can something like Hyperliquid go from like 26 billion today where to like a hundred billion. And I mean the like basically you will need to like put a serious dent in one of the historical incumbents Coinbase, Binance, one of those to make that really happen. And like a general rule of thumb for us is like other than Bitcoin and ETH is it it is extraordinarily hard. Not saying it's impossible for protocols to breach the 100 billion FTV mark. It just like it really is tough to to stay above that.

Um I think Salana probably is still below that. May maybe it's above it slightly, but like that that's like the the line of demarcation where it really gets hard. But like key point key point is stay. Yeah. Stay. But like the first two buckets, like that's where in like that's what we tell LPs is like the meat of the interesting acquisition opportunities in liquid markets, it's there. I'm curious what you guys think about XRP and Ripple. And uh this might this is going to sound a little bit weird and I'm not actually sure if I really believe this, but I I do think that probably over time Salana and Ethereum look less directly competitive with one another. Salana is really competing for execution layer fees. Um, so maybe hyperlquid, maybe base, maybe

that's what the more direct comp and comparison is, but you know, I think crypton natives are going to kind of underestimate XRP and Ripple because it's centralized and a shitcoin and people don't take it seriously, but they're they're making a real run. They're at least attempting to compete on the institutional finance use case in the same way that ETH is, right? Like they acquired Hidden Road. Um, they are making move. They're they're a pretty active player even in Ethereum DeFi doing things like providing liquidity. There was that rumor that they were trying to acquire USDC and Circle. Um I know it feels a little funny to say, right? But I mean do you think that uh that it feels like who else is competing for the internet

finance use case? Ripple is competing for it. they um it's a tough analogy but because of the way that the story ended but it does in a lot of ways feel and I I think that they are at least doing better than how this analogy will sound but it's almost like the AOL Time Warner situation from the 90s where you have AOL which had a business but it wasn't sustainable at the hundreds of billions of dollar mark that it had in the public markets as a publicly traded company. It was riding the the coattales of the internet wave and you know everybody's going to move on to the internet and they they were right. They were just early. Um but then

they did this $ 105 billion acquisition of Time Warner and it was it's like widely agreed upon as the worst acquisition in history of M&A. Um just because it it cratered uh it it zeroed. Um, but I think what Ripple has as a playbook is is something similar, which is that they've created this asset XRP and they are being highly strategic and inquisitive using it as an instrument to buy real businesses and Hidden Road is the first. I'm sure that we will see other major announcements from other major companies um where they will be acquiring businesses and and pumping them into you know the the Ripple

ecosystem. Um I think that that model will work for a while. I mean look at what Robin Hood just did as well. They they bought an Ethereum L2. um you know buying these assets and exactly um getting your reach into your customer base into your product and extending that and connecting it to the blockchain I think is going to be kind of like the two different angles that a lot of these businesses move obviously Ripple is cryptonative and they're buying businesses that kind of latch on features and capabilities to their cryptonative ecosystem whereas Robin Hood is moving the opposite direction they've got the users and they're kind of like buying things to latch to connect to the blockchain but I think that like the the the walls of like are you web three or are you web two are are

going to slowly start to break down um for for the right and strategic initiatives for these businesses that recognize the transition that's going on but I I think we are just at the start of kind of an M&A craze um maybe not craze but wave over the next year um and there will be a lot more announcements coming I'm sure yeah it's a I mean it's just not something that I mean it's kind of interesting in the same sense as well that you know Hyperlid is choosing to I mean it's a very it's a more like obviously today it's sort of from a more centralized point um that allows them to compete on different vectors they I think want to decentralize over time but that's largely been the story of crypto for the most part Bitcoin

started it's the most decentralized everything else has been operating on a spectrum of decentralization after that trending towards more and more centralized um at some point at least my hope and my I think this is how it actually will play out is the market will tell Nope, this is too centralized and we don't want this. Like decentralization isn't just a buzz word. It does give you certain desirable properties, I think. And you know, we don't have to rely on hey, social shaming if you're not decentralized enough. The market will tell us um you know, how important it like where the line is in terms of uh how important decentralization is. So yeah, but it'll be interesting. They're making a run at it. Over the years, we have seen a multitude of hacks, rugs, and bundled launches. The number one way that crypto

traders can protect themselves and the wider community is through onchain analysis. Knowing who is moving funds and where those funds are going. Paired with their new exchange, users can see what the top traders are buying and selling with Arkham Intel and then trade on that information with Arkham Exchange. Arkham's exchange provides traders with the tooling and liquidity to take action in crypto markets based upon their onchain observations, bringing them the world's first exchange powered by crypto intelligence. To get started, follow the link in the show notes below. Hey everyone, quick shout out to today's sponsor, Marinade. Since launching in 2021, Marinade has expanded their suite of products to provide solutions for both DeFi users and Tradfi, including liquid and native staking, as well as direct enterprise

integrations. Marinad's platform is optimized for institutions to securely expand their exposure to Salana. Whether through the provisioning of custodial or non-custodial yield, integrating staking rewards into Salana financial products, or leveraging Marinad's best and market rewards rate for revenue and treasury management. Whether you're in DeFi, Tradfi, or somewhere in between, Marinade has something for you. To learn more about Marinade, follow the link in today's show notes. Speaking of being a run at things, uh I would love to get the download on the Genius Act. Um, so this is the stable coin build that we've been talking about for it feels like six or nine months at this point, but it felt like it was on the finish line at the end of last week and then there was a coup which was staged by

um probably safely not friend of the pod Elizabeth Warren um on the Democrat side and shout out and uh she she riled up some some Democrats and yeah they ended up killing the bill. It sounds like there were some didn't didn't kill it. It didn't kill it. Sorry. Delayed uh I I can't They did some sort of proceed they blocked a procedural vote so it couldn't get passed. The the quick backstory is that there was over the last two weeks um man there there's just a lot of uh vitriol in DC, let's say, over what's been going on. Not necessarily even having to do with crypto. It's just like

the tariffs and the trade stuff and Doge stuff and Elon in general and I mean look at how much um how much uh Elon has riled up people all over the country. But I think broadly um what happens when any of these bills are kind of working their way through committee or working their way to the floor is that there's just also a lot of horse trading. And I think what happened was there was kind of a procedural change where the Republicans didn't kind of disclose the Democrats on something and um they thought that the Democrats thought that there was that they were going back on some of the things that they had already negotiated and they were really pissed and so so basically they kind of like threw um a blocker on the committee vote um which

is what didn't pass last week and our understanding is it was largely procedural. they've kind of ironed out a lot of the issues with kind of the the stuff that now they're coming to the middle and meeting somewhere on what they need. And um I I think in general our expectation is that this bill will pass. Maybe it's not in this exact text that just got released today, but we're we're getting much much closer than even the last um text that was released. And generally this, like we've been saying, provides market structure for stable coins issuers um in the US. And um yeah, I I would imagine that this will pass um you know, in the next few months. It's kind of a question now or like May 15th,

what's the what's the timeline because everybody knows that Congress is off for a few months essentially during the summer months. Um, and so there's there's kind of a question as to like when does the vote happen and like how quickly can it get done and priorities and all that, but um expectation is that this will pass um and it'll be really positive um in general. Yeah, I I mean uh I don't think there is a bad outcome here. If they do not enact regulation, there will be deregulation. There will be safe harbors. There will be no action letters. there will be uh whatever you want to call it, pardons, who the knows, like there will be a massive deregulatory agenda. And so this is really like the Democrats like last

chance to get their own feedback into the crypto world. And so I do think it will pass. The inside baseball that we hear is effectively like look, you either pass stable coins or we deregulate, but like the political ammo that the industry has accumulated over the years is not going to be spent on this fight at this moment. I think there is a lot of ammo that's being spent, but market structure is the beall endall that will happen at the end of this year. And if stable coins don't happen right now, they will either be deregulated or they will be put into the market structure bill. And the market structure bill is effectively the Super Bowl of you know what could happen for the industry. And again if that does not happen like we will get deregulation

which will effectively make it happen anyways. But I increasingly feel very very very good about the prospects for regulatory change. Um and the SEC can also do a fair number of things just by rulemaking like Hester Pur said that you know there's going to be a tokenization safe harbor for securities on chain. Um and so I don't see how we lose. Um, and I think a lot of the people on the Democratic side are are pretty acutely aware that Fairshake has a gigantic war chest, that's the crypto super PAC, uh, for 2026, and a lot of them have midterms. So, you know, like I they kind of need to get with the program, uh, or or just kind of be left behind and maybe even get primar. Yeah.

And yeah, I totally agree with everything Van said. I think just to hammer that point home, it's like I think that there's you know, huffing and puffing that can go on and you need to do that to kind of save face from um you know, maybe not even a related perspective to what the content is actually about. It's just you're pissed off about something adjacent and therefore using this as a platform to kind of like make your voice heard. But when you know when the pedal hits the metal, they will all come to the table. Um, but what I think is most important here is market structure is still the number one priority and stable coins will be a definite something that happens. It's just a question of how and when. Um, but it's not really where the the political um momentum is is being

put right now. Also, like there's this memo circulating right now. Uh, it was characterized as like the Democratic position. So, I just like downloaded it and read it while we were on the pod and it's from Elizabeth Warren. It has her like, you know, watermark on it. And like, you know how much clout Elizabeth Warren has right now? Like like less than zero, maybe negative. Like it's like when you're charging up the hill and you look behind you and there's nobody else pro probably, you know, it's it's just not an effort worth making. So I expect this legislation to go through. What's going on with the Democrats? I I couldn't even articulate to you what their policy position. I thought at least this far in there would be some, you know, someone would take

some leadership position and you'd kind of hear what they're reforming towards. I I literally just crypto aside, I couldn't tell you where what they're starting to reform around. They're they're they're reforming around anything that's anti-Trump and that's it. They don't have a real take, a real stance. I think there isn't a real leader. Um, and it is kind of like a grabag of whoever there are many people that could take the reigns, but nobody has done it yet. I think it's still pretty early to see like who who the early front runners will be. Um I I saw recently that Pete Buddhajes is apparently lining up for a 2028 campaign. Um I'm sure Gavin Newsome will be throwing his hat in the ring. Uh it's going to be really interesting to see um you know all the people that come

out of the woodwork for next election cycle. obviously have to get past midterms next year, but I I think um given everything that's happened with the tariffs over the last just week or two. Um I it feels like everybody was in terms of financial markets mostly was caught off sides in terms of this is going to be the biggest recession that we've seen since the 1920s and we're going to you know inflation's going to 10% and recession chances like or 75% and now you've got JP Morgan Goldman Sachs uh everybody coming back and saying actually never mind take it all back and it's just like whipsaw completely and I I I think um that's what the catch-up trade has been over

the last few weeks. Um but as soon as that gets completely, you know, ameliorated and we also saw the tax bill draft get put out, um which I think has a lot of really really good things in it. Um but I think one thing that I don't know, I didn't see as much reported on is these thousand accounts for new children, uh children born in the US. Um, and I think that that will go a really long way for um, yeah, just like getting more people on on the side of of this program. Um, and uh, I I just didn't see very much uh, reported on that or talked about since, but um, everybody else is focused on, you know,

what's my tax rate going to be? Um, but but I think that that was a really big element that kind of went unnoticed. Yeah, it's a really interesting time for political life in the US. Um, I can't really remember such, you know, a time when it was as dominant as it feels like at the current moment. Um, but anyway, we're not a macro or politics podcast, but uh, yeah, interesting moment. We just Yeah. Yeah. We LAR every once in a while. This episode is sponsored by Catria. Catria is the first zero knowledge rollup to enhance the capabilities of Bitcoin block space, enabling Bitcoin applications and unlocking Bitcoin's full potential as a programmable financial platform. With Catria, developers can now tap into

Bitcoin's liquidity to build scalable payment systems, privacy solutions, and more. Citria is currently in its test net phase and is approaching its mainet launch. To learn more about Citria, follow the link in today's show notes. Okay, I would love to get your guys' take on these two big coin or three Coinbase stories. So, one, Coinbase was inducted into the S&P 500. So, congratulations to Coinbase. That is very cool. It's cool to have a crypto company in general uh as part of that index. Um, and I think I saw Victor Boon tweet. It's not like they're number 500.

They're number 127 or something. Either 127 or 147. So, awesome. I think Vance Ashley was the one who told me this and I think this is the case. You know who they replaced? Who? Discover. Really? Out with the old, in with the new. Wow. I love that. That's great. Uh I mean, whatever. I got nothing against Discover, but the optics of that is uh is pretty cool. So, okay, that's great. Um so, congratulations. And and the fourth story, they shipped the 4hour candles is really bullish. Congrats, guys. All right. So, then on the more negative side of things, uh we had there was a data breach. So, it looked like 1% of Coinbase users were impacted. U no, um,

you know, private keys or anything. No assets are at risk. But you did have about 1% of users that had uh sensitive KYC uh style information. Oh, yeah. No, it's all good. Just my my home address, my photo ID, my social security number, all got leaked. And I don't think it was like 1% of users at random. It is the top 1% of users. If you have any size on Coinbase, I think you got doxed. And I mean, like we've moved away from Coinbase and and using it for this and a variety of other issues, but like it seems like they have momentum. It seems like at the same time like they don't have any idea what the they're doing.

Well, yeah. I mean, it's not obviously not great, especially when you pair that with it's not happening over in the US, but yeah, in Paris there are legitimate kidnappings and people are getting their fingers cut off and stuff, which is that is scary. You hate to hear that. That is, bro. That's happening here, too. Go to Los Angeles. Is it really? Yeah. Damn. Um, well, that that in Paris was a specific crypto one. I I don't know if the ones uh in LA are, but dude, the the craziest story of a home burglary that I've ever heard. Have you heard about Ted Sandos's mom, the CEO of Netflix? Dude, this happened like three years ago. They broke into the house that Ted Sarandos, CEO of Netflix's that

he bought his mom. They broke into her house, robbed her, and killed her. What? Yes. Like, dude, like like the whole like, oh, it's all good. You didn't get your private keys leaked. Like, that. Like, I'm pretty pissed at Coinbase. Like, I like I I really would prefer if we do not use them at all. Well, so my my understanding of this is going to cost Coinbase. I think it's $180 to $400 million for something like that. Looks like that's what they're reserving. That's what they're reserving. Um could be a lot more if the depth is a lot higher. Like one one very easy way that this is bigger than that is if it really is 1% but the 1% is the highest value customers. That that is

extremely costly. So there's that. I I do think um I mean well to maybe defend Coinbase a little bit here. It seems like North Korea bribed certain employees and then um you know I don't really know how you defend against that. That that feels tough. There's there's also a Coinbase element to this and there's a KYC element to this which to me I just this actually does feel like like crypto solves this. if you there it feels like there's a ZK way of um you know displaying that you're not on some sort of sanctions list where you shouldn't have to create these honeypotss of uh valuable information right like that it feels like KYC is also at fault here as a system we have the technology yeah um why do you guys think there's no

political will for this I'm surprised it there's not a lot of bipartisan stuff um in Washington these days it seems like it's basically anti-China and anti- privacy like there's Don't no one is fighting for this. Uh I'm curious. I mean are people that are fighting anti KYC. Yeah. Anti KYC or just more you know strict enforcement on like private like we somehow we ended up getting that you know banks are required to you know record every transaction under I think it's like $600 or something. Patriot Act that that was uh and and the uh bank secrecy act I mean which Patriot Act sended the bay secrecy act. Um, I mean, look, there there's also uh a really fun um, you know, $10,000 limit for any

transactions that you send uh over the wire network or AC that get flagged by the FBI. But guess what? That $10,000 limit hasn't changed in like 30 years. $10,000 years ago was a lot of money. Now, relatively, not as much. And so, I think that like the the surveillance that happens in the financial system is pervasive. I don't think that you're ever going to find a political um stance that will get enough attention to be able to go against that. But privacy is a real thing. Uh it's just you're up against, you know, sanctioned finance and um counterterrorism and things that are really really bad. Um and so that that's where it's like those are the two

spectrum. At the same time, one thing that did happen today, uh, which is, uh, I don't I don't know if this has been widely reported on yet, but, uh, charges were dropped against Roman Storm. Um, so really positive. Well, some some charges, not all. Not all, but look, there there is at least movement on some of the things as it relates to tornado cash, which once again is, you know, kind of a system that at least the government views as being something to get around KYC and and sanctioned finance.

Um, but I I generally think you're not going to find kind of a political will to get rid of KYC probably ever. Yeah. All right. That's a tough one then. And, you know, I get it. If I were in their seat and I was, you know, protecting against terrorists and pedophiles and whatever else they're protecting against, I get it. Like there's a lot worse things that you would enable if you didn't have KYC and just like the the the the aggregate value of it is way way larger than what you would be protecting. I just think that there's better ways of protecting that really sensitive information and nobody seems to have figured it out. I mean, think about all the um all the health insurance hacks that have happened and

um this is not the first hack that I think you know crypto companies obviously have suffered, financial services have suffered. Like I'm sure my phone records are probably somewhere because of AT&T or Verizon or whatever that hack was. Like I kind of have to assume that basically all information is out there at this point. Yeah, you do. Um so what is your guys prediction? When do what do you think we're going to get the genius bill approved? Do you think it's going to be I saw Alex Thorne tweet out that we might get this approved by Tuesday or Monday of this coming week? I I think I think it's a Tuesday thing. And like the difference between legislation and deregulation is kind of like a nuanced one, but I think the parties that it does make more comfortable are

the institutions who will buy our bags in the future. And that's the most important thing. Yeah, I I agree with you. I mean, that's another, by the way, positive catalyst for the market. Um, so this was always, you know, Trump's plan to, you know, he's going to there were the tariffs that he was going to talk about first. Um, and then there's uh tax cut and deregulation and those are seems like that's the big uh, you know, next thing on his policy agenda. So, should be good for markets. But, um, have you guys heard anything about consensus? I think that happen is happening today, day one in Toronto.

Yeah, I mean, uh, we've heard some from some people it's a great builder conference. Uh, it's not as much LPs as it has been in the past, but I think that's just fine. I don't think we need as many VCs in this industry and I don't think we need as many LPs as a result. So, like I think the dwindling of capital and the bottom 50% of projects uh are done by kind of the bottom 50% of venture firms and I don't think we're going to be sad to see them go. Okay, last question for you guys. Maybe we could close on just venture in general. I know we've talked about it a good amount, but you know, it seems like it's a relatively challenged like Philipe Leafant was talking about it in this so he's one of the uh the co-founders of KOTU um large asset manager hedge fund.

Uh they do a lot of VC as well but you know he's just describing the challenge that VC is going through um as an asset class. A lot of it is because um there was some pretty irresponsible investing that happened in 2021 and 2022 that we're still working through. A lot of it is because companies are choosing to stay private longer. Um, but either way, it's more and more difficult. Um, and you know, I'm curious. Uh, okay. So, maybe believe doesn't solve and you know, maybe it still doesn't necessarily make sense for this kind of funding gap for smaller companies that might not be venture scale on the outcome side of things, but I am curious. Do you think something has to break in venture if companies are just staying private forever or No. Well, first off, I don't think things break in

venture. I think firms kind of like live much longer than like you you could be a venture firm that is still technically active for a very very long time before you literally have to shut your doors just because these are 10-year funds. You're you're keeping the lights on with management fees if you have them. And maybe you can't raise your next fund, but maybe you're also just like not going to be able to raise your next fund for the next few years and you're going to ride it out to see if you can raise again in two or three years from now. That's a long period of time. And so I think the the balloons don't pop, they very very slowly dissipate in venture.

And I think that that's what we're seeing. We're seeing a lot of the bad deals, a lot of the bad firms slowly dissipate, not going to be able to raise more. They're letting go of people. They're kind of, you know, like slowly trying to land the plane, get capital back to LPS so that maybe in a couple years they can raise another fund. But in the crypto space, I think things happen a lot faster. And I think you're going to start to see a lot of funds um you know make announcements or maybe not even make announcements on their fundraises that are much much smaller than their previous funds just because there haven't been returns. There haven't been there there may be TVPI but there's not DPI um which is like value in the fund but not distributions to investors. Um or um there may be kind of

like an institutional bias to wait uh to Vance's point on some of these bills getting actually passed before they commit to the next fund. Um, like I think that could that could very much help from an LP perspective. Um, but you know, one one thing that um, I don't think we've talked about yet, but is kind of going on in the endowment world is there's there's two things. Number one, seems like there's going to be an endowment tax. Um, now is this 8%, is it 14%, is it 20%. They don't exactly know, but there will be some sort of foundation and endowment tax. Um, and endowments, you know, historically like the Ivy Leagues have the biggest endowments because they've been around the longest. And what they do is they

fund the university from net investment returns from the endowments. They've also been probably the biggest um LPs in many of the hedge fund, private equity, and venture fund ecosystems. And so, you know, when you when you get to a certain size or a certain level, you know, the thing is to go to the endowments to to raise funds for your fund. And uh Yale I think two weeks ago announced that they are selling their $6 billion private equity interests um which includes venture capital and they're selling six billion of it uh to get liquidity in preparation for this tax and potentially some of the other liquidity issues that they they might be running into. And historically Yale is the first to do

anything in the endowment world. They were the first to go heavy into private equity and and venture capital in the 90s. um actually in the late 80s. Um they were the first to kind of do crypto uh from an endowment perspective and everybody looks at them because of the you know the guy who ran the the endowment for the longest time David Swenson he he literally wrote on endowment management and so everybody kind of looks to Yale as to what is going on. I I would imagine just based on the fact that they are selling that there will be tens of other endowments that are also looking to do this and anecdotally we've heard murmurss of this actually being the case. So I I think there's going to be kind of a sea change from an LP standpoint. In a lot of ways this probably affects private equity and

hedge funds more so than venture just because those industries are just much much larger than venture. But I I think venture and and more of the traditional venture will will take the brunt of this as well. It's interesting because venture is also happening. This is also happening in the venture ecosystem at the same time as AI is really booming. And so I think what will probably be the case is there's just it will extend and um accelerate the dispersion that was already happening. If you're one of the top five or maybe 10 firms in in the traditional venture space, if you're, you know, Founders Fund, Sequoia, um, you know, you're going to be able to raise and you're probably going to raise more because there will be less investors, but there will be more

dollars flowing to you because they're just they won't want to give to the like tier 2, tier three or etc. uh, funds. they just want to give to the the main ones because there's only a certain number of deals that are going to become open AAI type opportunities and that I think will more quickly kill a lot of the tier 2 firms that are probably struggling to raise. Um and and so this I think will happen in the traditional venture space faster than people expect. But I think this is already happening in the crypto space as well. And um yeah, it's just it's been interesting to see and obviously we have you know a lot of LPs that we have these conversations with. So a lot of this is kind of direct from source. Um but it is uh it's an amazing time to be in the US.

It's also an amazing time to be in the fund management space because everything is changing week to week. Yeah, those types of uh you know very fast-paced environments are really fun and there's a lot of opportunity. Well, sometimes they're fun for some people, but there's also a lot of opportunity um if you're hungry and confident. So, nice bullish framework. Um yeah, dispersion is is very real. Yeah. All right, fellas. Anything else that we missed this week or we can end it there? I think that's it. All right. Good stuff, guys. See you next week.

Later. [Music]