Ethereum's identity crisis and the case for a second foundation

Transcript

You know, like Ethereum is worth more than 20 hyperlquids. >> What's up everybody? It's LG here and welcome to the Milk Road Show. The daily crypto show that has not sold its ETH yet and might be the last people still holding it. Today is May 25th, 2026. Ethereum feels like it's in danger. Just last week, many very vocal figures capitulated on the asset after many years of being permables, which coincided with many people at the Ethereum Foundation departing. But our guest today tells me that it's way too early to make a call on the asset and that the subtext of what Vitalic Buterine is saying is that there should actually be a second Ethereum Foundation that focuses more on the business interests of the protocol to help prop up its price and adoption going forward.

We're going to discuss all that as well as why certain alts are pumping like Hyperlid Venice and Near and what it would take for institutions to bid on them with our guest today, Hib Keshi, managing partner at Dragonfly Capital. Our usual Monday episode with John Gillan will be recorded tomorrow. Today's episode is brought to you by Cape, the privacy first mobile carrier, Nexo, earn interest borrow and trade crypto and Kshi where your takes finally pay out. Ab welcome back to the show man. Good to see you again. >> Thanks for having me. Always good to be here. >> Yeah. Okay. So listen, we last chatted on December 9th and uh Bitcoin was at in the low 90s stage and I think then we were talking about like okay, is are we going to recover? Are we going to not? A lot has happened since then. price

action-wise today. I want to ask you about like fundamentals uh that you discussed last time and just kind of you're always so great at giving us really nice analogies. So, we'll kind of go through some of those. But I do want to ask you probably the most pressing thing for me, especially at the end of last week was the drama around Ethereum. And I feel like there are so few majors out there, uh you know, out of everything you look at top 100 coin list, it's like Ethereum is always this is really become this super polarizing asset or protocol or whatever you want to refer to it as. uh a lot of people leaving or slightly being shown the door. The Ethereum Foundation, Vitali kind of painting a slightly new direction there with his post. What how do you feel about his how do you feel

about Ethereum because I feel like you are generally a supporter, but do you feel like any of this is kind of shifting your view? So, first thing I'll say, you know, we we own a lot of ETH. I wrote a tweet about um four or five days ago where I wrote Ethereum is the Microsoft of crypto and it ended up getting a ton of it ended up getting a ton of debate about like okay is this a good thing is this a bad thing and my response to that was like well it's neither a good thing nor a bad thing right it's like much like Microsoft Ethereum is very big it's very slow it's very enterprise friendly doesn't have the best UX you know it's not the first to innovate on anything at this point but it's extremely important and irreplaceable and it's worth a lot of

money. Now, Microsoft, if you look over the last couple years, Microsoft has not been the fastest horse in the, you know, top tech companies. Hasn't done that amazing as a stock. It's obviously not that exposed to AI. All things speaking of their AI products been pretty [ __ ] And Ethereum similar, right? Ethereum has been kind of a lagard. It had this moment where it was doing really well last year. Um, and since then, it's been kind of in the doldrums. I mean, it's it's kind of neck and neck with soul. Soul is also kind of in this valley of darkness right now with respect to, you know, people not feeling like it has a lot of energy and a lot of catalysts. But Ethereum is unique because it is so it's got so much baggage as a protocol, you know, and yet it's second largest

asset in crypto, extremely liquid, extremely highly traded. Like people people sometimes act like Ethereum has somehow become like it's, you know, lost the mantle, but it's still number two. still, you know, a $270 billion protocol. So, you know, it's like I I pointed this out to somebody last week is that if you take all of the public companies >> in crypto combined that are not DATs, if you exclude the DATs, >> all the public companies combined, so you take, you know, the the uh Coinbases and the circles and the e Toros and Galaxy and all that stuff, add them all together, >> it's less than half of Ethereum.

Ethereum is huge. It is absolutely enormous. So it's important to to keep some sense of scale of how big and important Ethereum is relative to all the other stuff that we talk about like oh the revenue meta and this and that and blah blah blah you know like Ethereum is worth more than 20 hyperlquids. Okay. >> Now with that all having been said Vitalik recently came out and issued a statement where he basically said like look the point of Ethereum is to be quote unquote exceptional. to be a special chain. And the way in which we're special is because we are decentralized and we're focused on the core properties that make Ethereum different. The censorship resistance, the the um security, the the um credible neutrality, like the crops uh acronym

that he's become fond of lately. And he's like, look, we are not the the Ethereum Foundation, despite the fact that people have been leaving and there's all this uncertainty about the direction of the foundation. we are not a price or we are not a number go up or we are not going to be a number go up org and that maybe there's room for other orgs within the Ethereum ecosystem that can do that but at this point I I think he said that uh they own like 12 bips or something of the total ETH supply and we're just not like there are many many people who are larger holders of ETH than us and they are in a better position to play that role than the EF is today. So his claim is that the EF is going to be leaner. they're going to be

focused purely on shephering the protocol as well as stewarding these particular core properties of Ethereum but Ethereum is not the EF is not the number go up or so now a lot of people well I I was reading some of the comments trying to understand what like what the vibe response is to this post and it seemed like half negative so half people were saying like oh okay this means that Ethereum is [ __ ] and that like okay Vitalic doesn't really care about the price and then other people fixated on this one comment that he made in this post that was like, you know, he said ETH is the core financial asset or financial output of Ethereum and it's important that ETH does well and people like just clipped this one part of his statement. He was like, look, ETH is the

most important export of Ethereum. This is great. Finally, you know, Vitalic is full of ETH. Um, which I I don't think is really the right reading of the statement that he made. Although on some level, what people read and what they amplify is going to be what the statement means at the end of the day. So maybe that they they sort of contorted what he was saying into a oh you know number go up I guess if Vitalic is still on board with that with that uh you know project. So I I I think on the whole I think it's bearish. I think the statement is bearish. I think the direction for ETH is bearish is that in the Tomas era when Tomas came back into the EF uh he was the person who was appointed as a new executive director uh or the co-executive director of the EF.

He very clearly came in with this muscular mandate of we need to scale the L1. We need to focus more on ecosystem development and BD and entrepreneurial support and making Ethereum great again. Like that was the whole vibe of the postmas shift into EF. And then Tomas left and then a bunch of people left the EF and now all of a sudden they're publishing mandates and they have you know this whole uh oh crops crops is the new important thing like that acronym emerged into the forefront after Tom the EF and all of that I think is unequivocally bearish for the EF but it does create room and the room that it creates is for this thing that Vitalik is talking about about there being a new

organization that steps in that is more focused on the more entrepreneurial and more businessoriented side of Ethereum. Um, it potentially creates room for that to step up. And what he said explicitly is that the EF is open to working with those people who can step into that into into that position. And so what I'd love to see and I think this will be the thing that kind of reclaims the mandate for Ethereum is if there is some organization that's given institutional legitimacy. Right now, you know, there's Etherealize. Etherealizers is this company that was venturebacked that's kind of doing like Ethereum for enterprise.

>> I don't think Etherealiz has that. It's, you know, it's a good or they've got good people, but it doesn't really have this megaphone. Um, and it doesn't have the muscle necessarily to like carry this torch forward. Tom Lee kind of has it with Bitmine, but it's not his job to do that for the rest of the world. it's his job to like sell his equity and to get people to buy his shares um and to you know affect his own buys of ETH in the public markets but um he's he's clearly not the second foundation you know so I kind of feel like the the call that Vitalik made if you sort of read between the lines is he's almost softly calling for a second foundation that's that's how I read it that's at least the the optimistic read that I make of of

what he said >> and I and a lot of people have talked about the need for a second foundation so actually there was a Dankrad talked about oh what we need is like a second foundation that's more focused on price and adoption. Many people have talked in the past about this. I think uh you know the curve founder Michael he talked about hey maybe there needs to be a second foundation. Uh I think if that emerges that might be the really bullish turnaround that Ethereum needs that carries forward the energy that Tomas originally started with last year when we saw the big run up in Ethereum. >> If you're not seeing this, you're trading blind right now. There are real moves happening behind the scenes that most people don't see until it's way too late. Inside Milkro Pro, you can track exactly what our analysts are buying,

selling, and what's on their watch lists before it moves. You can try it out for just a dollar for 7 days. The link is in the description. Wow. I never even thought about that there being like a second foundation that is like like the so you think you think the role of the second foundation would be to what ex like what would they like focus on value and price you know what I mean just be like this like what Tom Lee kind of is right now but just Tom Lee you're saying as okay >> Tom Lee Tom Lee is a you know he's he's at the end of the day he's running a public company >> and he is he's a booster of Ethereum but he's not a steward of Ethereum in any meaningful sense, right? So, >> think the Salana Foundation.

>> What does the Salana Foundation do, right? Yeah. They do the okay, the core values of Salana is like we're trying to distribute the stake and we're trying to do this and trying to do that. You know, they do some regulatory stuff. Okay, great. Um, and they and they also do the core development, right? So, some of it, obviously, Enzo does a lot of the development, but they also do some researchy stuff, but most of what the foundation does is they support entrepreneurs. They help the thing get adopted. They tweet about it. They talk about it. They they they they do number go up stuff >> and all that number go up stuff. Basically, what Vitalic is saying is that that's not our core job, >> right?

>> There is number go up stuff to be done, >> but we want to get away from that and focus more on being the high priests of Ethereum. >> We want to steward Ethereum's core values. We want to be, if anything, the bull work against Ethereum becoming too commercial. But, okay, who are you a bull work against? It's like, okay, well, the commercial people, right? It's like almost they're fighting against >> the the the the Tom Lees, right? They're fighting against the entrepreneurs because they're saying, "No, you guys are trying to go into the world of more centralization, more capitulation, more cutting corners. We are fighting against that. That's what the EF is saying, right? That works if there's a dialectic between another organization that is

focused on number go up." So, I I think this is what Vitalic is alluding to. This this idea has been in the air for years. This is not a new idea. Um I remember uh um it was it was not just the there was one more group that I'm forgetting now. I think it was like the Constantine from Lido maybe who was talking about or no there was a rumor that's what it was. There was a rumor that was widely reported that Constantine from Lido was planning to start a second foundation for Ethereum. This is when Ethereum was like really really in the dark ages. And so I think this may be the room for something like that to be created and to exist. And I imagine what might happen is that the EF still has some go to market people inside the EF, right? You

can imagine a world where the EF basically splinters, takes some of that budget, takes some of those people, puts them in the second foundation, seeds them with some initial capital and basically says look the capital that we have that's left is purely focused on research values and like you know the privacy road map, the crops road map, censorship resistance, some of these core research tasks, but the actual adoption of Ethereum is going to go in the second org and that's not Vitalic Run the The Vitalic Road or just focuses on research and kind of values stewardship. The second org is purely about go to market competition and you know winning the game.

>> Do you think that that's that's been beneficial for Salana though? Like especially at this point because you're saying kind of like they're also in a in a in a valley of kind of uncertainty of like what what is next for Salana, right? Like it's like so would you say that that has worked for them? like is that maybe what propped them up to the point where that they got to in the last >> I think it's very clear that Vital sorry that Salana could not have gotten to where they gotten but for the foundation >> foundation a huge role in all the marketing all the business deals all of the all the commercialization you know super team the the entrepreneurship the all the stuff that really emerged in Salana >> came in large part from the commercial efforts

>> of the foundation to make Salana more adopted and they were very successful in doing that and they still Right. Okay. What role did uh recently I guess departed from being Ethereum super fans? What what role did Banklist play in something like this? Like were they were they would you see them more as just being like they were supporters of the Vitalic Vision and now they have kind of decoupled from that? I mean that's that was kind of like the big drama last week. Whether that actually has a big impact is kind of you know we don't know what we don't know what the the the large impacts are of us doing podcasts and newsletters and stuff like that. Like we don't know, you know, being influencers or whatever, like we don't know what the actual impact is on >> maybe there's an impact on sentiment,

but in terms of like long-term price action and mission, all that kind of stuff, we don't know. It's hard to kind of quantify that. But where does that did they kind of occupy a bit of that role? Probably not. I feel like they were more on the fundamental side anyways. >> I would say look, if this was 2022 and Bankless dropped ETH, then I think that would have been catastrophic. But it's not 2022 anymore. You know, Bankless is great. Obviously, they're they're a fantastic platform, but you can see, you know, the day that that David announced that he didn't have any ETH exposure. ETH didn't move, you know, it like maybe went down like 50 BIPS or something or, you know, something tiny.

>> So, I don't think Yeah. >> Yeah. I don't think the market read that is like, oh my god, you know, Ethereum is [ __ ] now. The reality is that bankless had already moved away from being ETH boosters like, you know, they're doing shows on AI, they're doing shows on Venice and Zcash and blah blah blah and like everything under the sun. That's part of the reason why so many of their customers or their listeners were really pissed at them. But like not just now, but also over the last, you know, couple years like, "Oh, why do you talk about Salana? Why do you do this? Why do you do that?" So, you know, look, I feel for them because that's a very annoying audience to have. But like like if your audience doesn't let you evolve as a host or as a show, that sucks. I get I

get why that's uh annoying for them. But um the reality is that no, Ethereum does not need bank list. It doesn't need any single uh podcaster. >> Would this happen? Would any of would we been having this conversation or version of it if Ethereum was at like 4K or so, you know what I mean? If it was at like 3500, like if it hadn't cuz it's like Bitcoin's down from all time highs, I don't know, whatever. Still like 40% 35% or whatever it is. But it's like Ethereum is down 60%. You know what I mean? Like is that is that if we were down the same ratio even as Bitcoin, would any of this would this even be happening? Would we be talking about that? No, clearly not. And also, Ethereum didn't hit new highs in this in this market, right? So, like a new high by like $10 or something. It

was like a tiny little bit. But it wasn't it wasn't like Bitcoin that was like a huge new high. Yeah. In the >> Right. I mean, if it if it was a Bitcoin like high, it would have gone to 10K and it didn't get anywhere near that. >> Right. Okay. So, Okay. So, here's one last question for you about Ethereum and then I want to talk about a few other topics that that you've already kind of alluded to >> for people like you guys that are holding Ethereum and and and you know, you're saying the subtext to Vitalik's tweet is like, "Hey, I want somebody else to go out there and lead the charge in really commercial or playing the commercial side of Ethereum and maybe we'll be at odds at times or we'll kind of play both sides, but we need somebody to do that for you guys to be happy as

well." That is like somebody else is going to do that, am I going to do? That's what he's saying. You guys are ETH holders. Many of us are ETH holders. A lot of people listening to the show are still ETH holders. What what is the what is the uh positive outlook for us then? Like what what is the timeline look like then if this like what is the what is the good case scenario from here for Ethereum like over the next couple years based on this kind of like there's a bit of a turning point here. >> Yeah. So first thing is that way too early to say. So, it's very clear there's been a lot of changes within the EF. Obviously, a lot of people have left. There's been this this uh it feels like a little bit of a spiritual battle happening inside of the

EF itself. And I think Vitalic in saying this that hey, you know, we want to support other people who are doing more of the commercial work, it is a little bit of his capitulation to the fact that, hey, I hear you guys that this is really important and that we're not doing enough of this and we're never going to do it to the extent that you guys want us to. So we want to get out of the way and support whoever will be able to do this in a more muscular way than we currently can. I think the like the reality is that there has been a lot of improvements in the EF over the last 24 months, right? If you compare to, you know, when a was pushed out uh back, you know, this was this was like January of last year, like all the infinite garden

stuff and all the kind of just the the sort of Kumbaya slop that the Ethereum Twitter account was putting out at that time. Um, Ethereum has come a long way, right? You can see that they're now they're like, you know, highlighting entrepreneurs. They're uh working with founders. They're helping like, you know, we now get intros from people who work at the EF trying to get entrepreneurs to get funding with who are building on Ethereum. All that stuff is great. It's the stuff that the EF used to never do. It was it almost they wouldn't dain to do it. It was like beneath them to deal with stuff like that. And now all of a sudden they're doing things that other foundations have also done which is to help cultivate capital formation o on their ecosystems.

That is a new kind of EF, right? So stuff has unequivocally changed and it's not going to go back in the other direction. Um but I think Vitalic realized look we can't we're not going to go all the way. We're not going to be the Salana Foundation. It's just not our DNA. It's not who we are and it's not me because I Vitalic run this organization effectively and like you know this this is not this is not who I am. It's never who I'm going to be. So I think we have to be a little bit patient before we see what the new equilibrium is going to look like. Um and we still haven't heard from the people who left the EF what their designs are and how they intend to contribute to Ethereum in different ways because my understanding is that most of those people it's not like they're out

and they're just going to go work at Tempo. um the people who left the Ethereum, they have other plans of what they want to do. And I'm sure at some point they will come public about what those plans in particular are. >> So um so I I think the answer right now is that we kind of have to wait and see. >> Um I don't think this is the end of the story, but we'll probably know within a few months, if I had to guess, what that is going to look like. >> The way we build wealth is changing. Stocks, savings accounts, real estate, that playbook is getting rewritten in real time. Nexo is the platform built for what's next. It's an all-in-one digital wealth platform where you can earn interest on your crypto, borrow against it without selling, and trade a wide range of assets all in one place

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>> Okay. Okay. Well, maybe next time you're on we can we'll be at that point. We can chat about it then. Uh, I think a lot of people just holding their breath as well just in the crypto market, not holding their breath, but also wondering, you know, a lot of people feeling like the rest of the year is a pretty crucial time with a lot of regulatory stuff coming down the pipe or are starting to move forward and um, you midterms in in the in in the future as well and a lot of different things that usually typically have some kind of effect on the direction of of this stuff long term. Um Him I did want to ask you though back uh when we had you on December 9th um we had discussed that institutional bit that is coming and even since we've had you on there's been

honestly nothing but bullish news on that side. You have every major institution hiring digital asset managers, digital asset teams. You have a lot of new ETFs even like Hyperloop, right? The flavor of the week along with privacy and AI, you know, not just hitting all-time highs, but hitting all-time highs based on ETF inflows and ENT ETFs being launched. And I think you had said that institutions would not necessarily bid on altcoins for a long time. Do you feel like this has been a sufficient long time? And is the bid on Hyperlquid like that? Do you consider that an altcoin bid? What's your kind of view there of of the institutions finally coming for for stuff that isn't just the bitcoins?

>> Yeah, I mean, if you're talking about DATs, it's pretty clear that the DAT bit is not institutional. The DAB bit is retail. So, you know, there's a lot of retail capital that's that's, you know, unable to touch cryptonative assets and, you know, they're sitting in 401ks or brokerage accounts. And for for those retail, yeah, giving them access to an asset like Hype or Zcash or whatever is great, but doesn't really answer the question of when are institutions going to be entering into these assets. Mhm. >> Um I think clarity is obviously the big decision boundary is that if the clarity act passes that is probably the thing that's going to start getting the first trickles of institutional capital to come into the space uh that that is able to touch tokens

>> today. Part of the reason why they don't want to touch tokens is that they don't really understand them. Don't feel like they're fully regulated. Don't feel like and I mean the other thing of course is that for a lot of the people in the institutional world they don't see why they would. like there's a lot of exciting stuff happening in AI. Um public markets are going crazy. There's a huge volatility. Things are printing all-time highs every single day. On some level, like the thing that's going to attract institutions back to wanting to experiment with crypto, even if there is or sorry, experiment with altcoins, even if there is the ability to do so postclarity, um I think the number one thing you need to see first is for retail to come back. If retail comes back, then you can potentially see some

of these tokens start to hit all-time highs. >> And then once they're hitting all-time highs, that's when institutions want to come in. So, you kind of need assets to run for it to be attractive on a relative basis for an institution to say, "Look, I mean, why do I why do I even need to look at this, you know, like things are hitting all-time highs in the stock market all the time?" And I see, you know, memory stocks and energy stocks and nuclear and quantum and all this other stuff is going crazy. Now look, I I I don't say that because I'm bearish on crypto. I'm I'm very bullish on crypto. I express that with my with my own portfolio. But the reality is that, you know, we don't live in a vacuum, especially for institutions. For institutions, they can they can, you know, there's there's no reason in

principle why they need to touch any of this stuff. Now, given enough time, they will. Given enough time, one way or another, assuming that clarity passes and there's now some regulatory guard rails around the space and institutions feel like they can get their arms around it, they will come and they will buy some of these assets. Not all of them obviously but they will buy some. But before then I mean if you look right now institutions basically own only own Bitcoin and ETH and a little bit of soul and that's pretty much it and institutions are not touching anything beneath those three.

>> What about what about hyper liquid ETFs? How does that fit into the picture? >> I don't think those are held by institutions. I mean >> you don't think so? So you don't think that that's institutions at all? You think that that's just that's just retail seeing that as an option and finally getting some exposure? >> Right. >> I Yes. I would say that is almost certainly what's happening now if somebody knows otherwise you know I'm happy to be to be uh uh uh educated but as far as I know like if you even look at the um like if you look at IBIT right IBIT is the most institutional ETF >> by far the largest IBIT is something like 35 to 40% institutions >> that are holding IBIT majority of >> I really thought about that >> yeah majority of IBIT is held by retail

um and that's for the most institutional product held by Black Rockck >> which is Bitcoin right that's the thing that everybody knows >> you go further a field you even go to ETH right or Ether sorry which is the black rock ether >> that's less more owned by retail >> it's mainly just retail >> and if you go if you go down to like the really longtail ETFs >> there it's almost all retail >> so is there not okay so I guess okay so you're so you're basically telling me that like again I don't know I haven't looked at any of this data so >> sure Yeah. Yeah. And we'll see who are the the biggest owners are.

>> Right. So, you're basically telling me that like institutions aren't going to care about any other coins until there's like a until like there's most of crypto is at all-time highs and that there's a clear deep retail interest in these tokens, right? So, for something like >> I don't think you have to get both, but I'm saying for there to be significant institutional interest, you probably need both. institutions will start to dabble postclarity. You know, there'll be some that are ahead of the field. You know, they'll be like the Franklin Templetons and the Fidelities that are like they've always been very crypto forward and they'll be like great, we're going to buy a little bit of Morpho, we're going to buy a little bit of this, we're going to buy a little bit of that.

Um like you've already seen Apollo coming in and buying some Morpho and you know there's like there's there shoots of institutions that are buying individual assets with whom they have relationships or which they like the underlying thesis. But um you know buying hyperlid is is a very different kind of investment because you know hyperlquid has a lot of um uh uh has a lot of regulatory risk that is usually the kind of thing that gets institutions queasy right so historically institutions like the thing that they really like is not okay this number is going up and to the right thing they like is that oh this thing is regulated it's got licenses I know exactly what the surface area is like they weren't even comfortable touching stable coins

until after Genius. So, Hyperlquid, I think, is like very far out of the risk curve, which is part of the reason why it's a great investment for people who have more risk appetite is because you're sort of front running the institutional demand before that that um that that regulatory clarity is present. >> If you do see that regulatory clarity, then I should I would expect that a lot more money is going to come in to start chasing some of these assets. But today, I think it's very unlikely you're going to see that much institutional bid unless you, like I said, you see both these things uh coexisting. So, do you think that that's that's the kind of underlying sentiment driving the bid on kind of the outlying alts right now of the last couple months, couple weeks, which are like, you know, uh onchain finance,

something like hyperlquid and uh which has had has been done really well in the news as being a place that you can trade oil and silver futures and everything as news comes over the weekends. Uh but also on the other side like privacy AI, right? So, you've got like Venice and Near and Zcash. has been been pumping since basically you know kind of the turn of the tide way back in the fall. Is that what you feel is kind of like the underlying sentiment and thesis that's kind of pushing propping these up is that people you know uh I don't know I don't know what we call them retail whatever we all are bidding on these things with the expectancy that it's like listen once clarity goes through and institutions actually get interested they are they've been tracking these or some people have been following them and

that's when those things are going to get a real bid and those are those are the 10xs of the next cycle. Is that is that what you feel is kind of would be driving those? I I think that's likely. I mean, >> I'm not saying that you're saying that. I'm just saying that that's the sentiment that's driving it. Yeah. >> Right. >> I mean, look, so we're investors in pretty much everything that you've mentioned. If you The way that I would categorize it is that there's basically kind three different pools of capital. There's retail, there's cryptonative capital, and then there's institutional capital. And there's a lot more shades that you can throw in there, but that's just for a very simple model, right?

>> Um cryptonnative capital is here. That's, you know, the the dragonflies of the world and the, you know, kind of the crypto hedge funds and so on. There's retail, which is partially here, but like mostly not here. Most retail has checked out and has not come back yet since 1010. And then there's the the institutional capital. Institutional capital is not buying Zack. They're not buying VVV. They're not buying. They're not buying any of this stuff. All this stuff is happening from a combination of retail and crypto native capital. And for I think for if you look at um you know things like VVV and ZEC a lot of that is really crypto native capital.

Obviously retail is now driving a lot on on on Zack. Um but for near which really started you know taking off in the last few days that feels to me at least as far as I can tell mostly cryptonative capital and retail is is a is a lagard in getting on onto the near trade. Um and VVV I think is mostly cryptonative capital and the retail activation in VVV. you can just see the volumes are not that high in VVV despite the fact that it's done extremely well. >> So um I think and you know VV is not even on Binance, right? So the the um the the accessibility of these assets to retail is also not fully there for for something like VV. Uh so I would say on the whole like these are also not

generally the shape of assets that institutions get involved with. I would say that for something like for something like Hyperlquid, it's probably easier at the end of the day for institutions to get their arms around because it's pretty easy to underwrite. It's pretty straightforward, right? Then there's something like Ethereum or or Bitcoin which is just categorical like you it's it represents an entire category. It's just so huge that it's worth underwriting and understanding what it is. Um but for a lot of these assets that are like, you know, a couple billion in market cap, institutions generally don't invest in $2 billion companies.

much less $2 billion protocols or tokens, right? It's just like not even worth their time to underwrite. Okay, some company IPOed and it's worth $2 billion. >> Should I even try to figure out what this thing is or what it's worth or get to know the team or whatever? Like, no. Generally, they're not they're not in the business of doing that. Like, if you're not a $50 billion plus company, usually they're not underwriting single names, right? they're looking at maybe ETFs or they're looking at indexes or you know if you're if you're $50 billion plus like there are hundreds and hundreds of $50 billion plus companies. So you're you're like the scale of assets that you're underwriting if you're an institution you just don't have the manpower to underwrite something that's worth three billion five billion 10 billion. Um so these are small in the scale of an institutional

book. So that's why I want to underscore that like I would not necessarily expect even if you see a big comeback in crypto that a $2 billion asset institutions quote unquote are underwriting it. There might be hedge funds, there might be like, you know, more sophisticated buyers who are who are coming into these things. But, um, for a lot of this stuff, even in the world where we have a big recovery, where we have retail coming back in in a big way and institutions are coming back in, the institutions will likely still be putting their money into Bitcoin, into ETH, into maybe an index, into Soul, into some of these assets, maybe Hyperlquid, but they're probably not putting it into two billion, $1 billion assets. You're listening to the Milk Road Show, which means you've got takes, strong ones, I bet. But where do those

takes actually go? Do you tweet them into the void, argue them in the group chat, or do you try to express them by buying a stock? The thing is, stocks move on like 50 other things at once. And that's where Cali comes in. It's a CFTC regulated prediction market where you bet directly on outcomes like Bitcoin hitting 100K, Fed rate cuts, GameStop buying eBay with a clean yes or no. We did a full deep dive on why prediction markets might be crypto's third product market fit moment. Check the show notes for the full report and claim $10 free when you trade $10 on Cali. It's a good lens. It's a good it's a good sobering lens to look at this stuff with because you think about it.

Yeah, something like Hyperlid has reached, you know, full fully diluted cap 50 billion plus flip Salana, sure, but you look at it from the institutional standpoint, right? It's like there's hundreds of other companies like that. This thing has tons of regulatory risk. Yes, it's a cool tool. It's it works really well. They've built something cool. It's only a couple years old. Tons of regulatory risk. Tons of supply that's just sitting there. They don't know what's going to happen with it. It's a and it's a small potatoes kind of company compared to other ones that have more established players more have been around for a longer time. So, uh, and and like you said, 50 isn't even that much to them. So, that's that's a good way to look at it that it's like that's not hasn't really hit that like, you know, larger level that institutions

would look at yet, right? Right. That would be like an outlying risk for them, you know, >> and you can see that from the fact of how it's priced, right? I mean, that's part of the reason why it's priced very attractively. When we as crypto native investors look at hype, it's like, oh, this looks like a great asset with respect to the multiple that you're getting on earnings. >> Um, if this were priced by all the institutions in the world, there'd be a lot more money coming in and you would not be paying that multiple for what the asset is producing. Not necessarily. Anyway, I don't I don't know that obviously I'm I'm I'm speaking a little bit loosely about all these things, but um that's the way you should be thinking about this is that if the institutional bid does come in, then probably the

multiples we're going to be paying for everything go up. It also means that of course if you own these assets, there's going to be multiple expansion, which means valuations increase all things equal. >> The last thing I want to ask you about, and this is this is related to you guys at Dragonfly. And while we're on the topic of per, uh, last week you guys announced you led the round for a company called Variational, uh, where they raised $50 million, uh, for real world purps. I actually, um, I've been a little kind of under the weather, so I actually don't know much about this. Maybe talk us through that. I always love hearing about your work at Dragonfly and and, uh, you know, all the work you guys are up to. You guys, you guys are always heavily investing in the space. uh you know and I think people

always want to want to hear that as a positive sign that you guys are still finding a lot of great companies being built out there that that that are going to come to you know going to build over the next couple years and several years. Uh but also tell us tell us about this latest one. >> Yeah, so variational is a team that we've known for a long time. We actually uh invested in their seed round back in 2021 and they ended up building short short version is it's an RFQ DEX for PEPS. Okay, now what the hell does that mean? So just break break that down piece by piece. So obviously Perptex, everyone knows what that is. If you're listening to the show, I assume you know what Perpex is. Um but their system unlike most systems like if you trade on Hyperlquid or you trade on Lighter uh in

which by the way we're investors in both of those. When you trade on a normal Perex uh there's an order book, you post an order, your order gets filled, everyone knows, you know, I assume if you trade, you know how that works. But that is not how variational works. Variational is an RFQ exchange. And so it's not it's technically not an exchange at all. So calling it a DEX is a little bit of a misnomer, but we're going to call it a DEX for the for sake of simplicity. So uh RFQ basically means request for quote. That's what RFQ stands for. And what that means is that you do not actually have standing orders on any order book. There's no order book on variational. Instead, you are getting quoted a price from a dealer or from you know some counterparty that is trading with you birectionally, right? So it's a

bilateral relationship between you and whoever is quoting you the price. Um, so to be clear, that is how we trade as Dragonfly. When we when Dragonfly goes and and buy stuff on the market, we don't go on Coinbase and just start, you know, sweeping the order book or something. We go to a desk and the desk, you say, "Hey, we want to buy 20 million or something." And the desk quotes us a price and we take it or we don't take it or we go shop around or we go talk to other dealers and we see what's the best quote that we can get. Right? That's how we trade. And the advantage of trading that way is that you actually don't need to have inventory sitting on an exchange with orders sitting out there waiting to get picked off by somebody. Right? So >> now why does this matter? Why is this a

better architecture? Well, the first thing when it comes to crypto is that actually if you look at the top perexes variational right now is like top five in all the perplexes. If you just look by volumes, um if you look at all the perplexes, the number one perex for number of pairs right now in crypto is variational. They have something like uh I think they have like 600 plus uh pairs more than anybody else. And the reason why is because they actually don't need to do anything in order to have those pairs. as long as there's an order book on Binance, they can pull through the Binance price because if you want to go trade um you know, I don't know, Sheiba Enu pers, they can just go look at okay, what's the liquidity on Binance? What is it going to cost me to hedge on Binance?

And I just quote you the basically that that same price for spread, right? So, you're basically getting Binance liquidity pulled through the interface straight to you just in time. Now the real unlock for this is not okay longtail >> pers the real unlock for this is in RWAs that's the big story because if you look today at RWAS right so hyperlquid trade XYZ it's been blowing up in terms of RWAS um the top 10 RWAS on trade XYZ >> do 90% plus the volume >> you go out of the top 10 the top 10 you know it's like WTI S&P 500 NASDAQ you know Nvidia you go out of the top 10 and liquidity sucks

liquidity is absolutely terrible. Your execution is going to be awful. The funding rates are going to be extremely volatile. And even in the top 10, you go you go, you know, past just a couple couple names, it gets pretty rough, right? You're getting much worse execution than you get on a traditional exchange. But with RFQ, totally different story. With RFQ, you can basically pull through the same kind of spreads and the same kind of execution you could get on the CME or on NY directly on chain. That is how you are going to unlock the vast universe of RWA, right? With RWAS, it's not the same thing as it is in crypto where it's like, okay, well, almost everything is Bitcoin ETH and there's a little bit of other stuff that people trade, right?

>> That's not what the normal universe of investable assets looks like. And so if you want to be able to pull in, you know, Japanese stocks and Korean stocks and US stocks and Hong Kong stocks and commodities and currencies and everything, everything everything all into one place. I think that is the right model with which to do it is to tap in the existing liquidity that exists in trady rather than trying to make it yourself. It's not what Robin Hood does. It's not what Schwab does. >> That's the model that variational is using. And I think in long term that is going to be the way that you pull through more and more of the RWA liquidity on chain. So, it's kind of like a like a almost like a broker for all those different for sucking in liquidity from where it has it best

instead of you having to sign up for those platforms and do that individually. So, if you you love using >> one certain platform, but then certain assets aren't available there, you have to go and sign up for another platform and so and so on. And these guys just kind of aggregate all that for you and find you basically the the deepest liquidity for that asset. >> That's right. That's right. So there there are other dealers who step up on the platform who have access to those underlying markets and they're the ones that you're actually entering into a position against. >> And is it live? It's variational live like it's a it's a working product. >> It's it's it's live although it right now it's access code gated but they will be going fully live soon.

>> I see access restricted to your region for me >> that depending on where you are. That's right. >> You know where I am. You know, I'm in the great white north here in Canada. Some stuff we can use, some stuff we can't. This is how it is. Uh, that's cool, man. I like that. I, you know, this personally in the last couple months, I was looking for a place to trade like potatoes and tomatoes and stuff which have gone berserk after the, you know, the crisis. Well, no, because of the the crisis straight of hormuz was like, okay, you're going to have this effect on agriculture and everything. And I was like, where can I even bid that, man? They don't have that on hyperlquid. They just have oil, you know. So, maybe that's somewhere I can eventually bet on uh on grocery store.

sub tweet them. Get the potato market going. >> Oh man, we'll bring uh bring the DJ side back. Uh let's see. Always a pleasure, man. Thank you for coming on. Uh always love talking to you and and and you always give us such great perspective on the market and uh I'm sure we'll see you again soon, man. >> Thanks for having me. Anytime. >> Want insights on what's moving crypto markets and how we're trading each event? Subscribe to our channel and join the Milk Road Daily and Pro Newsletters and start investing like the top 1%. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky.