Ethereum’s Valuation, Saylor’s Next Move, and Prediction Markets | Weekly Roundup

Transcript

The ideological phase of crypto is over. The phase of crypto we are in is in the institutionalization phase. We are in the mass adoption phase and that means that you cannot be ideological to make money. The you cannot be ideological when you think about your investment decisions. >> This episode is brought to you by Zashi wallet. You'll hear more about them later in today's episode. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the company's funds or projects discussed.

We are live yet again. We keep promising people that we're going to have a prediction market to at least understand if episodes with or without Yano, like which one performs better? But we have been yet again abandoned. It's just you and me, Rob. >> I I don't think we've been abandoned. We went out and we asked, "Do people want Yano on the pod?" We it, you know, we did this kind of like AB testing. He wasn't here. You know, he came back and everyone was like, "No, we don't want Yano." So now he's gone again, right? So, we're just like we're trying to do what's best for the pot, you know, >> in these tiring times, ladies and gentlemen. Um, we are doing with what we have. Um, look, uh, why don't we just get straight to it. There's a couple of

things we want to talk about on the pod. Obviously, state of the market, it's been all over the place. Um, prices have just uh been quite volatile. Uh, let's talk about that. Let's talk about Micro Strategy. I feel like I've fielded like seven different calls from reporters saying, "Is Micro Strategy going to blow up? Are they a force seller? What does that mean for Bitcoin?" All these different things. I'm sure you've probably gotten the same. I heard from Hib, I was debating with him, a very lively debate that everyone should go watch on the thread guy. Um whether L1's are overvalued or not. Not that we should talk about that here. I'm more interested because he mentioned something when we were recording, pre-recording. He said that you guys hosted a founder event in your office.

Um, Robbie, you're looking surprised. I don't know if that was the case or not. I certainly didn't get make >> We did. We did. It was a It was a It was like a founder dim sum lunch, but you said like a founder event. And first time I was like, "Wait, what is that?" No, it was it was like a white elephant, you know, holiday lunch. So, it was like very lighthearted. >> Let it Let let it be known that I received no invite for said launch. I I have I I have not >> Where are What country are you in right now? >> Rob, you didn't know that. [laughter] >> I I >> Inver HQ is in New York.

>> I knew you were not in New York. You would have been invited. I promise. You are You are invited to everything else. You know that. >> I was starting to worry there because, you know, I'm I'm debating my lead investor on on on the pod and you know, I was like, man, you know, is there a refund on the docks? I went through it and I think we're good. >> You know, we're too far past. You can't get your money. Yeah, I'm not taking my money back. You're keeping it. So, I also Santi like you're kind of um you know, you're you're a healthy guy, right? And I didn't know if dim sum was right for you. You know, I thought maybe it was like too many carbs. So, >> fair enough. Fair enough. But I heard that there was an interesting debate. Um

one of the things that I think you guys do really well, a you put great events. I've been at a few, but um there's some chatter around like how do you how do you measure? We're going to talk about prediction markets as you know of course that's like the new stable coins but like how do you measure a change in opinion and in a perfect world and I were talking about this is like okay in this case it was like are L1's overvalued you shouldn't measure like the who won the debate by the total vote of a poll you should measure on how many people came in thinking that they were overvalued and change your mind and vice versa because I think that's sort of the the measure of and I think you guys I think it was George from my team mentioned that he had been in one of

your like debates and you did that. So, I thought that was pretty cool. >> Yeah, because you go into a lot of these things and people are, you know, maybe like like one of these debates that we did was around whether like DATs were good or bad for uh for the crypto industry. And so, we'll talk about micro strategy, but something like 70% of people just thought DATs were bad for the industry. And so you know when you come into a debate with like that level of bias like you or the person doesn't win by convincing from going from you know whatever you know 70 or 30% to 60%.

They win by going from 30% to 40% because they were clearly able to influence more people than the other person was during that debate. So which by the way I saw a poll on your debate with >> um did you lose like what happened like what talk a little bit about the debate. >> The debate. So I've been writing more uh really originally inspired around this idea of hey let's let's make sense of these valuations. If Ethereum is worth 380 billion is it worth 380 billion? And you know the fundamental anal you know value investor that I've been pre crypto just that part of my brain kind of was irking to kind of put it out in the open and it triggered a lot of debate. the se obviously came out and his very

eloquently written piece about the belief in the exponents and the potential of technology but so it was a good debate around that like it's not so much discussing the potential though he really loves to anchor it back to that and I was like is it priced in you know cuz you know I think we're at that point in the industry where most people kind of would agree that there's just a ton of potential want to be on the right side of history and be involved in this space in some way shape or another but it's like is it the worth 380 billion And I you remember that I played I kind of tweeted about this um couple months a couple weeks ago. I said what would you rather own? And I think that's I'm actually going to build an app around that. Like would you would you own

Ethereum at 380 billion close to 500 billion at the peak or SpaceX? Would you rather own Stripe at 100 billion or Salana at 85 or 100 billion? Would you rather own um Tron and Suie at 30 billion uh or ramp at 32 billion? And so it I feel like these juxapositions really force your brain around am I am I actually holding an instrument that like it really exposes the am I getting paid enough to take this level of risk and so anyways I thought it was a good debate. There was a guy from IEN who kind of used an AI model to predict who would won unclear what the blackbox does. Um, but then I I tweeted, uh, there's only really one way to settle this debate,

which is put your money on the line, which is why I think prediction markets do very well. Um, I wanted to get a poly market out, but I I think this I'd asked two questions, and I I want you to answer them if if if you I if your compliance team is okay with it. The first one is um, will ETH reach a trillion market cap this cycle? Um, I was thinking about putting it rangebound like end of 2026, but like this cycle. Will ETH reach 1 trillion market cap? Yes or no? >> Uh, what do you mean by this cycle? >> Correct. And that's it's it's ambiguous.

>> Again, I call it where you think we're in the cycle like and by in the next two >> I'm like not a I'm not like a cycle guy, right? Like I'm I'm like a firm believer that like you know uh the business cycle matters, the macroeconomic cycle matters. I don't believe in this like four year Bitcoin cycle and so especially not today and so okay so ETH is 375 400 right today right do I think ETH will go >> yeah do I think ETH will go between you know two and a half to 3x from here in some reasonable time period over the next you know couple of years I do absolutely >> call it over the next um because like

you all discount the MPV or whatever but like by end of end of 2026, middle of 2027, call in the next two to three years, does ETH hit a trillion dollars? >> A trillion market cap? >> By middle of 27, does it hit a trillion dollars? >> Like by 27, are are you seeing ETH at a trillion market cap? >> I think before the end of this administration in the US, ETH is over a trillion dollars. >> Fair enough. That's more than that. That is that what three years left in this administration? That's like two. Yeah, it's going to be like close to >> Yeah, three years. Three years left.

>> Okay, let's let's use that within this administration. I like that. >> So, you're saying yes, ETH will hit a trillion in this administration. Fair. >> I believe so. >> Okay. Second poll. You're Yes. By the way, right now, >> not financial advice. >> Correct. Correct. Right now, um a third of um right now a third of participants agree with you. 52% disagree with you. So, 52% of people say no. which is interesting >> that um by the way very different right because my the the hate commentary on my bearish bearishness the overvaluation of these has invited a lot of maximalists to come out and say that I'm terribly wrong and stupid and make curving it and

I should leave the space promptly and go do something else with my life anyways the second >> by the way you might have been like the single most active angel in crypto token projects for a long period of time so it's not like you haven't given and put your money where your mouth is in this space for a long time. >> I'm still here. I'm building I'm dedicating my career and an irresponsible percentage of my net worth to this space now. I that and this is sort of the thing that I I will actually look maybe your perspective on which is you can simultaneously be very very um believing in the potential of something an optimist but being skeptical.

That doesn't mean that you're a pessimist or a cynic. And I think that's something that a nuance that most people kind of don't appreciate. Like Rob, I mean, you're in the business of producing the best riskadjusted returns for your investors and absolute returns? Um, it's like loyalty to what? Like you don't you mean like if if something were to run up dramatically in your strategy, you you reallocate, you take risk off the table, you mean like you're a professional investor. And I think that's some it is hard to kind of argue with the crypto crowd because they will immediately immed. I hate anytime you suggest that perhaps cuz just maybe Ethereum shouldn't be worth $38 billion. But I still haven't heard a very compelling argument as to

why it should be worth $38 billion. >> I I will say something that I'm not sure if that's a crypto specific point as much as it is like a general like Twitter discourse issue, right? Like discourse online today is terrible. It's awful, right? you you get a lot of so under Nikita there's actually um there's a a guy based 16Z who uh who wrote a post today he's an A anon but but he's a also I consider him a a friend um in person but he's also an AON online and he wrote a article that was kind of like uh short degeneracy it was basically being like maybe we've topped in terms of like the

amount of like gambling people want to do and the amount of just like n the financial nihilism that exists and maybe we'll get to a a point where you know people are doing less of that uh and we've we've we kind of have like a snapback but also the point was just around how under Nikita Beer's um kind of stewardship of the Twitter yeah just the Twitter algorithm uh and just like generally how everything works in the world of AI that there's now this essentially um crowding that's happened where the, you know, the the thing that is most viral is way more viral than the thing that is third viral, right? And there's like this crowding that's

happened where being number one or being like the most, you know, the largest topic, the the thing that people care about the most that day is now the only thing that people see, right? You see 90% of things, right? And there's just a lot more dispersion in interest now and a lot more dispersion. And so the reason I say that is because of that you now have to be just more insane to get people to react and to get people to see your your stuff, right? So you have to be more controversial. You have to be even more insane. You have to be even, you know, call it um more out on, you know, the left or right side of the curve. And what does that mean? That means that also people's reactions are more emotional. They're much more they're much stronger. And so it strikes

me that now people are trained to like just really uh reflexively fight with everything because like that fighting gets them seen at a higher rate. It also means that you know the things that they're engaging with are things that is meant to be more viral and to and to re meant to make them have an emotional reaction more. So I don't know. I thought that [clears throat] was interesting. That's a little bit of an aside, but uh I I just think the state of course is awful. >> Yeah. You it's this idea of you feel that you're more connected doesn't mean you're more informed, >> right?

>> Because and and that's a nuance and it's powerful. Uh second question. So you're saying yes, Ethereum can hit a trillion dollars in this administration. Second question, which I think is probably the cleanest way to settle the debate because it's a point around overvaluation or not. It's like which outcome has a higher probability of happening this cycle in this administration? ETH hitting a 100red billion market cap or ETH hitting a trillion market cap. >> Oh, so Eve goes down what? It goes down 75% 75%.

>> Yeah. >> Versus, you know, I kind of was debating whether the what bookmarks, but I feel to me felt to me like that is an appropriate kind of range. >> Which one's more likely? I I personally think that it's more likely that it hits a trillion dollars, then it goes down another, you know, call it 70% from here. >> I wanted to ask what percentage of the book is on Ethere like ETH, the liquid part. He kind of and then I told him if I gave him $100 million how he would invest it. He kind of dodged that question. I'm not going to subject you to the same scrutiny because I would assume compliance is going to say, you know, >> however, >> we're venture investors. We you know this, we are venture investors. Like we're not buying ETH. We're not buying Bitcoin. Uh someone was asking me this

today, but you you do you still have some liquid part in your in in your funds, right? I mean, >> we have a we have a a small a relative relatively small fund that has liquids in it that is uh that we don't take new uh new capital into and uh and we've told people specifically we're not going to do, you know, we're not going to buy like Bitcoin and ETH, right? Like it's meant for like old. So >> yeah. Uh but anyways, so so the market there well the the poll there I should say is actually more um more contentious. It's 50 52% says there's a higher probability of Ethereum here hitting 100 billion. 47% say um one trillion. So

>> way that's expected right like the fear and greed index right now too is like 10, right? Like it's like max fear. >> Correct. And I wanted to structure these I learned this from Danny Conorman. Um I worked at a health startup called Alisium Health Studying Aging and he he was an adviser and he his guy wrote thinking fast >> run slow like just >> a true legend in the in the sphere of behavioral economics and incentive design >> great great book there's others on Richard Thaylor and Dan Arieli but I learned a lot about incentive design from um Danny and he he says the question you ask influences the response that you get so focus it's this sort of idea that Einstein has which is focus on asking the right question because that is what you spend 80 I think he says

something around spend 90 80 to 90% of your time figuring out what the right question is and then the solution comes far easier and so I think like that's why I like introducing these two questions because it to your point earlier about like how do you measure the real answer it's like I feel like it's the marginal or or the discrepancy between how people like just might have a very strong opinion but express it in different ways that is totally like divergent This episode is brought to you by Zashi Wallet, your gateway to buying, storing, and spending encrypted Bitcoin. Zcash is decentralized digital cash encrypted to preserve agency and safety with a fixed supply of 21 million and a proofof work consensus. Zcash is encrypted Bitcoin.

With Zashi wallet, you can swap Bitcoin or any other cryptocurrency into Zcash and stay shielded by default. Thanks to Zashi Wallet for making today's episode possible. Shout out to today's sponsor, Katana. Katana is a DeFi first chain built for deep liquidity and high yield. No empty emissions, just [music] real yield and sequencer fees routed back to DeFi users. Incubated by Polygon Labs and GSR, [music] Katana is launching with notable ecosystem of primitives, assets, and partners like Morpho, [music] Chain Link, and more. Katana's 1 billion CAT campaign is live. Bridge and deposit [music] directly into vaults in one simple click and start earning

immediately on your Ether, Bitcoin, USDC, [music] 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. >> I think you're hitting an important point, which is like lack of liquidity in the market, right? And to your point around uh musical chairs and that's an access issue, that's a interest uh in terms of issue. Some some of it's just a volatility issue, right? But it's also things like you know, we were going to maybe touch on this later, but um you might have seen that Vanguard is now allowing their wealth managers to sell crypto ETFs, right? And they were like

basically the last hold out. uh right and so as we have more and more of this access more and more of this um understanding that financial markets are coming on chain more and more just education I do expect that there will be more uh less volatility and more long-term holders and more buyers right and you know we can talk about the ETFs a little bit because we had kind of I think November was the only only month that we've had you know Bitcoin um outflows on the ETFs. >> Yeah. In uh since in a while, right?

Maybe maybe for the entire year for for >> February, I think, was pretty bad, but I think November peaked. >> Yeah. November was like the worst. Um and you know, these these inflows and these outflows, I think a lot of them have more to do with uh that people are using the ETFs as part of like basis trades with the CME, right? But >> and Ron, let me stop you there. What is what exactly is the basis trade? And I think you're we need to oversimplify what I've learned after the last couple weeks of just explaining to people fundamental analysis. >> Yeah. So, so people are going uh long the spot meaning long Bitcoin which I think they're using the ETF to do if they don't want to if there's some sort of regulated entity or an entity that that would rather deal in a share than

deal in like holding you know Bitcoin physical. And then they're uh shorting the future or shorting the CME futures uh to pick up a funding rate difference, meaning they're getting like they're delta neutral. So they're not exposed to the volatility, the price risk of Bitcoin, but they're picking up the funding. >> And so I think that the ETFs are being used as a a way to execute that without having to actually buy physical Bitcoin for people hold the shares. Not to get too complicated on options uh 101, but are they're they're they're buying options around the the ETF to hedge. Um how exactly?

>> They might be long the ETF, right? So >> they're just they're long the ETF and then they >> they're shorting the future the CME futures. >> Got it. >> Yeah. >> And and for context, you talk about funding rate. There's an O team round. There's controversy around how to calculate the funding rate, how Hyperlid does it, but every exchange kind of has similar, but you there's nuances in like the funding rate. Walk us through like the funding rate like what when do you see really high funding rates? When do you see negative funding rates? They could be positive, they could be negative. Like how does that work?

So the funding rate is a mechanism of um how when I am going to be long something on leverage, how much am I willing to pay to be long, right? And so there's this weird thing in crypto where uh every exchange basically decided that the like base funding rate should be uh 10.95% annualized essentially. And so the uh when the market is typical, the funding rate is typically I'm willing to pay basically 11%. To borrow le uh to go long uh long.

>> Yeah. >> And that way that that funding rate is a collective figure of >> of the short is shorts and long. um that doesn't necessarily mean well obviously if if someone is a 100x levered they're going to pay higher versus someone that is 10 times levered. Uh, no, not necessarily. That's not necessarily. >> You're just, it's the same funding rate no matter how much leverage you have. But of course, if you have more leverage, ladies and gentlemen, there's a higher risk that you're going to get liquidated. >> Yeah. You're just going to get liquidated more more quickly and you're paying obviously like you're paying the same rate, but you're paying obviously much more.

>> Same rate for everyone. Yeah. >> Yeah. But they um and so what happens is like when the market is very um greedy and people are really bullish and people are thinking the price is going to go up, they're willing to pay a lot more to borrow to get long like you know [clears throat] get long and so sometimes the funding rate blows out right um and then when you're shorting right you're picking up that funding rate because when you're shorting you're essentially lending right so so people go short the CME future and the funding rates are structurally lower on CME than they are in like on crypto venues. But like if I'm short the CME, I might pick up u call it 8% of you know Bitcoin denominated interest

>> uh while I'm delta neutral Bitcoin itself, right? So I'm essentially picking up 8% but I'm delta neutral the price and like that's pretty good trade, right? >> It's uh 8% uh and implicit in that is I think probably uh you could be doing a whole different other strategies. you're committing capital to that. You probably say probably the hedge fund that's doing this and we talk about kind of who are the suspects here, but like the large hedge funds, sophisticated hedge funds probably say, "Hey, this thing Bitcoin probably has legs." Probably structurally like probably probably kind of long, probably kind of think I would accept it as a payment in kind. I'm going to take the gamble. Uh it feels like a better way to express kind of where in a scenario where Bitcoin kind of goes higher. I'm going to get 8% in Bitcoin. If Bitcoin 10x from here, I

made 80%. Is that usually how it goes? >> Well, no. I mean, if you're del if you're if you're one to one delta neutral and you're not and you're not like super highly levered, right? Then like you're you're not getting [clears throat] exposed to the price whatsoever. If you're if you have if you're not matched one to one, you're not actually delta neutral, then yeah, you could actually get um more leverage. So, >> yeah. And and what percentage of the shops are doing strictly delta neutral and like how much of the market's like not delta neutral? >> I think a lot of it's delta neutral, but I think you you know a lot of people might be call it 2 to1. uh especially like on CME though like people I mean like crypto degins right like there's there's a lot more leverage in crypto dggins than there is on like people you

know playing CME I think people playing CME are typically you know the hedge funds that like if they can clip 10% uh on what they see as a relatively lowrisisk trade like that's huge for them because if they're up >> yeah the name of the game is um the sharp ratio on that is pretty high because if it's truly delta neutral then getting 10% risk-f free is 2x of what you get with you know that that's a that's a trade as a heads up. >> How can that trade go wrong and what does that mean for the rest of the market? >> Uh well, I mean there's counterparty risk which is why you see a lot more. So people are willing to actually do this with an ETF in a in CME even though it's um it's typically lower funding rates and and the reason for that is primarily

because of the fact that like one they might just want to deal in a share instead of dealing in physical, right? Because that's easier. it's a better setup for, you know, how they already uh trade, right? Because they already deal in shares all day, right? If they're trading equities. >> Uh and two is they would rather take CME equity risk uh or sorry, counterparty risk versus like, you know, call it maybe, you know, Binance or by bit or >> Coinbase or Custodian or you're implicitly kind of like indirectly exposed to that, but you don't want to kind of do do it directly. >> Yeah. Exactly. And but there also is I mean there there are times where like the market really dislocates and when the market you know trades down a lot like you know if you're levered you you might have call it um potentially like

P&L you can't realize or like what we have had on 1010 uh which was the people got autodvered but the short and long leg got you know closed at different times right and so like that delta neutral uh neutrality broke um and so there are um in terms of of increased volatility the this kind of you know ability to be neutral uh truly delta neutral kind of breaks sometimes. >> Yeah. Yeah. >> Let's bring it back to current state of the markets. Um you know you're saying there's a lot of there's a lot of nerv nervousness in the market. You're saying hey look a lot of people are closing these trades. Uh why is that? Is just because the ponder rates have come down.

You're no longer getting paid 8%. Or or what's what's the sentiment out there with hedge funds? Some of it, by the way, is just that like, you know, people are it is December 4th and like you know how this works in traditional markets. >> We're three weeks from Christmas today, >> right? You know, I got a holiday party last night, I have one tonight, you know, I've got I got three next week, right? >> Um >> people are going to get invited to any of those or you know, are you Yeah, >> I'm waiting for the inversion holiday party, right? So, my report cards are inviting me. I Where's When's the inversion holiday party? You know, >> Rob, I might send you a little vest. Uh, but otherwise, >> there we go. There we go. There we keep you warm.

>> No, but but the in traditional markets uh where people are not used to trading 24/7 and don't think that like they need to make all of their gains like at certain periods of time. Like you say this in crypto all the time. People are like, "Oh, like there's parts of times in the market where like you're going to make, you know, huge gains, so you have to be on at your your uh at your computer all the time." In traditional markets, like people if they're up 20% this year, 25% this year, like they're closing their positions, they're moving into the end of the year, they're clipping their carry, like they're going in like relaxing, right? And so the people that are more likely to be in an ETF are like a lot of those people, right? Not like the crypto natives. And so uh there's a

lot of that happening but there's also there's a lot of macroeconomic fear and we we should go into macro strategy a little bit because there's >> if you look at the what the bond pricing is right now like the bond investors are quite scared about what's happening. >> What's the bond price on MS MSR what is it maturing 28 27? >> Yeah. So there's there's a there's a few of them. I think if you look at on the uh I'll pull it up right now, but if you look at the perpetual the the perpetuals, the one that's like the most junior was trading at like $78 this week, right? And so, you know, they're they're pricing in a a significant risk in that this is going to, you know, this is going to be it's essentially junk, right? Like that

you're not going to be able to get your money back. Um, yeah, the STRD series stride, which was it's about 12.5% effective yield. It's like junior to all of the others. It's trading at Yeah. about 78 79 bucks. Um, >> yeah, put that in perspective. I mean, that that that I've seen I've seen bonds trade all the way down to 12 cents, 10 cents. Uh, >> you probably see it's interesting. What do you read into that? Because like, okay, Sailor might go out and say, "Wait a minute, folks. We" And there was a I think the CFO that went on and and I got pinged the media by a couple of reporters got quoted on Bloomberg about this, but it was like, "Wait a minute. I thought that the whole thing was that

their capital structure is so sound and bulletproof that they're never going to have to sell Bitcoin. The interest is so low. I think it's like less than 1% on on on the notional that you actually just with the cash flow of the business, like you don't have to you don't have to sell. you can cover interest payments. You're saying by the bond holders and why it's trading at that level of 70 cents is >> it's bullet maturity. So you're not going to be able to you're not solvent enough to pay this and you're going to get wiped. >> Is that is that kind of what's going into that or why is it trading at?

>> Yeah. So may maybe we'll like we'll we'll back up a little bit but um so so at at 78 bucks right for for Stride which is the one of their preferred stocks but it's the most generally preferred right like if you do the bottom math a little bit it it it basically implies that the market thinks there's something like a nine or 10% chance that of default on that right so uh that's still more senior than common equity but it's you know call it more junior than the other uh the other preps and and any debt that they would put on. So like they think like somewhere in the middle of the equity stack or you know call it, you know, closer to the common there's a 10% chance that they're not getting paid back, right? That's pretty high, right? But it's not obviously a

death nail to your point. >> This episode is brought to you by Zashi wallet, your gateway to buying, storing, and spending encrypted Bitcoin. Zcash is decentralized digital cash encrypted to preserve agency and safety with a fixed supply of 21 million and a proofof work consensus. Zcash is encrypted Bitcoin. With Zashi wallet, you can swap Bitcoin or any other cryptocurrency into Zcash and stay shielded by default. Thanks to Zashi Wallet for making today's episode possible. 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 [music] to DeFi users. Incubated by Polygon Labs and GSR, Katana is launching with notable ecosystem [music] of primitives, assets, and partners like Morpho, Chain Link, and more. Katana's 1 billion CAT campaign is live. Bridge and deposit directly into vaults [music] 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.

If you take a step back and like you think about what's happening at Micro Strategy, well, what is Micro Strategy? It is, you know, there was this or now strategy, sorry. It was this, you know, call it software company, but uh it was a software company that does a couple hundred million dollars of revenue and then it's approximately $50 billion uh of you 505 billion of >> Bitcoin essentially, right? >> It's like 3%age of the total supply like $625,000 Bitcoin or something like that. >> Yeah. Something like that. Yeah. Yeah. >> Yeah. And so it's so you have 55ish billion dollars of Bitcoin and it's at times traded at you know two times NAV or two and a half times NAV and that's when they've gone and like raised a

bunch of capital because the story has always been strategy is going to outperform Bitcoin because they're going to be able to increase your Bitcoin per share because they're going to sell equity um at when you know it's trading at a premium to NAV and then they're going to go buy more Bitcoin, right? So now it's trading back down. It's not uh it's not below one, but it's been trading between like one and like 1.15 of NAV. And the CEO came out and said, well, hey, listen, like maybe we would have to sell Bitcoin to or we would sell Bitcoin to buy back shares, which mathematically makes sense uh for the shareholders if it trades below NAV, right? And that spooked the market. I think one day the strategy was down like

30%, the the um the the preferreds were trading you know kind of more of them were trading in junk territory and uh people were were were scared right because with the price of Bitcoin and also Bitcoin went from 125k to 80k in basically you know a couple weeks right and so now Bitcoin's back up to 92k and the strategy came out and they actually um raised a cash buffer uh and they the c they came said, "Okay, now we have actually enough cash that we will not use to buy Bitcoin that can pay about 2 years of dividends for um you know these debt-like instruments that we have." And so the market really liked that. I think it traded back up 30% right after that

happened. And it was essentially like listen like this idea that we're going to get to people are scared of this thing called a death spiral where it's like okay well it trades below uh below nav so I sell bitcoin to buy back my shares but because I'm selling bitcoin and I own you know 3 to 4% of it now bitcoin is trading down so like I keep trading below nav so I keep selling more bitcoin and now this you know kind of spiral happens I think um sand deepep from polygon came out and said oh like you know I hope this isn't Luna as if uh you know, this this reflexivity between, you know, the um the US dollar stable coin that Luna had and uh was was the same thing. And it's clearly not. I think that's just like a pretty big

misunderstanding about how like these like public market instruments work, but the the market was spooked like no doubt about it. So anyways, they put out the cash reserve and now it seems fine. It's steadied and also like you know, Bitcoin has steadied. So, I' I'd be I I think this kind of like short-term scare will probably go away for a little bit, but you know, if Bitcoin, you know, trades down another 15% from here in kind of rapid succession, we we'll we'll continue to hear more people talk about this. So, >> yeah, for sure. And just to put a little bit of more color into this, I think it's uh the USD reserve is to the tune of 1.4 1.5 billion. Um they sold some class A shares at the market. Uh, and I

think I think one of one of the things that I would asked a lot is um is is when you have someone so fanatical and you know so adamant about Bitcoin being the purest most pristine asset in the world and everything else you got to sell and cash is trash alladalio and then it sort of concedes to the whims of the market. It sort of and ever so slightly just chained in tune kind of spooks a lot of participants. Do you think that that there's merit to that argument in the sense that like if you're an RAIA if you're you know Sailor is kind of the chief marketing officer of like CMO of Bitcoin and you're now seeing that and you're saying well it do you think it gives pause to people that

would say hey um this is interesting like maybe we shouldn't be all hot and heavy on Bitcoin and maybe you know maybe it just warrants a bit more caution or thinking about it and or or is it just totally irrelevant? Um um is it's more of a perception thing. I know I know it's very ar like hard to measure but sailor is like for better or for worse. I think some hardcoin bit like hardline Bitcoiners have said we don't like micro strategy because it's an it's counter to this whole ethos of Satoshi being anonymous and you have now someone that has kind of for better or for worse hijacked the supply and hijacked the uh the narrative and is that good or bad uh

does that even compute does it influence decisions at the board level or raia's institutions >> I don't So listen, I the the ideological phase of crypto is over. Full stop, right? Like >> again, because your your your co-founder might heavily disagree. [laughter] >> No, the ideological phase of crypto is over. Uh the the phase of crypto we are in is in the institutionalization phase, right? We are in the mass adoption phase, right? And that means that you cannot be ideological to make money. the you cannot be ideological when you think about your investment decisions and is sailor ideological in some sense but I

bet you less than people actually think right so at the end of the day you know sailor of course and you know I'm not going to go back through every statement he ever made but >> if you go listen to the actual earnings calls with the people that work for him the story was never strategy will buy Bitcoin and it is a black hole and it will never sell Bitcoin the story is that strategy will outperform Bitcoin because they will increase your Bitcoin per share, right? >> And so if you viewed it from that lens, which a sophisticated investor probably would have, >> then you understand good entry points, you understand what's happening to the market and you're trading it

appropriately, right? the people who are ideological but like oh Sailor is the chief marketing officer of Bitcoin and like he's going to be the one to you know he's just going to continue to gobble it up like that is ideological and I think was incorrect read of the situation. So >> I think he's been fairly um um cogn like very explicit about playing the capital markets right and and and his strategy is just you know playing that. Um I want to get um one of the things that I thought about like the Luna comparison is is is blown out. There is a there is a there is a kind of a silver lining there that that is worth kind of like introducing because if you remember the collapse of of Luna it's sort of the

>> could have Luna worked and there's a version of this world where I think it could have worked if if you remember um look not to get into the mechanics but like you're a algorithmic stable coin um in some sense is trying to do this this mechanism uh that Sailor is doing with Mn um it's not a perfect comparison I'm not ever suggesting that. However, I do think that there is um the reserve is what I'm trying to zero in on cuz Terra in the late latest kind of stages was saying, hey, you try to diversify the collateral backing the stable coin. this case if for you know some you know history of crypto algorithmic stable coin terra had a stable coin uh like

there was the Luna ecosystem and everything that was backing that stable coin was the token Luna right uh and they always kind of said hey look there's going to be more demand more uh they have this chai e-commerce thing and merchants are going to adopt this stable coin it's going to be you know the payments really the internet everyone in Korea's using it you know here's our all our growth and it was hard to always audit which is why I never invested. Uh I never got clear answers from do um uh personally when I met him was he was raising the the seed and then well I was a pairy and then but then over time he sort of conceded he said oh maybe maybe it wouldn't be such a bad idea to diversify the collateral pool and go from pure kind of like a uh pure like

fictitious thing a social construct that gives value to the the token because they were paying all this yield and then they said let's expand the collateral and so they bought Bitcoin and that's where I think the market was like Oh Turtles all the way down. Which in some sense like Bitcoin is turtles all the way down too. It's like a pure social the god tier meme and it's a digital cult. >> Yeah. But but I I think the I mean listen I I I understand how at surface level like Sandeep said what he said right and Sandep is obviously not a he's a very smart person and like you know he's he's you know created Polygon and he's done a bunch of other stuff and done very well for himself obviously. Um but like the the the price of Luna was essentially linked to the pre to US

adoption, right? And so when people no longer when people wanted to sell Luna like you know or they wanted to sell the US for Luna and then then they need the arbitrage to be there, right? Those things were interlin and so there was like like a reflexive thing that was happening between the two of them. the price of Bitcoin while there is a person who owns 3% of Bitcoin and like you know theoretically I guess could decide to sell it to you know go and buy back their shares one they're not actually a forced seller they don't have to do that right because there isn't like you don't need to run for the door you they can just decide to hold it and they can try to to trade below nav two they uh the price of Bitcoin while

>> and by the way it's a harder collateral like you're holding something that you know is separate from what is tied to your they have other >> yeah exactly right like the the while the equity price is dependent on Bitcoin in some sense it's not fully dependent on it but the Bitcoin price is not dependent on the equity right whereas in the USD price and the price we're directly dependent on each other >> what you just said there is the most important distinction between Luna Terra and Bitcoin and Micro Strategy >> you want to say that again so that people can internalize that because it's if the FUD will continue. If price goes down, say that again because we want to clip it and we want to sear it in the brains of people that are making the same comparison.

>> In Luna, the price of Luna and the price of US were directly related to each other and they were they affected each other one to one. In micro strategy or strategy, the price of the equity is dependent on Bitcoin, but the price of Bitcoin is not dependent on the equity and that is the difference. >> Correct. Now, if Micro Strategy were the sole buyer uh or a very disproportionate buyer of Bitcoin, um but that's not the case. >> Yeah. And listen, if they if they were in a a liquidation event where they had to be a for selling, they had to get rid of all of it. If you dumped three and a half% Bitcoin onto the market right away, would we have massive massive uh you know, a decrease in price? Sure.

Absolutely. But it's extremely liquid asset. And you know what? A lot of people would buy it, but it's still only three and a half% regardless, right? >> Yeah. So >> I mean this reminds me a lot. >> No, the Mox stuff. Yeah. But I think one point I want to make too is I think to your point around Luna, they started thinking about um putting more collateral for USD. They I think it was they bought, if I remember right, six billion of Bitcoin, >> right? >> Yeah. >> And it was like 6 billion of Bitcoin and $80 billion. >> Yeah. So it was still vastly vastly Luna right?

>> Yeah. If I and I and I like to play this like what would have happened if D would have come to this realization early on but he was just like very maniacal in some sense or in a lot of sense. what would have happened if you would have come to that realization way early on and expanded that reserve of Bitcoin to it's like the banks have a basil capital requirement ratio um you know to kind of have a buffer uh we should maybe talk about the tether fund too uh which I'd love to get your perspective on but just around this conversation around Luna was there an appropriate a lot of the conversation as it went down was there an appropriate level of Bitcoin reserves as a percentage of the total that would have given stability to the protocol and would have avoided this collapse s

combined with a lack of liquidity because the door on the way out was the amount of USDT in circulation like the door never came out like the door never expanded to absorb all of the and so the price really dislocated and just went into this spiral but do you think there was like a had that number not been 8% had that number been 20% 30% 40% like what was there a number that where this would have fundamentally have changed the outcome [snorts] >> well yeah I mean absolutely like if if there was it if because Luna was dependent on USD and USD was dependent on Luna essentially, right? The if there was some sort of collateral that was the majority of you know call it like like if I think of Luna as equity, right?

Right. Um, and I think about like, >> yeah, >> whatever a bank and a bank needs some sort of like, you know, tier one equity like Luna obviously the tier they saw like if Luna was like the equity it shouldn't have been more than call it 10 to 15%. what was backing uh US right and so if that's the case um there would have been you know call it whatever treasuries it would have been Bitcoin there would have been anything else and but then the price of Luna would have collapsed because the usability and the reason for Luna to exist and the arbitrage to be there wouldn't have wouldn't have made sense either right and so like the incentives were all wrong because the incentives were for

the people who were running the protocol to continue to push Luna because that's where all their wealth was, right? Yeah. And that was the issue. It was like it was an incentive misalignment. >> Totally. Uh just just on this point alone, um not Basel capital requirements are so important. People learned that the hard way in the global financial crisis. Um but importantly, if you're a financial institution, just like a JP Morgan, you cannot use your shares to meet those solveny requirements. uh which is an important point which is in this case of of Luna Terra like they were using their own equity.

>> Yep. >> For the market to believe that this was sort of like going to continue and you had to believe a whole lot of stacked assumptions and at some point the Jenga Tower just kind of collapsed. So anyways, um I feel like in crypto sometimes we speedrun a lot of the mistakes that Trafi has done over the years and like it's like it pays maybe to kind of go look at some of the things that have not worked in traditional finance and and avoid them outright. This episode of Empire is brought to you by VanX onchain economy ETF Node. If you feel like you are constantly missing alpha, never have time to scroll through crypto Twitter, Node is for you. Node is actively managed by an experienced team with years [music] in both trady and crypto. That team at Node looks to capture the most powerful trends across

all of crypto while actively managing volatility as markets evolve. Super important in today's environment. Check out Node's track record so far at van.com/mpire/node. That's van.com/mpire/node. You can also little easier just click the link in the show notes. Thanks to Van and Vanex onchain economy ETF, Node for making today's episode of Empire possible. This episode is brought to you by Geonet, the world's largest decentralized RTK network, delivering real time centimeter accurate positioning around the globe. Powering technologies that enable precise navigation for drones, autonomous vehicles, first responders, [music]

farmers, and robotics, Geodet shows that blockchain can be a truly transformative force. By delivering real-time centimeter level accuracy, Geodet enhances emergency response, boosts construction precision, and enables advanced navigation for drones and surveyors far beyond the limits of standard GPS. To find out more, click the link in the show notes or follow them on X. The UNIS swap trading API solves the problem of adding crypto to your products without the hassle of needing deep crypto expertise, ongoing maintenance, or liquidity aggregation.

The trading API provides access to the unis swap protocol which has processed $3.3 trillion in all-time volume, handled [music] over $465 million swaps from more than 25 million addresses, all with zero security breaches. Developed by Uniswap Labs, the US-based team behind one of the most used DeFi apps [music] access some of the deepest liquidity in crypto, combining both onchain and [music] off-chain sources for optimal pricing. The same liquidity that powers billions in swaps now available via a singular API. Thanks to Uniswap for making today's episode possible. As always, investments in blockchain technology involve risk terms and conditions apply.

Should we talk about the Tether FUD? Do you want to [snorts] >> I I so listen I mean >> I mean you're you're Mr. Stablecoin. I I I have to ask the question, is Tether going to be solvent for the hundred million time? Is Tether gonna be okay? >> Yes, Tether's fine. They're okay. Whatever. I mean, they're they're, you know, uh, you know, there's rumors out there that they're raising $15 billion right now, you know, at a $500 billion valuation, right, for some of the smartest people in the world. They listen, I think, >> give us a give us like the TLDDR like why why did this rumor come about? And it was Arthur Hayes kind of tweeted something and then everyone kind of

picked it up. >> Yeah. I mean, listen, Arthur's like Arthur is doing a lot of tweeting these days for a lot. >> Arthur also said that Arthur also said that the discount rate for for hyperlquid and some of these crypto assets is like 5% which is a risk-free rate. So uh you know how fundamental analyses does not sound >> I think if you had a really real conversation with Arthur he would tell you tell our conversation earlier about attention being the right currency that what the he is not tweeting what he actually believes because he's a very smart guy. He's just trading what he thinks gets him attention, right? And rebringing up the Tether FUD is what get, you know, got him attention, right?

You might remember this, but in 2021, there was a lot of very sophisticated hedge funds that were paying like 8% to short USDT with the idea that like, oh, like we think USD, Tether is going to collapse. Um, and I think at one point I heard one fun like that the borrow ended up getting like up to like 20%. right to short USDT which like crazy people were like lighting money on fire because they really believed that Tether was going under. >> But no, I mean the the concern has been that the uh if you look at the addestation of Tether that you know or USDT it is not a onetoone treasurybacked stable coin in the same way that Circle is or some others are. They have a

significant amount of gold. They have a significant amount of um uh there's some Bitcoin. They have, you know, these like private investments. They have supposedly according to Palo like $30 billion of excess equity though, right? Which is like a pretty big buffer. >> And so you look at it and you you know maybe you you have to make some sort of um I guess I would say like qualitative calls on how some of their collateral would be thought about in Basil. But they probably have like 10 to 12%, you know, tier one capital, right? which is like lower than bank ratios are usually required. Like it's usually like 17 18%.

But 17 18% is pretty high and that's a post you know global financial crisis number. So like it doesn't look particularly that less risky than call it you know anything that ex uh ex exists in like the traditional banking world and you know if they managed their uh they managed their gold or managed their portfolio like yeah then maybe they would go and sell Bitcoin, maybe they would go sell gold, right? But like it all seems pretty fine to me, right? it seems like appropriately riskmanaged. >> Um, and they're also at like such a size today that uh we're talking about like big numbers and there would have to be like a huge run on USDT. Um, and one of the things that they've done a pretty good job of is that uh it is actually

really just impossible to redeem uh redeem USDT today. There's like very few people who can do it. Um, and so like they would have a lot of time. >> Yeah. Yeah, >> feature feature not a bug. E >> yeah, I it is definitely a feature not a bug for them. >> Uh so I'm pulling up solveny ratios here just for the sake of the the crew to keep this number in the back of their mind. Uh and then we should transition to maybe other stuff. Poly market and something else but >> prediction markets weekly prediction market update >> prediction market update. Yeah. So so solveny ratios. Yeah. Uh the set one ratio is the most important one. the highest quality capital, common equity, retained earnings, the money that's

truly available to absorb losses. That is 12%ish seems like minimum is eight >> before buffers. So typically I mean that makes sense, right? Like it's not it's not crazy here. And like they they um I pal said they have like $30 billion of excess equity. Uh and I mean what is Tether outstanding today? Like [snorts] 180. Am I am I totally off? >> Yeah. Yeah. >> Yeah. Yeah. >> Uh yeah. 185 >> any um >> yeah probability you talked about the probability of micro strategy what the bond holders at least are telling us is somewhere to the tune of 10% of going

bank you know being in default. What would you peg the probability of USDT uh being insolvent? >> Um or and or and or DP pegging because I I old enough to remember that there were multiple DPEG events. >> I I like I mean I think like you know also depends on like what level of DPEG but like I mean a DPEG is essentially by the way just the market pricing in a potential insolveny, right? right? Like it's kind of the same thing we talked about with bond or the or the the preferreds over at at strategy, but like what the market right now is priced in that likelihood of like near zero. Uh

and like my guess is like you know that it's pretty you know it's not zero obviously but is it 1% like uh you know I'd be shocked if if if anyone thought it was more than one or 2% that was sophisticated today. >> Yeah. And look, it's a important nuance. [clears throat] I was uh in conversations with this like super large conglomerate based out of um the Middle East and they asked me this question talking about stable coins and and I think they said, "Hey, what are the risks?" And I immediately said like there there's always risk of course like any any anytime someone says there's no risk, run away. They are they're either naive or deceitful or both or um and and and it's just there's always risks. So

as and I was we were sitting there a really large financial institution and the event was hosted by them and I said look there is you keep your family office here there is risk of JP Morgan like doing bad loans and you know potentially being insolvent in the same way that no one believed that Lehman would ever go down because it was the premier institution and so I said the difference here is you have a transparent system that you can audit some of this stuff that you can have proof of reserves and um I think we've come a long way as an industry but you know more of that is is useful it's a more transparent system and >> well and and And I would say like for for tether if you believe it is likely to be insolvent or you're pricing that in your

the probably the smarter or like the the the the way to get there that like makes more sense is you just think they're addestations are >> are false >> are are false right and you think like then you think okay well they don't have real audits they only have addestations because they aren't able to actually produce like the information required for an audit and so we think it's false but you look at the addestation and you say listen I think these guys are going under that doesn't really like that strikes me as like mathematically um I won't say >> I would say not not something that I think most >> improbable >> yes >> simple question and I think Paulo has gotten this question time and time again like why not produce an audit why just an at the station >> why not settle this argument once and

for all and you could say well an audit doesn't solve anything because then someone say look Enron was audited >> and verse brands was audited >> fraud right like yeah you it was very sophisticated fraud Enron as right like and doesn't mean you can't commit severely sophisticated fraud uh in in any sort of financial institution. It's harder I think when like the assets are simply like gold and bitcoin and you know US treasuries. >> Yeah. Right. >> And maybe Juventus soccer team or something. >> Yeah. Yeah. Yeah. Well, you know, luxury assets >> that might that might be the saving grace given where sport franchises are trading and Juventus is not a bad team.

>> Yeah. Well, listen. The >> you are getting rich. >> You and I are in the wrong business. Sir, we should just um buy a soccer team or Formula 1 interest in a team and just tokenize it or something. >> Can Can I get a can I get an inversion sponsored, you know, uh like like you know, Premier League team? Can we do that? When's that going to happen? [laughter] >> The valuations are a bit too rich right now. I don't want to get into that, but I' i've certainly, you know, I I content of the week. I'm fast forwarding. There's a book, Moneyball Equivalent for the guy that ran the scouting program for I forget Liver I think it was Liverpool and it's just fascinating stuff. Just the Premier League earnings and whatnot. A great book. I'll post it

in the show notes. Anyways, TBD Rob, you know, I'm working hard here. Hopefully, we get to a point where we can buy these teams. >> Should we um should we do prediction markets again? >> Yeah, let's do it. You're the king here. Um so, give us a rundown. [snorts] >> Uh what's the news this week? So Koshi's I think this have been rumored already but Koshi raised a billion dollars uh led by Paradigm I believe at 11 billion valuation that uh follows their $300 million raise that they did at 5 billion uh a couple of months ago. Um, obviously there's been this like, you know, kind of backto-back fundraises for them in Poly Market, somewhat competing. Poly

[clears throat] Market obviously raised uh two billion or or it was a little less than that in primaries or some secondary in there at a $9 billion valuation and they've been rumored to raise at a higher more money at a higher valuation as well. >> So, you know, the the excitement around prediction markets continues. Um I think somewhat interestingly right after that uh deal was announced uh Robin Hood who is about 60% of Koshi's volumes came out and said that they were acquiring uh the old Ledger X business uh to like vertically and they were doing a JV with Saskuana to vertically integrate a prediction market exchange which through

Robin Hood markets that implies that they will replace Koshi as their liquidity provider uh underneath the hood and they're so that's 60% of Koshi's volume. So I'm I'm I'm interested in what you know the investors in this round knew or what they were able to figure out during diligence uh before uh that round got done. So, so on that point, >> yeah, >> say that you're the founder of Koshei, the two founders, you know that's coming. Do you or do you not have a fiduciary responsibility to reveal that even if you don't get asked that question like a material change in contract?

>> Uh I think legally they would have no they wouldn't have like a duty. >> No obligation. Okay. >> No obligation even though you're >> Yeah. Legally, right? um if they got asked it, they should have answered appropriately. And if they committed fraud and they misrepresented what was happening, then like that's different, right? Um I don't think they have any obligation. >> Paint me the hypothetical of the misrepresentation. >> Well, I mean, you send a diligence request that we've all sent them.

Sorry. >> Yeah. I I mean, listen, I think I on like you sent a diligence request and by the way, we saw this with like FTX, right? Where, you know, people would send a diligence request and they sent back financials that clearly were missing part of, you know, their balance sheet, right? Essentially, it was misrepresenting what the balance sheet looked like, right? >> Right. that very clearly in this case if you send across a diligence request or a question list and you said hey listen you know what is the nature of your contract with Robin Hood and you know what do you expect that to look like over time and they knew that they might be losing the Robin Hood volume they

would have to answer like appropriately that like they had this understanding right so I I don't know what happened here I don't want to like imply >> that anything on Or yeah, >> but but let's just say your paradigm right now and you're saying, "Holy a lot of the volume might might poof disappear." You go back through diligence requests and you say, "Hey, we asked them this question. Hey, God is Frank." Or, "Hey, Charlie, whoever led the round, hey Matt, what the hell happened here?" I say, "Hey, we actually asked them about this contract." And they said that they had been working with Robin for a while and that they had no reason to believe that, you know, they never can kind of answer that is what I'm trying to say, right? Uh they were never like legally like, oh, we

have no reason to believe that the you know, as you see in the risk disclosure sections of a 10K in venture rounds, you typically don't like it's not as thorough. Um whereas in a 10K, you probably would kind of spell out we have material concentration with one party called Robin Hood. uh h if that ever were to go away uh we feel that we are in a well positioned but it's a very competitive market there's a kind of duopoly happening and there's you know there there might be an adverse event because there's material concentration of customer here or a or a provider and uh liquidity provider volume source and there's a high concentration just you know um but you know it is I mean the only reason why I'm branching is it's a good lesson >> to not just in crypto but as an investor

it's it pays to really do your diligence and I found myself sometimes you want to win the deal, you want to be in good with the founders and it's a competitive round and I tell my team this all the time, you got to slow down to go fast. Like you have to just always when we interview candidates, never ever compromise on these three things. You can you can mess up all this stuff, but if we don't do references and we don't do that like inerson meeting, we can't hire a person. It's just fundamentally not going to happen. And I think as an investor, it just pays you to really, really, really just not compromise on the unnegotiables, right? And it's hard because if you're doing a hot deal and comp, you know, prediction markets are all the rage these days, you lower your standards. And I'm not

suggesting that that happened here, but it's it's something that perhaps you could have maybe asked that question harder and harder and harder and harder and drill down until you get a very satisfactory answer. I'm not I'm not saying this happened here, but it's just sort of a hypothesis. I remember you guys grilled me there. There there was nothing other than an idea and a pitch stick in my case, but you guys did very thorough as thorough as it could get for like a just an idea and a pitch stick, you know what I mean? >> Yeah. No, and you're right. I mean, the the one thing that and again, I don't know uh what was said, who knew what.

Maybe this was, you know, there also like it's actually very unclear right now what exactly Robin Hood's plans are and if like maybe they will continue to use, you know, some liquidity providers under the hood and um you know, maybe they'll continue to route some uh some flow to Cali, etc. as this takes time to roll out. So like it's all very unclear exactly how this is going to play out and maybe it this was um known and still underwritten, right? And and that's fine. But I would say the one thing that we think about Say that again.

>> No, that that's a fair point. May maybe, you know, Paradigm knew that and they were like, hey, we're going to fill this out with someone else. >> Yeah. And they were like, we we we see the pipeline and like it doesn't matter, right? And like we think this is going to continue to be um you know, on a rocket ship, which all which both Koshyian and Poly Market have been. And so, and that's totally possible as well, right? And so, it's always it's always interesting. Um it the but the one thing I will say is like we talk about this all the time as we do you know some later stage deals and when you see VC funds doing later stage deals there that is a bit of a style style drift and so you have to make sure that you have the capability and the understanding and the

process to still underwrite in the same way that like a private equity firm does or you know call it a more public equity type firm does. And so um but when you get these kind of really fastm moving really fast growing businesses uh like the prediction market companies have been like some of the stable coin companies have been and you get people that are going into maybe later stage later uh and and higher value companies than they're they're in typically um you do sometimes see you know call it things that are missed and so you have to really be thoughtful of that and and I've seen that less >> this cycle than we saw in 21 as everyone got really excited but it is top of mind for us as we think about doing um you know some of these later stage deals.

>> So two two followups to this and we got to probably close out soon. One uh did Robin Hood ever have an equity do they have an equity position in Koshi? >> Uh I do not believe they do but I don't know for sure. Um >> probably would have been smart probably would have been smart for them to kind of produce a bigger lock lock in by having them in the cap table now. >> 100%. Yeah, that's always if I'm dead. I'm like like I think Poly Market was smart taking ICE and a couple other very strategic investors. I'm like very personable like well-known figures that dominate on the they have phenomenal video on the app. Um but you know we're we're you and I both bias people know

this like full disclosure you know I we're investors in bond markets. Um however I I want to maybe on that removing ourselves just from policy but um I guess now people are calling me Mr. Price to sales or price to earnings. Um do you think that uh these rounds are being valued on that basis? Um and furthermore like what is the moat of a prediction market? Because if this was true, like if if you if liquidity can be drying up and someone else is going to just launch your own, try to circumvent you, then particularly someone like Robin Hood that has a lot of users, a lot of distribution, like what is the actual moat here? Like are these businesses worth 15 billion or 10

billion or are they just going to be competed away by someone that has way more distribution like Robin Hood that says, "Hey, this is something people users want to punt. I'm going to get here and I can I can copy the tech. I can deploy engineers. I'm just going to I'm not going to buy this thing for 10 billion. I can actually do this for a billion and like, you know, sufficiently early on cuz there's not that much volume. But we can do this better. >> I mean, I do think we're in a world where um distribution matters more than anything than ever before and like owning the customer matters more than before because like building the infrastructure is easier, right? So it's especially for Robin Hood that already has the right licenses and also there's all these DCOS that can be um that that

are up for sale for relatively cheap, you know. So I I I do really strongly believe that you should be giving more value to the people who own the end customer. And again like I'm biased because poly market you know uh way outperforms couch in terms of brand and in terms of um you know search engine and term their app u has directly outperformed them and like having people um uh those users directly interact through the front end like that's significantly outperformed uh kosh where koshi has been more of this infrastructure provider and on the regulated side and so I think that you have to own the end customer in these markets where it is hard to have a moat if you don't uh and you should be

providing more value to that, right? And I think the that's starting to play out. We're starting to see the risk of that, you know, clearly here um in this this Robin Hood deal. And you know, you've seen I think Fanatics, you know, launched like the maybe a it was like like maybe a beta version of their uh app uh like a couple of days ago and they're using Crypto.com under underneath the hood. like how much value does Crypto.com get out of that? You know, Poly Market just launched their app earlier this this uh week uh in the US. They're having they're going direct to consumer, right? And the app was number one in sports on the iOS app store like within a day, >> right?

>> Yeah. I got I was I was You want to hear something funny? I I was uh um I was down in in my parents for for Thanksgiving and I met with um the president and as traditional as it gets of this one of the largest industrial companies in the world and we're talking because he wants to talk about crypto and you know how we could help them and that and all that and and and I see see his phone and he says oh yeah notice when he pulls up and he's like yeah poly market and him and his son had it and they were talking about it and it was kind of surreal moment. You were like, "Oh, like wow." Like we this is to your point like crypto is now in a very different place.

It was something about that moment was like holy And people love to talk about in dinners like I've had so many dinners people like pontificating about polit everyone's a political pundit and everyone's and now it's so such a great conversation like no like the market like is just changed and you anchor the conversation around the change in the probability. So it's kind of really neat um impacting like permeating into like the day-to-day. Anyways, that's my rant. >> All right. I mean, listen, like it's become very clear that Poly Market is as a brand. It's just like it's in many ways, uh, it's become like kind of the Uber of prediction markets. Koshi has done a good job about fighting it back against that. But you know there's you

talk to people uh internationally especially and you know people just refer to they don't refer to pressure they refer to poly market um especially you know doesn't operate internationally. >> What's a poly market? But anyways to round out this discussion congratulations to the koshi team for raising the ground. Uh the found one of the co-founders, Lua, is I believe the youngest self-made female billionaire or something to that effect. >> I I saw that and I wondered if um who is it? Lucy Go Lucy Go. >> Lucy go I think she beat apparently she beat that and then obviously like some of the one of the Kardashians or Kylie Jenner or some of these people. I forget there's uh there's someone else but no

anyways nonetheless huge feat. Congrats. Um impressive. I mean, congrats. I mean, Shane is also like 26 27, I believe. Like, you know, prediction markets are printing billionaires right now. >> So, >> great, great for them. >> Yeah. >> So, >> um, totally. Any, um, obviously speaking of young folks, the Forbes 30 under 30 list came out. Um, one of your founders, uh, Nick Vanek from Agora was there. U,, Nick, we hope we hope you all the best.

Congrats. But [laughter] uh yeah, no, really cool stuff. I I think uh I saw something else in Agora that was pretty cool. I think they hired someone from Coinbase, I believe. Some pretty pretty good hires. They've been cooking up. >> Yeah, they hired one of the um the most senior engineers at Coinbase to become their new head of engineering. So excited for them. Excited for Nick to make it. Hopefully he doesn't um do uh follow in some of the footsteps of some of the previous Forbes 30 under 30. Um and then obviously I mean what are we like What what are we Forbes? What is it? 40 under 40. Uh not to reveal your age, man. You look pretty young.

>> Yeah. Can I get that? Forbes 40 under 40, you know, whatever. I'll >> obviously and also, you know, to talking about this and talking about prediction markets, Shane was on the cover of Forbes 30 under 30. So, um >> and then someone had the of course the someone had the auda the the the as the internet does, he he had the Sam from FDX and Shane. But anyways, >> y >> anyways, uh there's a couple other news here. We've been running for over an hour here. Uh, anything else know newsworthy that you want to call out? Uh, maybe the Kraken acquisition by X stocks. That was pretty cool. I mean, tokenized stocks. I don't think we need to go into it. They didn't disclose terms but >> that was interesting, I guess.

>> I I guess I mean like like listen, like I I I've said this and and I'll probably get a little hate for this, but like I I didn't really think the product worked. Uh, and you know, they were they kept announcing some sort of like high levels of volume, but if you looked on chain, like the onchain volume was like less was like $2.5 million a day for Xbox. Like people weren't really using it on chain. And then most of the other than Kraken, >> there was basically no volume in any of the like reputable exchanges for it. But Kraken was saying they were doing a bunch of volume in it. So that's true. Acquisition makes complete sense. Like they'll be able to offer, you know, now tokenized equities globally. They were in a better they were in a better position than anyone to understand that

they they they're pressed with these claims. XTOX has seen an exceptional adoption since its debut earlier in 2025, surpassing 10 billion in combined exchange and onchain trading volume within 6 months. 10 billion in six months. >> Not bad. Uh investors can trade 24 hours a day, 5 days a week. >> Yeah, I mean the only reputable exchange that's been reporting volume of X stocks has been Kraken. Um so they were in a better position than anybody obviously. Uh, and then >> what do you think the what do you think the price for that was? >> Was that a big outcome for for them or >> I I'd be shocked. Uh, if it wasn't, you know, call it, you know, sub$und00 million but >> Right. Right.

>> Um >> Um, >> and I but but listen, I Kraken's been all about the the >> IPO, >> this, you know, idea of the everything app, right, which like Coinbase has been and others have been. And this helps them continue to offer like new products globally and uh and also for for Inc. I'm sure and so I'm I'm sure that's a big part of this. >> Yeah, obviously Kraken operates um internationally. Interesting to see. I think this will be one where we might look back and say did we over overly engineer a product that was not there in the demand. I think you've had questions around is the demand going to be there and maybe the demand is a function of like solving the product and the liquidity and the market structure which is still you know maybe non-existent.

But I I I think there's something true to the fact that like people outside the US have a a lot of people have a hard time having exposure to your Teslas, your Apple, your you know Nvidia. This could be a good good um and the same with stable coins have filled a lot of the demand for dollars X stocks and tokenized stocks could fill a lot of demand XUS and sophisticated developed markets for stocks. So we'll see we'll see early days there. Yes. >> All right. Should we do content? >> Yes sir. I kind of gave one. So, you're now you forced me to be first last time.

Now you got to go first. What's a horror movie of choice this time? >> No, we're we're in Christmas time. Okay. So, I'm going to give I'm going to give two things. All right. Uh the Jonas Brothers Christmas movie. Okay. It was it was fun. It was >> not in my bingo card, but Okay, tell us more about [laughter] that. >> I'm telling you, listen, I like Christmas. Christmas is like the one holiday that I like to I like to celebrate. It's fun. And you know, listen, I I you know, the Jonas Brothers is not normally my cup of tea, but like I thought the movie was fun. It was like, >> show me your Spotify. Show me [laughter] your Spotify recap or >> I'll show you my Spotify rap after this.

There's no Jonas Brothers on it. >> Uh but, you know, like listen, I thought I thought it was fun. I thought it was, you know, kind of good production quality. There was like, you know, some good numbers. You know, I was drinking some spice rum. Was watching Jonas Brothers uh holiday movie. I was setting up the um the Christmas tree in the living room. So, I was in the holiday spirit. So, I thought that as far as Christmas movies go, if you like Christmas movies, I thought that was fun on Hulu. >> Uh and then the other one is the third Knives Out movie is out. I've always liked all the Knives Out movies. They're fun. I don't know if you've seen them, but that one's out now. Uh I enjoyed it.

Go watch it. >> A personality question, sir. Now that we're on Christmas, are you more of a a Grinch, Home Alone, or Trying to think of something that might reveal your character here? >> Die Hard. >> Yeah, more I don't know. Nostalgic. I'm like a Christmas like Home Alone. >> Christmas Vacation. >> It's a good one. >> Grinch or I'm trying like what is a nightmare? Like the Nightmare Before >> What's your favorite Christmas movie? Night like Christmas Vacation's a good one. I like that one. Uh >> okay.

>> I never seen that. I'm clearly Home Alone. Home Alone is or was probably the best Christmas movie of all time. So, >> yeah, it's pretty good. Home Alone one or Home Alone 2. We're having this debate internally like a movie that >> got the original. >> Fair enough. Fair enough. I love Christmas, too. Um, my content of the week will be go watch the debate that I did with a vote that I want. Okay. Uh, no, but listen, uh, I self shell here. I think it was a good debate. I respect his sheep a ton as worthy of an adversary as what can happen in a debate. He is very well trained. He doesn't answer the questions necessarily directly. He's dodging and he is a phenomenal uh he paints a narrative

really well. But it was a good debate. I think we're going to try to do another one. Uh it will serve us well as an industry. So maybe go watch that and put us in the comments of where I did. >> One note on that by the way >> is uh congrats to thread guy who I think is like the new up only. So like you know it's he's doing a good job >> you know on that point his and I were like discussing over the weekend say hey listen let's do this debate where should we do it and we kind of like landed on the thread guy he's like kind of credibly neutral and he kudos to a shout out to him because he let us like rip and he did not interfere. He did threaten to mute us but he did he allowed us to kind of make it get a

pretty good debate. I thought it was pretty good but um yeah go watch that. Let me know what you think. I I was on Thread Guy uh in July and I think I was like maybe the first of like the non-mecoin traders he had had on, right? And now he's done a really good job I think of diversifying the the the the >> like why the hell is this guy here? I came here to be if I should long fartcoin and this guy's talking about stable coin adoption. >> Literally everybody in the chat was like who is this boomer? Like why is this a boomer? This is so bearish for crypto. When are memecoins coming back, you know, and now you guys are doing a debate. So, congrats to Thread Guy.

>> It was good. It was good. All right. Good place ever to end it. Thanks, folks, for tuning in. Rob, uh, I'll catch you next week, I guess. >> Absolutely. >> Maybe Jana will maybe Jana will grace grace us with his presence, but nonetheless, we'll be here punching it out. >> Thanks everyone. Have a great weekend.