Ethereum’s Next Step, HYPE’s Token Supply, and Tether’s Big Raise | Roundup

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Yeah, I don't think this is bullish for the vast majority of the altcoin complex, but for the ones that generate revenue will be very nice. Um, and there's fewer of those than you would expect. >> Quick shout out to today's sponsor, Katana. We'll hear more about Katana's 1 billion CAT campaign later today, but for now, let's get into the episode. Hey everyone, quick disclaimer before we get into today's episode. 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. Blockworks Digital Asset Summit is back in London October 13th through 15th. We'll have top speakers from leading global funds,

financial institutions, DeFi protocols, crypto companies, and policy makers all under one roof. Think Black Rockck, Circle, Coinbase, and more. Follow the link in today's show notes to buy tickets and make sure to use code bell 100 for 100 pounds off at checkout. See you there. All right, everyone. Welcome back to another roundup. You got Michael's one and two. Vance, how we doing, fellas? >> Doing good. Hanging out. >> Hanging out. Yeah. >> What about you? >> Uh, not too much. Getting acclimated to uh Montana. Currently living above my parents garage. Trying to fix that.

>> Baller. Big baller alert. You know, there's good good things that happen in in garages or basements. >> Yeah, >> indeed. Yeah. >> The subterranean layer. That's where that's where all the deep research gets done. >> I'm like, is this uh like Google type stuff or is this stuff we can't talk about on a podcast? Uh stuff that happens in >> No, this is uh I mean, yeah, it's kind of a big deal. Whatever. But like framework uh that one that one >> Let's go, baby. >> Can you refresh us? Uh, I know we talked about the framework origin story before, but everyone loves a good origin story.

What was uh how' this all happen again? What was the magic? Michael's parents basement. >> Yeah, I was I was the main inhabitant of that basement. Michael slept in his childhood bedroom. Also discovered Michael's Boy Scout outfits and uh >> while I was sleeping around the house. >> Definitely not safe for podcast. >> Cut that. No, no, keep that in. Uh yeah, no, we we definitely technically started I remember reviewing our first LPA draft before we raised any money like literally sitting on the back porch in my backyard.

>> Yeah, we we lawyered our we lawyered our first fund and then Michael did the financials for the first year and they were completely wrong. So we had to redo them. >> Well, no, they weren't completely wrong. They were completely fine. But nobody knew what staking was. I mean, this is this is kind of the crazy part. We uh we go back and talk to you know existing LPs or new LPs and they're like yeah you know you guys had this thing framework labs and like was building all this stuff and it's like why why' you need that? It's like well keep in mind there was no Coinbase Prime there was like ledgers there was no Fireblocks there was no accounting system like we literally had to build it as we were flying the plane. It was uh it's quite an interesting operation.

>> Mhm. You know, I uh I mean even still today some of that stuff is unsolved. Like there are frameworks and whatnot, but I talked to uh I've been poking around at how um like protocols do accounting. So I'm like how does this work exactly? And it's like it's so brutal. But this guy's take was that even the auditors don't really know how to match up what's happening on chain with what gets reported through sex or something like that. So, if the auditors can't even figure out what's going on, like his his pro his thought was that if the auditors can't figure out, there's no incentive to get it like exactly right. There's still so many data problems when it comes to the accounting side of things. So, >> still a big problem.

>> It's been a journey, but we're here. >> Yeah. Basically, Michael, you deserve deserve a lot of I as someone who also did the books for the first couple years of their their organization when I was 24, the classics background. Uh I feel you, buddy. I feel you. >> It's better than me doing the books. Okay, look, it was it was >> better than the other option. >> Yeah, I bring the intensity. Michael brings the detail orientation. >> Hey, that's what make the magic work. Uh, all right, fellas. We should talk about uh we we got a lot to cover this week, but I would love to start maybe with this blog post that Vitalik wrote, which is lowrisk DeFi can be for Ethereum what search was for Google. Uh so I'm going to summarize this post

here, but you know basically the idea is he outlines this tension in the Ethereum community for a long time which is a tension in between applications that bring in enough revenue to economically sustain the ecosystem uh and applications that satisfy the underlying goals that brought people into Ethereum. Um and historically Vital talks about how he he had viewed these two categories as being very disjointed. Um especially because a lot of the stuff around DeFi in the early days was this is the word that he's used in the past. He doesn't use it in this sentence is an urbos, right, which is there's not a lot of value being created. These are just, you know, meme coins or NFTts and people are trading them. Yes, it's creating fees, but are we really, you know, generating any value here? uh and he talks about how this framing has uh

changed because you know just kind of looking at the traction that low-risk DeFi kind of a lot of the borrow lend uh basic trading uh type stuff that's happening is taking off and how um you know maybe something like uh some like political meme coins aren't particularly interesting but a lot of what's happening particularly on the the RWA side of things actually is starting to provide a lot of real world value and that could power um you know just drive enough fees to sustain Ethereum that's my summary you guys tell me about any nuance that I might have missed that you think could be really relevant or takeaways that you had and yeah let's unpack >> I I think one maybe like take a step back perspective is um let's just think about where Vitalik has come in terms of perspective Ethereum which is he could

barely even say the word DeFi like four three four years ago >> and it was all going to be you know web three and it was going to be the consumerization of the internet and we're going to be able to have ownership finally of your own data and data sovereignty and I mean we're talking about like borrow lend as the killer feature like so you know just thinking about the context of where this is there where this narrative and conversation has come from is pretty astounding um so hats off to being able to have the mental plasticity to be able to change your perspective over time um but I do think that you know he's hitting the nail on the head in terms of what's working and what's not right now um you know this is a conversation that we have internally um within framework quite a

bit which is what what are the things that are working and what are the things that are not and the things that are not working it's pretty obvious you know the the consumerization um and what I mean by this specifically is more of like the the chat or or communications applications like that's not working um you know things like social media onchain really not working um you're not going to be able to have a sustainable model um if you don't have some sort of fundamental revenue generation And the only thing that is working there basically two sectors that that have fundamental revenue generation and one of them is and some of them are better than others but I will call them out.

One of them is selling blockspace and some of them are DeFi and financial primitives built on top of those base layers. Mhm. >> Basically, DeFi and L1s. And I would actually argue and and this is something we talked about this week, uh, inside, you know, these four walls. Um, selling blockbased is a really tough business right now. >> It's not, um, it's not scaling with the activity. And I think, you know, building chains, like we said, like we were just talking about for throughput that was supposed to be um, filled with consumer applications. um but the consumer apps aren't here and DeFi apps just don't have the throughput. They don't have the the needs um that you would have with a chat app. Um and so

it's just a different model and security becomes important which is one of the reasons why I think you when you're moving in the direction of financialization you don't need high throughput as much. Um and so that lends credence to Ethereum and I think that this is the recognition that that Vitalik is having. So then within DeFi what are the things that are working and what are the things that are not? Well, it's interesting, but there's basically two formats that make money, legitimate, scalable money. One of them is trading and one of them is lending. Um, and you know, stable coins become sort of a a wrapper, an application that packages up both of these activities. You could say Athena with the basis trade is really trading revenue, but it's wrapped in a token. Um, you'd say, you know, things

like USDS with Sky is lending, but it's wrapped in a token. Um but but I think those are kind of the two things that you'd point to. The the problem with and where I think he's coming from is what is the thing that has durable sustainable value. And um historically at least trading is b based on volume. Trading revenues are based on volume. Volume is based on speculation. Speculation has positive and negative cycles associated with it which makes it difficult to have that durable sustainable perspective. Lending is something that's totally different. And if we're moving into a world where and lending becomes a an evaluation of what are the different types of collateral that you can bring on chain to borrow against and historically it's only been

ETH and then it became sort of like wrapped BTC in ETH and then it became other assets that are in a that you could borrow against and we're starting to get further and further out into what you can actually borrow against and even now Sky has I think a billion dollars of Janice Henderson AAA CLLO's on chain through Centerfuge. Um, so you've got real world assets on chain that you can borrow against that that are being borrowed against. Um, and I think if you start to look at some of the SEC or CFTC uh guidelines or or their programs, um, bringing more assets on chain probably is with an emphasis on using them as collateral assets first. Um, so I that's

my read and I I think he kind of hits the nail on the head and a lot of people were calling this sort of like this is, you know, one of the most important pieces he's put out. Um, I think time will tell, but it's definitely very aligned with the conversation that we're having internally. >> The the other thing that I just read is uh Kang's tweet about Tom Lee's thesis being, you know, misguided or whatever. Um, I do think some of it is just a difference in time horizons in terms of if you want to build the world computer, it's obviously going to take a long time to onboard enough assets where it can become that. And I think kind of no matter what anybody wants to say, you know, maybe the tech is better on the

L2s or the other L1s, but that's not where the assets are going. And so they're they're on Ethereum. And I think we will see a similar transition from you know it was just like CDPbacked lending for ETH and then it switched to things like a V3 which also had a trading component and obviously the prices of fixed income is going to change or variable income is going to change every minute hour whatever so there's going to need to be trading volume based around those assets that are just like latent there today. But the lending use case is probably the best and highest use. And um I've been trying to craft a tweet, but I haven't been able to really kind of hit the nail on the head. Like there's native trading styles of blockchains that are not really funible across chains. So like

the ETH people love to borrow against their ETH. They don't really want to trade per trade meme coins. They used to, but that's kind of gone away. And now it's really like a lending and looping chain. The Salana people are kind of the opposite. They want to trade memes. Uh they have a very short time horizon. Um but they don't want to borrow against their soul. And kind of that like time preference does disqualify a lot of the RWA issuers from like putting assets on that chain and just like waiting for them to get Lindy and get used. Um and then like you know I think the maybe like the hyperlquids of the world like you know they're not as interested in like the CDP based you know trading and lending and so it's probably like that that's going to be like a per exchange and that's totally

fine but I think when people say like block space is fungeible I I generally agree with that. What I don't think is fungeible is the activity and native behavior and then the knock-on consequences of that in terms of you know liquidity be getting more liquidity be getting treating be getting trading fees and if you do think of these things as like a world computer type thesis your time horizon does need to be super long like most of the cash flows for these things will be in the far far future um and we're in the bootstrapping phase and and kind of the best thing you can do uh is just be patient um but as long as people are issuing assets on ETH1 one, I think the thesis is very much intact. And the lowrisk DeFi, that's a great way to put it. Um, nobody's ever really traded like that,

which is super unique. Like, you put ETH in a CDP or a you draw dollars against it, you loop it, and you just kind of like you put it there and every month you check in. No, nohere else does that. And I think that's a bullish thing for ETH. It it just last point on that is on the kind of community or um the social elements of each one of these different ecosystems. Um, I think also lowrisisk DeFi gives you the optionality to eventually have the consumerization of crypto happen there because if that's where the assets are, if that's where the long-term durable value is, as you increase throughput, as you increase capabilities, that that's going to be where the consumer apps um want to be because it's not going to be like

Instagram or Twitter onchain like it's going to be something that's an assetbased um ecosystem and blockchain are purpose-built for value transfer. Like we haven't proven yet that they're purpose-built for data transfer, maybe eventually. Um but at least the consumer apps that work are going to be things that are based around assets, not necessarily data. >> Yeah. I you know on the the social front there there's a I have an old tweet about this but I think there is something kind of there's a there's a connection in between you know social preferences on each chain and then the architecture and design you know because for instance like the looping uh it actually makes sense that it happens on

Ethereum because it's optimized for the fees are higher than some of the other lowcost chains but the security they've really leaned into security as a brand right and if you look at basically every big financial services company security, trust, anything that has to do with money, that needs to be at the core of the brand. But, uh, that doesn't actually make a lot of sense for trading, right? Like even a pretty lowowered trading application would max out East Blockspace today. So, that's maybe why you see it on uh something like Salon or Hyperlquid. >> I I would push back on that just a little bit and say you also don't want to be trading on the exchange that has, you know, uh, leaps in it. But the only thing is you just physically cannot trade in the way that you want to trade on something that has high cost.

>> Yeah. To totally. Um >> so there's another element where it's like if you made the thing that has the trust and the safety and the security faster cheaper over time, I I would imagine people would want to trade there more so more so than the one that's already fast and cheap and and and not secure right now. >> I think it just has to make sense economically too, right? Like even on Salana is already running into I think this is why Hyperlid is successfully competing with Salana right now is because it's completely optimized for exchange whereas my understanding of like if you're a maker on Salana it's still you're still very challenged right like you're still placing all these orders and they're stale and you get picked off and it you know it's faster it's faster and cheaper so you can place those uh you know bids and ask but you

you can't you it's not optimized for that. Um but I'm splitting hairs here. My my point was it I I think it's interesting that uh yeah I'm really glad to see Vitalik uh I think it's awesome. I think this this whole post was awesome. Um I have questions about whether or not uh borrow lend generates the type of fees that maybe search would um over time like I'm curious to get your guys uh sense of that. Like one thing that he wrote um that I'm not 100% sure I would characterize in the same way was you know he's got this uh the analogy for like the the I'm just reading from the post here. The analogy between lowrisk DeFi for Ethereum and search for Google is as follows. Google does many interesting and valuable things for the world. The chromium

family of browsers pixel phones their AI work including open source Gemini models the go language and much much more. But these things are all negligible or even negative as far as revenue generation goes. rather the largest revenue generator search and ads. Lowest DeFi can play a similar role for Ethereum. Um the only slight change that I would say there is that all of those things Chromium you know the Google phone the investment in AI was directly to reinforce the moat of the search business. >> I I this is the one part that I don't agree with as well. I I don't think that the analogy holds when you compare Google search to um or search in general to borrow lend. I mean, let's be serious. There's no, at least up until maybe 2023,

there was no better business model than the Google search engine because you had no other place in the world where you had as much intent at that much volume as as they did. And and it's really easy to build an advertising business model around that when you've got that much intent and you've got that that many eyeballs uh with that intent. And also, let's be clear, ads are basically zero marginal cost. And so it becomes this cash flow engine where you don't have to do anything.

>> And I I get what he's trying to do, which is like, okay, Google search was able to fund all these other things. And um you know, Google Loom and all the you know, science innovations and the things that aren't directly related. I mean Google Loom is like let's put internet everywhere but like all the scientific innovations that they've made and things that I would say are not directly um enhancing of the core business model of Google. Google also built all of these different things like Whimo for instance which um I I think could potentially enhance the business model over time but but that was just an experiment and and so I think I I I get what he's saying which is like let's lean into DeFi and let's lean into lending because it'll

fund all these other longer term operations and in that mentality I get but it it's not Google search because um borrow is just like a low ROE business uh unless you add leverage and then it's and then it gets more risky. >> I I didn't see this as like a as like literal of a comparison. I thought of this more as um like this is the mechanism that we're going to upload files onto Ethereum and files plus their underlying liquidity. Like there are so many fixed income instruments. Um there are so many different types of options, strikes, experies. like how do you actually put all of that onchain? Um I think lowrisk DeFi is is kind of how

where you kind of blend this CDP derivative fixed income model and intern has talked about this where he's saying it's it's kind of like transforming fixed income into variable income with ETH as kind of the uh the medium of exchange asset. Uh and so I think there is something to that. It may not be exactly what Vitalic is talking about, but there is no doubt that all the RWAs are being issued on on ETH today just because that's where all the liquidity is. >> I completely agree with with >> and last thing I would say is like um one of our LPs who is long a lot of Salana I think at least was asking me like what do I think Salana should do? I think Salana should uh build not not in the L2 way but build towards ETH in terms of encourage people to borrow

against their Salana. Obviously, not financial advice, but like make that asset more money, like you know, bring more stable coins onto the blockchain. And one of the things that they're missing is just like a stable coin allocation protocol. And uh yeah, we we'll have news on on that pretty soon. We're we're going to be spearheading one of those efforts uh just to bring more stable coins to Salana. And I think that's a very exciting path for that chain as well. >> Yeah, I agree. Um I I want to uh I think I maybe didn't articulate 100% of what I meant here as well, but I think I think there is a misunderstanding of the intent here as well behind Google. Like this has been a criticism of Google. Why are there all these you know uh side projects? But uh I I listened to a long

podcast about this to help me kind of understand that like even these these exact products that he's mentioning like uh the framing that I feel Vitalic is putting forward here is hey let's do our ad business to fund all these really cool things that we could do for the world like free chromium and phones but actually like the browser was created because they were really really worried about getting disintermediated uh by you know Microsoft with internet explorer right there was a direct cost benefit of like if you could get this many more people searching There's a super simple CAC LTV calculation. It's the same thing with phones, right? They were worried about getting disrupted on mobile. So, this this way of like, hey, let's do this kind of gross stuff that makes revenue so we could get back to giving free stuff away to the world, like I think is

a I think is a pretty serious mischaracterization of what happened. >> Listen to the acquired podcast recently. >> Bingo. Yeah. But yeah, I mean I think but I think the intent is kind of important here because I while I love this direction and I agree with everything that we're talking like Ethereum is completely dominant when it comes to ass it's that chain where you go when you want to issue assets. It's what's going to win RWAS. It's what's going to win this use case. But yeah, sometimes I kind of hear this like, oh, let's do this gross revenue generating stuff so we can get back to the airy fairy stuff and it's like that's just not >> Ethereum over the last over the last two years is like you had this perspective of you guys are just building stuff and nobody cares or like you're building

things and it's not related to tangible value and you're not going to be able to get, you know, the the spiritual but also sort of the uh ideological leader of this ecosystem to about face and turn his perspective completely on a dime. It's going to take time. Like I see this post in a series of like at this point four posts where slowly shifts into, okay, this is what we're doing now. And the first one where he's like, yeah, look, we're still going to do the nice things and the free things and we're going to save the world, but in the meantime, we need to do the things that make money so we can fund that.

>> You you do need the save the world uh ethos. I think that is kind of important to have an overarching mission, but it's good to see that they're just doing something that's a lot more practical and reasonable than what they were before. And um like I I think for just owning the asset issuance layer, like a lot of people have this model of competition where it's like a prize fight uh and you come out of your two corners and one of you like throws a haymaker and like knocks the other guy into the stands and then like the fight's over and you win all the money. I think the more realistic model of competition is just like you're just staying with someone. You're trying to kind of not let them get ahead for too long, not get far behind for too long.

And eventually that compounds to make the difference in terms of like outlasting them or beating them. And I just think like it is um maybe Eth one is not the best technology stack that we have. Although I am like super excited about things like quantum resistance, but unless anyone delivers a 100x better product, there's no reason to move these assets over. And the 100x better product would include liquidity. It would include speed, feed, decentralization. Um, and so I think kind of by default they're going to win. And my guess is that that market is just very valuable over the long long term.

>> Well, it is the definition of a Lindy or network effect market, >> right? >> Until something changes and the momentum shifts completely. Well, like momentum is building right now and until something completely not only slows that down but diverts it or changes it, re reverses it, it's it's it's going to be theirs to win or theirs to lose. >> I also part of the reason I think that it's really difficult to stop this, you know, stop this train is because uh I think Vance, you've talked about the adverse selection problem when it comes to especially asset issuance. like, you know, not to throw shade, but if you were to look at something like uh Apollo's Acred over on Salana, like that's that's not, you know, the cream of the crop, right? That's uh that feels

a little bit more like the the snickler fritz a little bit. And I think that Ethereum has has won already uh in terms of yeah if you if you have a ser if you are serious about uh you know moving your asset on chain you do it on a I think it's already kind of broached that adverse selection issue um that a lot of chains that are vying for this market are going to face so I just kind of see it running and taking off and yeah >> I just see it just slowly grinding up as people realize this and I think there's a correlary here with like a better money uh for Bitcoin versus ETH Obviously, Michael, we hold both, but like we believe that ETH is a more sensical asset, but Bitcoin is the shelling point. People just don't like maybe they will agree with us in the

fullness of time. I think both will be successful, but like if you asked an average Joe on the street, what is digital gold? They would say Bitcoin. It just like once you hit that chilling point, it's very hard to to to push them off that that that stand. So, um don't fight it is kind of my where I get to. >> This episode is sponsored by Katana. Katana is a DeFi first chain built for deep liquidity and real yield by redirecting chain revenue back to active DeFi users. The 1 billion KAT campaign is live. Bridge and deposit directly into vaults in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain

technology involve risk. Terms and conditions apply. Do your own research. >> Anything else on this guys or you want to talk hyperlquid? Let's talk Let's talk hyperlid. Um I've I've got a take on this. >> Hit me. >> So, uh this was the week. Let's Let's >> Wait, let me Yeah, hold on. Let me introduce the post actually. Okay, so there was a post that came out here. Uh let me get it up on my screen. >> Research extraordinaire. >> Exa Exactly. Uh John and Hu. Um and they got in. Thank you to Comfy Capital and Felipe.

>> Oh my god, I didn't even read this. This is an insane proposal. >> Uh yeah. So summary, I'm just going to read the summary. Um so we propose the following changes to Hyperlquid's economic model. Future emissions and community rewards. FCR revoke authorization for all unminted hype currently allocated to FECR. The assistance fund burn all hype currently held in the assistance fund. Burn all hype acquired by the assistance fund on an ongoing basis. Uh max supply remove the max supply cap of 1 billion hype. ongoing token issuance e staking emissions or community rewards would now increase the total supply. The result is an immediate 45% reduction in hype's total supply. So basically, you know, they go through this and look at it

maybe through the lens of like a more traditional uh money manager. Hype has excess authorized nonout um non-outstanding supply. We've talked about this a little bit before kind of like how would a more traditional, you know, equities investor look at FDV versus market cap? Uh that kind of thing. There is a perspective on this that I do at least understand the impetus behind which is where you've got everybody looking at a billion tokens and so trading at $50 a token everybody says oh it's worth $50 billion that's how everybody looks at it and and and when you're an investor when you're a trader all you really care about is market cap >> totally >> when you're an investor all you really care about is FDV and that is um I I

would say very clearly the dividing line between time horizon or time preference because really like how many tokens are in circulation I'm just looking for a quick 50% 2x whatever flip I'm a I'm a trader but if you're holding for the long term it's really about what's the durable value what's the total value what I agree with on his perspective is in the um equivalent of an equity based company that's publicly traded there is a concept of authorized shares versus outstanding shares.

And what you have in most cases is um and this would be amazing if we can move into this world, but it we're not for many reasons which we can get into. Um what you have is there's an authorized number of shares which is defined by the articles of incorporation and the board of directors basically has the ch the the decision-making authority to authorize more shares. Maybe you can do a stock split to double, triple, whatever the number of shares. Uh or you can authorize more shares within by changing the articles of incorporation.

That's not an easy thing to do. Um it's actually a very hard governance thing to do, especially for a publicly traded company. And so what most companies do is they have an outstanding number of shares, which are the number of shares issued off of the total amount that are authorized. And these are for things like equity employee equity incentive programs or you want to buy a new company and it gets approved by the board and you're going to issue shares to be able to buy that company. Like you can use these in productive ways that the board of directors determines to be an accretive shareholder transaction by basically minting creating uh new um new shares >> and that process I think is once again

governed by the board of directors. It's a very clear like fiduciary duty, you know, law, rules and regs, um, tons of case law around what it means to be a publicly traded board of director. And if you are found to do fraudulent action, like jail time, it's it's criminal. And and so I I think that there's a lot of controls in place um, for that process. And what they're trying to kind of like round peg square hole, I think, is like, look, a ton of these tokens, they're not being utilized, so let's stop counting them in the FTV. And you know, maybe they're a part of the authorized number of tokens, but until we actually issue them, like they don't count. And so they're they're kind of define they're trying to create this middle ground, which is like, okay,

we've got the authorized shares at a billion. We've got the outstanding shares at whatever the number of like tokens that originates the market cap right now. What if we were to take the FTV and just call it the number of issued shares uh issued tokens? Um, so that that's my rundown. I I think yeah, there's tons of questions in terms of like governance, who's who's in charge of it, and it's it it's a mess once you start to pull on the thread. Um I understand where they're coming from, but I I don't necessarily think that we're at a we're in a place where this actually matters right now.

>> Vance, before you could I just summarize, by the way, Michael, if I because there was a lot like the simple kind of kindergarten version of that is basically what I boil this down to is the hurdle rate for issuing new supply, right? So in the world of even like startup equity, right, in order you can issue technically new supply whenever you want, but you have to go to your board of directors and they have to approve it, right? It's much more complicated if you're a public company, right? Because you kind of buy some of those share back shares back and that's the difference between issued but uh issued but unauthorized, etc. And in crypto, it's almost like you have all of the shares that you're ever going to have have been pre-authorized. So to be fair, right, that does lead to some pretty crazy spending that uh from

protocols and Dows in the past, right? Like not to name any names. We can all think of examples, you know, uh but the hurdle rate has been lower for protocols on spending their equity. So I think that's what they're trying to get at here. Uh but >> I think there's also like a pretty let me let me do my take. So there there's now like this uh there's like probably at least two groups of hyperlquid people in my mind. There's the people who are advocating for an air airdrop, you know, in in October, November, and then there's the people who are like, there's no airrop ever coming. Delete all the coins. Like, you're not part of this thing. Uh, there's the people who, you know, were like early in terms of buying the coins. Uh, and then there's like the people who are buying at $50. There's

like the people who are aligned with like the native perspective of like USDH, for example. And then there's all these other ecosystem actors that want a piece of the pie. Um you'll see this replayed on hip 3 as well and even with things like unit which uh I do think has shown some level of favoritism within the hyperlquid ecosystem in terms of they are the canonical bridge. Um and so like there's all these kind of forces that are like pulling the community uh apart on top of things like Aster uh which are like literally trying to compete with them and then you have like the unlocks coming which is kind of part of the char posts. Um, I think if you are uh like how Hyperlid navigates all these different factions coming together

is going to tell you a lot about what the end state of the project will be. Um, you also have like the toxic FUD bomb of the unlocks plus CZ going after you. Um, and so I personally think like this is if you are bullish on the project probably the place where you want to be buying into the fear. Um because if they can outlast CZ and fix, not like fix, but like kind of unify the community, um it's going to be a lot stronger for it and it'll basically knock out any bare case that exists today.

>> Yeah, I Yeah, I don't disagree. I mean, it's I haven't seen any of the CZ stuff. Is he coming after Hyperlid super intensely? >> Oh, yeah. Has been since day one. But but like now he's got Aster, which is a Hyperlquid competitor on BNB. Depending on who you ask, the thing either does not work at all or is a perfect replica of Hyperlid. Um, and so I I think, you know, I'm playing around with a little bit. It seems not quite up to snuff and the liquidity certainly is not there, but you know, this is a huge target on Hyperlid's back. And you also have lighter, you have GTE, like Hyperlid is going to be running the gauntlet for the next feels like two months. Um, so yeah, I mean, you're gonna you're gonna get to

see it all play out in relatively short order. Um, as well as the the Sonnet D buying, which I think started this week. >> Uh, I'm not sure if it's officially closed yet. >> I know they re-register they registered, they did some registration, but like that's coming. There's going to be a lot happening in hyperlquid land. And then HIP 3 is kind of the biggest one. Um, which probably won't be this year. It doesn't sound like. >> Well, what do you guys think about this idea? Because what do you think about this idea of I mean, they point out something that at least I agree with in the proposal, which is this max supply cap is kind of a vestage of Bitcoin and the 21 million. And that's a great meme that makes a lot of sense if you're trying to be a money. uh less convinced

that it makes sense if you're less of a money, more of a you know, I don't want to say company, but you know, something like that. Um >> if we want to get into this, then it's sort of like, okay, where's the gap accounting? What's revenue? What's profit? And it's like, okay, well, who's who's the governing entity and how does governance work for deciding whether you're going to raise the max supply? like you pull on this thread, there's I would say a bunch more uh important things that probably need to come first before we go back to like how many tokens are there? I don't know. Let's figure out what these tokens actually do first.

>> Should there be more tokens? >> Uh I didn't really put that. That makes a lot of sense. So basically, yeah, it would force you to formalize things about governance. Okay. Yeah, I didn't understand. We do need We should get gap accounting though, by the way. Like for sure. >> I feel like we could get that independently if Let's focus on gap accounting and disclosures when you know you want to do like and hopefully and and maybe this is a good segue we can talk about some of the regulatory stuff but like at least you know disclosures and like accounting treatment and clarity like how how does gap accounting work in this world um but all of that leads to okay so like we're going to govern the supply the total supply and we can change it who is governing it how does that change happen like I don't

really care what the number is just like I want to know that there's controls in So, I look, I get what they're saying. It's a good point. Um, I I just think there's like three or four probably more important things to focus on first. >> Yeah, we need gap accounting. I will say uh it's very confusing right now. I mean, the data space is super fragmented. Um, and basically the game has been like if you can get eyeballs, you can kind of push this. >> Look, you you know that space inside and out. What I would say is and just as important as gap accounting is also disclosures.

>> Yeah. Yeah. Totally. >> Are the founders selling? Have they sold? >> Yeah, >> that would be good to know. I mean, maybe a brief detour, but the Clarity Act is starting to take shape. I think they put out a date of October 20th for the next like Senate uh review period. It just just the way that Genius has impacted the up only nature of stable coins in terms of being a tailwind. I think the only way for altcoins to really have an enduring run uh is for new inflows facilitated by clarity facilitated by disclosures and gap accounting. Um it does feel like this altcoin market is basically just an outflow tape which means that people are

just taking money out of the industry and distributing it back to their LPs which honestly good for them. Um, I think some of these decisions are being made around liquidity versus the prospects of these projects on an ongoing basis, but the only way to turn that around is is to make it equity-like and, you know, that may be not the the cipher punk vision that we set out to to have, but um, I think that is where we need to go. Like these things are trading like energy stocks in the sense that it feels like people just don't have a mandate to trade them. And if you're an average pod fund manager, what is even the permission structure that you need to go through to get, you know, permission to trade altcoins? And like in that whole process, do you make people think that you're so dumb that

you will lose your job anyways? Like you need so much more. You need like a chassis for people to actually get in and understand the altcoin landscape. Uh I think regulation is the only way to get there. >> Well, yeah. So, so let's let's dive a little bit into that. Um post Genius, which I actually don't remember when Genius passed, if that was June or July, but it was this summer. Um what I would say has happened since is um basically a massive Cambrian explosion of activity in the stable coin market. Uh the largest payment company in the entire world stripe is launching their own L1. The one of the largest IPOs in the last probably four or five years uh circle um in terms of attention

and notoriety and then and then increase in share price um is also launching its own payments chain. like all of the companies that we know and would have expected to be focused on stable coins have just doubled tripled down. Um the other thing that at least we have heard and and have um you know some perspective on is that basically every single major bank um and I'm not saying like commercial bank I'm saying investment banks, merchant banks, commercial banks, all of them are working on some sort of blockchain or stable coin proof of concept. Um and many like more than half of the Fortune 100 who are not financial services businesses are also uh having conversations at the board level or or working on proof of concepts typically

around payments and stable coins. So all of this is postgenius activity. This is also keep in mind during the summer months which historically uh in corporate America is is pretty laxidasical. Um, I think there were a lot of people who were waiting, a lot of companies who are waiting to see Genius happen and get implemented and and official. Um, there's also still a long period of time before it becomes um uh effectual, but I would say everybody's kind of like, okay, we know we know which direction things are moving. At least we can start building in those directions.

Imagine that this were to happen for every single other asset within crypto. That is clarity market structure for every altcoin. uh what is a decentralized security, what is a decentralized commodity, what are the rules and regs, who's the who's the regulator in certain situations, what disclosure regimes do you need to abide by? Um it makes it possible for the pod shops to be able to buy this stuff because they don't have to go through a DAT to get access to it anymore. They can buy it direct. Um that that unlocking I think is a huge element that we don't necessarily kind of think about right now. Um, but it is it's it's kind of the one thing that could probably turn the tide for most of these assets who are just

going through their unlocks and you know some managers who probably don't have great returns are looking at these assets as well at least we can get like 75% of our value back or you know this is something that we're going to have to sell so that we can get our LPS their their capital back. Like it it is not you know up and to the right for a lot of these funds. Um, and if you're trapped with them, you know, on your token cap table, um, it'll be a long and arduous unlocking season until you're done. >> Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just real yield and sequencer fees routed back to DeFi users.

Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, Chainlink, and more. Katana's 1 billion KAT campaign is live. Bridge and deposit directly into Vault in one simple click and start earning immediately on your Ether, Bitcoin, USDC, and more. Follow the link in today's show notes to get started. As always, investments in blockchain technology involve risk. Terms and conditions apply. Do your own research. I have a question for you guys. Um, I had a I was I went to the this was a conversation I had about a month ago, but I went to the Salt Jackson Hole conference. Uh, and I was speaking to a fund of funds u like one of the big fund

of funds guys um that that you guys would know and I was just kind of poking around like hey how are you looking at the landscape from like a manager kind of standpoint and it's like they're basically a lot of the same stuff that we've talked about on this podcast like the good managers are doing well there's a big falloff after that but what he was really excited about is like AI uh and he was like look even even like the good coins you know in crypto like just nothing is putting up the the growth grow numbers that that AI companies are at the moment. Just like absolutely bananas, just real growth metrics. Um, and so sometimes I know these things aren't mutually exclusive at all. I know that's not what you were saying, Michael, but sometimes, you know, we talk about like fixing these things via

market structure, like making sure people have access to this stuff and can buy it, but also like these projects just need to be attractive on a relative basis. Oh yeah, this is this is with I I I mean just to to the two market differences right now just as an example um there there are multiple fundraisers going on currently for AI based applications which are not even foundational models that are being priced series B's at 200x revenue multiple right now like I know I know two of them and I know thousand X's as well like in AI so yes for Sure, there are tons of great investment opportunities at 200x revenue. Meanwhile, you literally have

let's say Sky for instance, just we we have talked about it a bit on this pod. We obviously are excited about it. Uh Sky is currently making 20 I think 60 million in in profit that's being distributed back to token holders and stakers and I think it trades at like a 1.8 1.7 billion valuation. That's the tale of that that is the fundamental difference between access to markets and markets that don't have any access. >> Yes, we are not coming to save your random altcoin. We're doing this for the handful of good projects that deserve it. Um so yeah, I don't think this is bullish for the vast majority of the altcoin complex, but for the ones that generate revenue will be very nice. Um and there's fewer of those than you

would expect, but I don't know. People have asked us, do we think there's a bubble in crypto? I I mean all coins are basically where they were in 2022. There's been no run, you know, for most of them. For AI, that is where it does feel the frothiest. And I think where you see a nice like graceful combination is things like USDA where they are funding GPU buildout with stable coins. It's an economic model that makes sense and a team that's, you know, there for the long term. Like there are great projects in crypto. they just get no love because there's been so many bad ones and they've rugged so many people.

Um, and like there will be a day where the AI stuff happens as well on that front. >> Always. >> But for right now, you know, it's just like the giant sucking sound of all the capital coming out of the room that that is AI. >> No doubt. >> Yeah. >> And and I think that is also why like Zero Hedge posted some like M2 versus Bitcoin chart. There's some chart crime that happens in Zero Hedge, but um they're like, "What has been sucking energy and time and, you know, money out of the Bitcoin complex?" Well, number one, gold has had a record 82 billion of inflows this year. And number two, AI has just been uh up only until you kind of see the end of the AI trade and and there will be multiple like, you know,

plateaus, but like the part of the AI trade that's happening right now is the one that fits most naturally with Wall Street. It's the capex buildout. >> It's like Wall Street gets excited about the software IPOs, but they really only get into the software IPOs at the last possible second. >> Um, the capex buildout, you know, JP Morgan, uh, Crusoe needed $10 billion to build out the Stargate campus. JP Morgan took out took down the whole thing as the sole lender. Like, think about how much fees that they're making on that. And so, the capex buildout will probably continue on for at least another year.

Um that's at least what the hyperscalers have guided these big capex numbers to. Um but people will frontr run the end of that with the start of you know crypto things starting to get research and valuation and valuation support um from major asset managers. >> It's also not zero sum as much as I would say. >> Yeah. Yeah. >> We've seen the capex buildout of AI really supercharged over the last three years. Lo and behold, we also went, you know, whatever 20,000 BTC to 120,000 BTC. So, like they they move in lock step is what I would say. And and right now, um I I would definitely say like gold and AI have captivated audiences.

And so, right now, that's where the attention is, but that that could change within a week. >> It often does. I >> I can also feel it starting to change like like I told Michael this on Monday, everyone came back from the weekend. I felt like everyone was a little bit off in terms of, you know, we did the rate cut, like what do we do now? Well, there's more rate cuts. That's what's happening. And that doesn't do too much. >> You see the economic activity and the takeup, but um my sense is that crypto has probably bottomed for now going into Q4.

>> Yeah. Plus, plus or minus 5%, maybe seven%. But I I look there here there's one other kind of perspective that I have which is you've never seen um unless there's a massive correction like a 2022 type thing. You've never seen an asset as big as Ethereum literally bump up against its all-time high, break through it a little bit, then come back down and then settle back down minus 20% and then not break through it on a sustainable breakthrough. And I I think we are probably right around the corner from that. Um could be weeks, could be months, but I I think that that's kind of representative of where we are in

crypto, which is that we've just been we've been consolidating for the last few months. We had to get through an $80,000 OTC transaction in July and then multiple >> not $80,000 >> sorry 80,000 Bitcoin uh transaction in July which was only announced after the fact although there were conversations about it happening in uh ECC but I think then multiple 20,000 BTC transactions were done onchain which is another you know crazy stat um so we just had to work through a lot of supply Um, and uh, I I think things will change um, pretty soon.

>> Same. That's wild that the market is that big. And I I think that 80,000 OTC 80,000 Bitcoin OTC transaction, it moved the price down like three or 4% or something like that. >> Been tens of billions of dollars of selling of Bitcoin specifically. Um, I don't know. you e you either think that you know Bitcoin has topped at 120K before the rate cutting cycle has started or you believe something else. There's really no middle ground. >> I think the the probabilities are way better on the more positive side. So, so there is a there is a uh let me let me steal man the other side um which is we're in a four-year cycle and everyone is finger on the trigger ready to p push

the big red button the second they get a sniff of we've topped because they want a top ticket and they know we're going to head into a absolute crash 85% crash next year um because it's happened three times already and you know that's the plan. That's the plan of attack. Um, that assumes that we are in a four-year cycle. Number one. Uh, number two, that assumes that unlike any other cycle, we topped in August, July. That's never happened before. Um, so like there there's a lot of just like I would say incorrect assumptions baked into that.

Um, and look, I I don't think that we're in a four-year cycle anymore. I think we've talked about this on the pod a number of times. >> Yeah. Yeah. >> We probably have broken through that. Um, you even start to see people like Ral Paul kind of like memory hole the four-year cycle. I sent this to Van, but it was like he he back a year. >> He pushed it back a year because uh I can't even remember what he said, but it was like the the business cycle was pushed back a year because of like longer duration. Like it it was just like complete narrative violation uh of everything that he has been talking about. and he's basically like, "Yeah, I think we've got another year." Uh, gonna push push my projections back a year. Um, I think

2020 staves need to be better than 2025. >> It's it is it's violating a lot of people's uh frameworks. You can tell. I mean, it's possible that people already tried to frontr run um selling and maybe are sidelined. Maybe that would explain why >> consolidation is. We we've had calls with uh with people who say, you know, the the cryp the cash is in the bank account now. there's no more crypto and and these are people that you know are our peers. >> I would say a lot of our peers have already sold >> and and the American VCs don't I would say the American VCs put the bottom in on ETH back in the day in 2022 but they don't even have enough supply to really

dictate the price anymore. It's just this combo of if you have the ETFs and the DATs buying the Black Rockck ETFs on the same day be it Bitcoin or ETH that combo is unstoppable. And when you've got kind of the the three-headed dragon of like Joe Luben, Tom Lee, and Black Rockck doing it on a smaller asset, it's even better. >> Um, and can that happen again? I would say so. People have been fading these MNABs forever, and they've been partially right, partially wrong, but the amount of monetization that's happened by the ATM has pushed the underlying up. when uh when someone tells us that you know a lot of a lot of the peers of your your venture group uh have sold already um thinking that

that's like be careful like that's a signal to get out. I actually think that that's the opposite. That's a bullish signal because that means that there's no structural sellers, there's no block sales that are going to go through. And to Vance's point, the the triple-headed dragon is literally just like a steamroller. Uh, and you should probably get out of the way because that's going to be buying for the next year. >> Espad having a very nice day. >> Joe Luben seems to have cracked the code. So, we may be back here, ladies and gentlemen. We may be back. Um, and the last thing I would say on ETH is that there was this there do you have the unstaking queue?

>> Yeah, maybe there's been this huge unstaking move. I think it's >> it's 2.4. Sorry, 25 now. 2.5 that's in the unstaking queue. >> Yeah. So, it's it's like 2.25 million. It's the highest that it's ever been. Um I I think the other thing to call out is um you know, another person asked me um you know, like, wow, ETH's been really consolidating what's been going on. Um it's like, well, yeah, send send them this uh perspective. And basically what's happening is ETH is rangebound because you've got 2.2 25 million ETH that over the last two weeks has been slowly rolling off and will continue to

slowly roll off for the next month. But at the same time, you've got DATs, you've got uh ETFs, um and you've got buyers in general who are buying and staking. Um and the fact that we're rangebound and we're unlocking that much ETH, it's pretty substantial, I would say. Um, yeah, we can't pull up the chart. >> I would bet that ETH has already been hedged partially. Like if 2.5 billion ETH, which is, I guess, you know, mid teens in terms of billions of dollars, you don't wait for the end of it. You know, you work with a sophisticated counterparty to buy put, lock in the cost basis, and then you can let everyone in fear, you know, watch you unlock. Um, so I think, you know, when

will that chunk be through? Is that still like 30 days or something? >> 39 more days. >> 39 days. Yeah, >> it's like >> it's kind of hovering there though. Yeah. I don't know if it's >> 6,000 or 50 something,000 ETH every day. >> Assume that this has been sold. That's kind of >> the hedged. But yeah. >> Yeah. >> I don't think it really means I mean honestly I haven't spent too much time thinking about I don't think this means an enormous amount for price, right? Like I would not >> 2021 this would have been like okay that's it we're done. Now it's like okay means we're going to consolidate for another 35 days as the DATs continue to buy all of that unlocking supply like

that's and then and then it's like there's nobody left to sell. Okay. So what happens when you've got the same amount of buying after the 35 days as you do right now? >> It's a sellside liquidity crisis. >> Yes. Old school. Uh, all right. I think those are most of the big stories of the week. Like, anything else you guys wanted to cover? Um, >> let me review. Um, >> Tether, >> Tether 500 billion valuation. It's crazy. They do not need the money. They are so profitable. But I I think like look, stable coins are 300 billion now.

It's clearly going to trillions. This investment makes a lot of sense. um they're not going out to random VCs and being like, "Hey, we've put our series D deck together." It's like, "No, they're meeting with like princes and heads of state and that type of investor." >> I I I would guess that it's already accounted. >> It's already done. Uh but here is I think the the rub is like with $20 billion, what do you buy? And there's a bunch of interesting things that could be on the table. Um, and I think most of them are probably US- ccentric given where their business is today and where they want to go. But it is looking like they are going to run the table, you know, and basically be

the hyperlaw power hyper power law winner. Um, and I would say it's like the only hyper power law winner that we've ever seen that's outside the US, >> which I think everyone should be rooting for. Like if we keep making these like Zuckerberg like you know alien people rich like it's not really going to do much for us. Like but if we like why don't we give a couple Italians $250 billion. Let's see what they do. Maybe they have different values. And like even for things like you know uh for instance Rumble and all the controversial content that happens there that I think is integral to the free speech idea. They're backstopping that.

What's the what's the thesis? >> Do do you guys understand the thesis behind that investment? There was for context for people, they tether invested some between five and 700 million in Rumble and I think there's a Caner Fitzgerald connection there as well, but what's the rationale for that as a does that make >> I mean it's it's probably um you know it's a distant maybe fifth or sixth top video streaming platform. they now have a crypto wallet which is going to be powering a lot of the creator transactions and it's kind of a you know a more high flutin um version of kind of like the onchain streaming that we're seeing today but I think the amount of talent they have especially on the right wing um which obviously people agree or

disagree with uh it does give them this very unique uh position within the US and within the Republican party like if they're hosting most of the vanguard of the right wing that's been kicked off of YouTube It's a pretty interesting position that they're in. Um, and if they try to like, you know, kick like there's no YouTube, you know, rules, censorship that's going on. It's just like a free speech platform, which I think is very cool and is hopefully indicative of other things that they will fund with this money. So only other comments not directly related to that but um call out of number one um crypto and AI are now clearly backto back the largest industries happening in the world um for

tech and innovation. Given that you have two of the the two largest companies in their respective uh areas being OpenAI and Tether both valued at half a trillion dollars in the private markets pretty substantial. Um, also the this the symbiotic relationship um, you know, is is kind of an interesting one. Um, but I do think that um, the other call out to on Tether is there's a lot of push into the United States. Uh, we didn't really cover this a lot, but in the last I think two weeks ago, USAT was announced, which is the Tether uh, genius compliant variant uh, of Tether um, of USDT. So, this will be something that is run by Bo Hines uh and and a

large team, you know, from industry and outside of industry that are going to be pushing a genius compliant stable coin um backed by the Tether balance sheet in a genius compliant um way, which means treasuries uh as the bash stop. But I I think the Tether push into the United States is something that we can expect to see over the next 12 to 18 months as well. Um it's kind of their big I would say strategic gap right now. Um, but they're they're going to be pushing pretty hard. >> Well, it's super interesting to see. I mean, I think Tether started with a really interesting market, right? Like I think a lot of the original product market fit for stable coins, I mean, especially USD denominated stable coins, ironically, is outside of the United

States. That's who wants dollars um in a more unlimited format than the US has allowed them to be exported. So, yeah, I think they're going to do super well. Uh they've got I was just looking at their their uh so Tether's got about 175ish billion um uh Tether out there. That's roughly the same size as their market cap as well in between 150 and 200 billion in terms of the valuation. You guys might know exactly what it is, but I think there was a range in this report or sorry $500 billion valuation. >> 500 500 billion is the is the value of Tether equity. Uh the number of Tether tokens is >> is 173. Yeah. Yeah, I messed that up. Uh that's crazy. They're I mean they're

also getting a pretty big premium here uh compared to Circle. So I think that shows you I don't have access to their revenue or whatever if that was But yeah, >> this is what happens when you keep 100% of your revenue versus zero. >> Yeah, that makes sense. Um >> shots fired. We got to get Jeremy on here to defend himself a little bit, but uh >> yeah, maybe not speak for themselves. podcast. >> Awesome. All right, fellas. Well, I think we can uh I think we can wrap it there, but fun one. I'll see you boys next week.

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